Avoid These 5 Mistakes When Buying Off-the-Plan

Lenders treat off-the-plan purchases differently to established properties

An off-the-plan purchase involves buying a property that hasn't been built yet, and lenders handle these applications with stricter rules than established property loans. You'll face sunset clauses, valuation risk at settlement, and longer pre-approval periods that can expire before the property is built.

Consider a FIFO truck driver who secured pre-approval for an apartment in a new development near Perth. The property was valued at $450,000 at purchase, with a 10% deposit and pre-approval sorted. Two years later at settlement, the bank's valuer came back at $410,000. The lender required the borrower to cover the $40,000 gap or increase the deposit to maintain the agreed loan-to-value ratio. That scenario plays out more often than you'd think, and it's entirely avoidable if you understand how off-the-plan finance works from the start.

Off-the-plan properties do offer some advantages for property investors. The recent Federal Budget changes to negative gearing and capital gains tax from 1 July 2027 don't affect new builds in the same way they affect established properties. Investors buying new builds can still choose the 50% CGT discount, and negative gearing deductions remain fully claimable against wage income. That makes off-the-plan purchases worth considering if you're planning to expand your property portfolio while working FIFO.

Mistake 1: Assuming your pre-approval will still be valid at settlement

Pre-approval typically lasts 90 days, but off-the-plan settlements can be 12 to 36 months away. Your income, credit profile, and the lender's policies can all change during that period, and the lender will reassess your application from scratch before settlement.

If you've taken on new debt, changed rosters, or if the lender has tightened their serviceability calculations, you could be declined at settlement even though you were approved at purchase. Some lenders will extend pre-approval closer to settlement if you provide updated payslips and a fresh credit check, but that's not automatic. You'll need to stay in contact with your broker and keep your financial position stable throughout the construction period.

Mistake 2: Not accounting for valuation shortfall at settlement

The property is valued twice during an off-the-plan purchase: once when you apply for finance and again at settlement. If the second valuation comes in lower than the purchase price, the lender will only lend based on the lower figure.

That means you'll need to cover the difference in cash or renegotiate the purchase price with the developer. In a scenario where the contract price is $500,000 and the settlement valuation is $470,000, a lender offering 90% LVR will lend $423,000 instead of $450,000. You'll need an extra $27,000 at settlement, or you'll breach your contract. Developers rarely agree to reduce the price, so this risk sits squarely with you.

Mistake 3: Not reviewing the sunset clause and your exit options

A sunset clause lets either party walk away if the development isn't completed by a certain date. Developers can use this clause to cancel contracts if property values have risen significantly since you signed, allowing them to resell at a higher price.

If the developer cancels under the sunset clause, you'll get your deposit back but you'll miss out on any capital growth during that period. You'll also need to reapply for finance and find another property, potentially in a market where prices have increased. Check the sunset date in your contract and make sure it's realistic based on the development timeline. If the date is too tight or too far out, negotiate it before signing.

Mistake 4: Ignoring body corporate estimates and rental vacancy rates

Off-the-plan developments often have higher body corporate fees than established properties, particularly in apartment complexes with gyms, pools, and concierge services. Lenders factor these costs into your serviceability, and high fees reduce how much you can borrow.

Rental income projections provided by the developer are often optimistic. If the development releases 200 apartments at once, the local rental market can be flooded and vacancy rates spike. A vacancy rate of 10% in the first year isn't unusual for large developments, and that can leave you covering the full mortgage without rental income for months at a time. Before committing, research the suburb's current vacancy rates and comparable rental yields for similar properties.

Mistake 5: Not structuring the loan to handle rental income delays

Most FIFO truck drivers apply for interest-only loans to keep repayments lower during the early years of ownership. That works well if rental income starts immediately, but off-the-plan properties can take months to settle, fit out, and lease after completion.

You might be making repayments for three to six months before a tenant moves in, and if you've structured your borrowing too tightly, that period can hurt. Build a buffer into your cash flow planning, and make sure your loan structure allows for rental income delays without forcing you to dip into emergency savings. Speak to your broker about whether a construction loan or an investment loan with redraw facilities makes more sense for your situation.

Capital gains tax and negative gearing changes don't penalise new builds

From 1 July 2027, investors who bought established residential properties after 12 May 2026 will only be able to claim rental losses against other residential property income, not against wage income. Capital gains will also be taxed at a minimum rate of 30%, with cost base indexation replacing the current 50% discount.

New builds are excluded from these changes. If you buy an off-the-plan property, you can still claim the full negative gearing deduction against your FIFO income, and you'll have the option to choose between the 50% CGT discount or the new indexed method when you sell. That's a material advantage if you're comparing an off-the-plan purchase to an established investment property bought after Budget night.

Off-the-plan finance isn't harder to arrange than a standard investment loan application, but it does require more planning and a longer timeline. If you're working FIFO and considering an off-the-plan investment, talk to someone who understands how lenders assess these applications and how the recent tax changes affect your strategy. Call one of our team or book an appointment at a time that works for you.

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