Live proud podcast Ep. 2: Off-the-plan or off your rocker?

• Definition: Off‑the‑plan means buying property before it’s built.
• Pros of buying off-the-plan: Fixed pricing, potential capital growth, smaller deposits, stamp duty savings, and government schemes.
• Cons/Risks: Construction delays, sunset clauses, market fluctuations, and reliance on developer reputation.
• Expert Advice:
  • Get pre‑approval from a finance broker before engaging builders or developers.
  • Choose reputable developers/builders with strong track records and warranties.
  • Understand progress payment structures to avoid unexpected interest costs.
  • Consider legal review of contracts to safeguard against risks.
• First‑Home Buyer Schemes: Government deposit schemes allow entry with as little as $23,000, making off‑the‑plan attractive for younger buyers.
• Long‑Term Strategy: Start small, buy within budget, and focus on leverage and sustainable growth.

Brent: Welcome to the Live proud podcast, a place for candid discussions, expert analysis, and the real story behind the Australian property market. I'm Brent Hill. Today we're talking about buying new property, whether that's land, house and land package, or an off-the-plan apartment or townhome. For some, it's a smart way to get a foot in the door. For others, it feels like a leap of faith. My guest today is Tanveer Ali, Senior Mortgage Broker with Loan Gallery, a finance specialist who helps hundreds of first home buyers navigate this journey with confidence. Tanveer, welcome to the podcast.

Brent: What I thought we might do is start unpacking some definitions about buying off-the-plan. We all understand what it is to buy an established home; you might buy it at auction or a simple for sale property in the street. Off-the-plan is a little different, isn't it?

Tanveer: That's correct. So the term off-the-plan is when you look at the plan and there is nothing - it's dirt - and then there will be a house in the future there, which can be house and land, which can be a builder builds it and gives it to you or a developer builds it and gives it to you.

Brent: Yeah, so to break that down, we're buying something that physically isn't there at the moment. That might be an apartment, it might be a townhouse, or it might be the land that's yet to go through a subdivision. What are the time frames when looking at buying off-the-plan? So, what's the process that you need to go through, and what are the expected time frames that you might be looking at?

Tanveer: Let's dig into townhouses and house and land packages. So usually townhouses are one payment, like you paid 5% deposit and 95% at the settlement - something like that is about a year or year and a half from scratch in outer suburbs, where most people can afford houses. House and land? In a hot market, it can be 12 months away. In a market where there is lots of inventory available, it can be three, six and 12 months. The further away the land is, the price is different.

Brent: Yeah, so we might just unpack that. For instance, you might buy from a developer, and there's a parcel of land, it's not yet registered, so they've got to put all their services and their roads and so forth in - that could take up to 12-24 months, is what you're saying. You then go to a builder and appoint a builder to build your home. Is that what you'd be doing?

Tanveer: Yes, so in our terms, we call it house and land package.

Brent: Are there two contracts that are required there? How does that work?

Tanveer: Two contracts. So, usually people walk into a builder and the builder says, okay, you know, sit with a broker, or do you have a budget in mind? Okay, I've got $600k budget, let's say. Okay, I've got this package available in XYZ estate. Let's say Mambourin for example, I've got a three bedroom, single garage house in Mambourin available. They will send you to the land office, the land office will explain to you about the project, and they say the land will be available in such and such time. And based on that, you talk to your finance broker, am I okay to go with this? And then the builder will give you, okay, I can put this house - let's say in an 8.5 x 25m block, about 220sqm block, roughly. Something like that, you can put a 13-14 square* home priced about $570k in today's market, in Mambourin, for example. Something like that will be 12 months away, for example. And you then save up on it.

*Editor’s note: In builder terminology, ‘squares’ are used to describe house size. One square equals 9.29 square metres (sqm), so a 14 square home is roughly 130 sqm. ‘Squares’ are an older Australian building measurement, while sqm is the modern standard metric unit.

Brent: It's interesting where you were talking about often a buyer would go to a builder first - what's your recommendation in buying off-the-plan, particularly a house and land package - and we'll get into apartments and townhouses - but are you recommending that a purchaser goes and sees the builder first, or they go to the land sales office first?

Tanveer: Actually broker first, or bank first.

Brent: Very good point and self promotion also! Again, that would be my advice is, first of all, you go and speak with a finance broker to get a pre-approval. Is that how it works?

Tanveer: Even if you walk into a builder, they will say, do you have a pre-approval? Are you a first home buyer? And usually all the big builders have their financial arms. For example, Loan Gallery, where I am, they are with Simonds. Mortgage Domayne are with Metricon, and so on and so forth. So all the big builders have got their financial arms. And then when a first home buyer walks into their display village in the outer suburbs, they get you to sit with their financial broker first - he or she does the assessment for the family of two or a single person buying, and that's on that basis that they find a package for you.

Brent: It'd be quite sensible to seek advice on what you could borrow first, before you go out and spend a lot of time looking at property. If you can't afford it, then really the time is not taken up wisely. So what you're saying is, go and speak with a finance broker first, see how much you can borrow, and then you can start narrowing down your house and land package. And what you're suggesting is to potentially go to a builder first, once you've got your pre-approval, see how much you can borrow for the home, and then ensuring that aligns with your package, with land or a developer.

Tanveer: That's correct, yeah. And most people, if you see the average income is about $80-90K per individual. So, if it's a family of two / $180K, it means you can get into your first home if you do not have a crazy amount of personal debt. So, it's not really difficult, you just need to talk to the right person first, and then they can put you on the ladder.

Brent: That's really interesting, particularly around the new ways of purchasing. And what it would also ensure is it's locked in that price, like, if you're not settling for another 12-18, 24 months - correct me if I'm wrong - is that that price is locked in, as in today's price and not the future price - is that correct?

Tanveer: Yes, in general, with a land developer. But there are areas where you need to be careful. For example, are you signing a fixed-price contract?

Brent: Interesting - can you talk through that, what a fixed-price contract is?

Tanveer: So fixed-price contract, there are builders who are very first home buyer builders - if you allow, I can name them - which will be making sure that they will bump up the contract upfront with a little bit of base price extension. Base price extension means after 12 months, generally, they charge you $1,000 per month if your land gets delayed. But a lot of builders, they do not charge you that because their margins are high upfront - a little bit higher, not extremely high, but they make sure that it's a fixed price, even if your land gets delayed. So I had a client whose land was in Officer (VIC) get delayed by 12 months. They did not charge him anything. The benefit of that is when he booked the house and land package, it was $750k for a 29-square* home in Officer during Covid times, and when he got the keys, I did the valuation, it was $950k roughly. The thing it did is it consolidated his car loan and allowed him to buy an investment property just by sitting on it, because he had a very good income.

*Editor’s note: In builder terminology, ‘squares’ are used to describe house size. One square equals 9.29 square metres (sqm), so a 29 square home is roughly 270 sqm. ‘Squares’ are an older Australian building measurement, while sqm is the modern standard metric unit.

Brent: Often, I do find that the time in the market, you do get that appreciation on price, depending on what markets you're in. And quite often you hear remarkable stories like that - they secure a property for X amount of dollars, and by the time they settle, they've made hundreds, tens of thousands, hundreds of thousands of dollars. So there are benefits there, but with that, there's always a risk and a reward. So we've just talked about the reward, now what are the risks in buying off-the-plan?

Tanveer: So this is the market, actually, you can time. It's not like a stock market. When can you time the market? When it's going up, it's like a cycle. So if you're buying somewhere here (mid) in the cycle, and if you're buying somewhere here (high) in the cycle, these are two different things. So at the moment, let's say, it's started to rally. So if you buy here and then you're going to title* in 12 months time, most often than not, you can build on $0**. I can talk about southeast Victoria, where I'm operating.

*Editor’s note: Title (or titling) refers to the legal process of registering ownership of a piece of land or property. Once the title is issued, it officially records who owns the land and any rights, restrictions, or interests attached to it.

**Editor’s note: When the speaker says 'you can build on $0,' he is referring to situations where rising land values create enough equity by the time the land titles to cover the contribution normally required for a construction loan. It does not mean the build is free, only that no additional cash may be needed upfront if the valuation has increased.

Brent: So rather than getting into the market conditions of growth and timing of purchasing, I think what I'd like to explore is, are there risks in buying a block of land, and what are they? Is there a risk in securing a contract with a builder, and what might they be? So if you could just explore that a little, about some of the pitfalls you've seen and maybe some stories you've seen.

Tanveer: Oh yeah, there is a recent one. So a client of mine, they bought off-the-plan in Pakenham, Victoria, which is the outer suburb, southeast, 70kms from the CBD. They put a deposit down $46,000 in 2021 - off-the-plan property, which means they will get the keys and pay the remainder at the settlement, and they put 10% down. Come settlement, which is 2025 (recently), I got it formally approved. The builder turned around and said, we cannot complete the project. The only thing outstanding was the driveway, and they exercised something called sunset clause. So that's a risk.

Brent: Can you explain what a sunset clause is?

Tanveer: Sunset clause is leeway in which either party can finish the contract when the contract expires.

Brent: So all contracts of sale will have a sunset clause?

Tanveer: Most of them, yes. So it is very, very important which developer you're going into. A reputable developer like Frasers Property, for example, or Mirvac or Stockland, they won't do such a thing. They will honour the contract, even if it's delayed - you know, unforeseen delays can happen. For example, council needs a power line to go through some areas, it can delay the contract. It is beyond a developer's control, something like that. You know the big developers, reputable developers, big builders, will honour their contracts always.

Brent: Yeah, probably the summary of that is that there are sunset clauses within all contracts of sale, particularly all off-the-plan contracts. You need to understand how long they go out for and what the impact is, if the property hasn't been developed or is available for title then, so it is at both parties' decision to either forfeit the contract or continue. So just be wary of that. And I think that is a risk there. With a builder, what are the risks that you look for when appointing a builder? And what should people look for?

Tanveer: It's a very good question. So building is a technical thing. It's a human product that takes time to build. So what happens is, people walk into the contract, they see, oh, the XYZ builder is $10,000 cheaper than this builder. They do not look into the builder itself. So what you need to look at is reputation. Reputation is very important. Timing of finishing the contracts, the existing contracts. The reason it is important is, for example, there was a reputable builder that went bust a year or so ago. They were good builders, but they could not finish their contracts, whereas there are reputable builders in the market finishing contracts in four months for small houses - the volume builder means they will finish your contract. Now it has a financial implication. A builder that sits on your house for two years, versus the builder that gives you a house in four months, is a different thing, because the interest rate is about 5½-6% right now. If you have a block of land and the builder is taking two years or two and a half years, that is a very, very costly thing for you because you're paying on the land and the progress of the build. And most of the first home buyers are renting, they're not living with their parents. If there's a family of two and kids, and they're paying a mortgage on the land and half the house and also the rent where they're living, it can be very burdensome. So, it is very, very vital that you do not look at the $10,000 because over 30 years, that $10,000 is a very small number versus right now, it's a thing to survive. And actually post construction - it is also very important that you go into a reputable builder. For example, builders that are giving you 25 years warranty or lifetime warranty. The reason is they're giving you that warranty because they trust their build. It is a liability on their books. So, they're doing that because they trust their product. And if you get into a builder that once you get the keys and you don't see them again, it's a very risky thing.

Brent: So, what you're saying is reputation is really important, you need to understand the build quality - so go around and check out the builders' product once it's built, go through the display homes. I think that's probably another thing that you pointed out, it's actually fun to do that as well. But also understand the timing of the completion there. So, there's a few really good tips there to look at when considering purchasing a house off-the-plan.

Tanveer: Progress payment schedule is a very, very important thing.

Brent: So can you explain the progress payment schedule?

Tanveer: So the house is built in stages - I'm talking about specifically house and land now - so there are five stages: deposit, base, frame, lock up, fixing and completion, and HIA*, which is the body that issues the draft of the standard contract has got two methods, method one and method two. Method one is where most of the contract payments are loaded in the middle of the contract - lock up and fixing. The other one, method two, which the builder can modify a little bit, that's front loaded. So, because it's a time value of money, which means the bank is charging you interest with every payment, and it depends on the pace the builder is building, the front-loaded contract can cost you more money versus the method one contract, which is recommended. So, a lot of the times when there is LMI** involved, the bank can turn around and say, hey, can you ask the builder to change it to method one. A lot of the time, the builder will try to push it around and do not agree with it. Most builders do agree with it because they need the money. But these days, because a lot of contacts are coming off LMI because of the 5% scheme, I'm not sure how that will turn out. I start seeing method two a lot in the contract now.

*Editor’s note: Housing Industry Association (HIA).

**Editor’s note: Lenders Mortgage Insurance (LMI) is an insurance premium you pay when your home loan deposit is below 20%. It protects the lender, not the borrower, if you can’t repay the loan.

Brent: Yeah, so there's a few things to look at there, and again, we'll talk about the reputation, but also the progress payment structure, particularly on a house and land product. In the apartment space, generally, we see it's a 5% or 10% deposit with balance at completion, that seems like a very easy process for a customer to work through. If you're looking in that off-the-plan apartment or townhouse where it's a 10/90 or a 5/95 contract...

Tanveer: Yes, it can be easy, especially when you just put 5% down, and especially in a market like this, when it's going to rally and most people know it's going to rally, and you lock in today's price, and you're paying the 95% at the end.

Brent: Again, you can hear some remarkable stories. And even at the price points, I know, from a national point of view, a price point under $400,000 for a property sounds insane, but, you know, in Melbourne, there was during that Covid period. So there are some really great stories that you hear about people making a fortune. And as I said, tens of thousands, if not hundreds of thousands of dollars in buying off-the-plan. But what you're saying also, there are some pitfalls there. If you're doing so, you need to look at your funding position. And first of all, it is getting a deposit, and particularly for the first home buyers listening to the podcast today, what would you suggest to a first home buyer, particularly, around these new schemes, and if you could explain a bit more about them?

Tanveer: So one, they need to be ready to buy in an area where they can afford.

Brent: Got to be ready to buy, and you need to know what you can afford. So they come to you and you'd do a pre-approval. How long does it take to get a pre-approval?

Tanveer: So it depends on the bank, and depends on the broker as well, because some brokers are platinum status with some banks. For example, I'm platinum with CBA. So for other brokers, it might be 7 days, for me it's like 24 hours. Some brokers are platinum with Westpac. For me, it's like 8 working days because I'm a normal broker with them. And a platinum broker with Westpac will get in 24 hours pre-approval. So there are things, and it also depends on broker to broker. Every broker specialises in different things. I'm specialising in low deposit people with no money versus some people are commercial brokers. Some are in SMSF. So, every broker specialises in different things. It's pretty much like a doctor. Your eye doctor is different to your GP.

Brent: Okay, let's be specific, talking about first home buyers, the 5% government deposit scheme. How does that work? And can you explain a bit more about the process?

Tanveer: So the criteria is you have to be either a permanent resident or Australian citizen. They removed the income cap, and they have a cap of pricing.

Brent: So you could be on any income, and you'd be eligible. And you've got to be an Australian citizen to be eligible, and it has to be your first home, obviously.

Tanveer: Correct. Or you did not have a property in last 10 years, or interest in a property. For example, some people buy in a trust, or they have a long lease agreement in a model, or something - nothing like that.

Brent: And the only caps, Tan, are on the price bands. For instance, New South Wales, it's $1.5 million. Victoria, it's $950,000, and check the relevant states and territories for their own caps. So it enables you quite a breadth to get into. What's the process? Do you get a pre-approval first? Do you go to the government website? How does this process work?

Tanveer: It is very easy. So when you go to your broker or bank, there is a form they fill out on your behalf and give it to you to get it signed, which you can actually fill out, it is a very simple form, which is basically a declaration that I'm a first home buyer. Or if you're applying with your spouse, he or she is a first home buyer, and he or she needs to fill it out on behalf of the other one. So if it's two people, it has to be both. And once you apply for your loan, they will give you a spot. When it is approved by the government, your spot is approved, and now there is no limitation. Before it was a cap on 30,000 seats, or something like that. So, yeah, it's a walk in the park. You can actually get a property for as low as $20,000. For example, outer suburbs of Melbourne, let's say the house and land package is $30,000 - oh, sorry, $600,000.

Brent: We're back in the 1960s!

Tanveer: So let's say you need 5% = $30,000, and $3,000 worth of other costs (conveyancing and council), so $33,000. $10,000 is your first home owner grant. So you you're left with $23,000 to cover. You can get, actually, a house for $23,000 - as low as that.

Brent: Yeah, I think the benefit in off-the-plan, whether it's apartments, townhouses or the house and land, is your ability to get into the market earlier with a smaller amount of money. It also gives you that ability to save money - you might be living with your parents, you're saving money as the property is getting created and finally settles. Probably another thing that we haven't touched on is the fact that you can customise your home. Whereas a new property, you'd have to go through refurbishments and renovations, whereas off-the-plan, you can often customise and upgrade your home there, which has significant upside when you're wanting to personalise it around yourself and I think that's where you know, in speaking with a reputable builder, they'll guide you in that direction. So that off-the-plan enables you to get early entry points, lower deposit, potentially some upside in growth, and also the customisation of your own home is really what you're saying. You know, some of those pitfalls are probably, be aware of a builder or a developer, make sure that we understand their reputation.

Brent: You know, there's websites that you can look at, go and have a look at estates. I think you gave great advice about checking other builders, going through display homes to make sure that they're reputable builders, have a look at their product that's been delivered. But that sunset clause tip is a good one.

Tanveer: And HIA contract modifications. So some people, some builders, what they can do is they can remove the items from the fixing stage and move into the completion stage, and they can finish from base to fixing very quickly, let's say, in three months time. And they can sit on your contract until 365 days expire. So basically, you're paying a lot of interest on a house that's not complete to that stage where it should be, and then you're paying for a builder's cash flow to do another off-the-plan project from your pocket in a way.

Brent: Yeah, and I think that comes down to the reputation of the builder or developer. So that's a real headline for me. Probably the other thing, which we haven't yet touched on is some cost saving that you might get in buying off-the-plan with stamp duty. If you could explain that, it's different in different states and territories, but particularly, you know, we're Victoria here, their off-the-plan benefits - explain that.

Tanveer: So let's talk about off-the-plan house and land, and then let's talk about the build property. So hypothetically, an average house in outer suburbs is about $700,000, let's say, in outer southeast or outer west, which means four bedroom, double garage, two bathrooms - a typical family home. $700,000 on an established home, if you're a first home buyer, the duty is $24,000 roughly, give or take, and $3,000 worth of other costs. If it's a house and land, which means land is $350,000 and build is $350,000 - in that case, the standard is zero because it's computed on the land. So it's zero*. The tricky one is off-the-plan, which means 5/95 contract. So in off-the-plan, it depends on the dutiable value. What is the dutiable value? When you sign the contract, how much of the building was completed? So let's say, when you sign the contract, it was land only that the duty will be calculated on - the value of the land on the signing of the contract. Let's say, for example, there is a builder that sells the finished product, or nearly finished product, a reputable builder. So let's say, if it's 60% complete, if it's a $700,000 house, it will be roughly about $450,000 worth of work complete. Then the duty will compute it on that $450,000 which means it's still zero. So it is a thing that a lot of people need to understand, that they can actually save a lot money in there, and that $20, $30, $50,000 can be make or break for first home buyers, actually.

*Editor’s note: Stamp duty for first‑home buyers in Victoria is $0 when the dutiable value is below $600,000. There is also a discounted (concessional) rate of stamp duty for first‑home buyers when the dutiable value is between $600,000 and $750,000. Stamp duty rules and first‑home‑buyer concessions vary by state, so make sure you check the eligibility criteria and thresholds in your own state or territory.

Brent: Absolutely. So the benefits of off-the-plan are quite tangible when you look at those stamp duty benefits. And, you know, that that can go towards your safety net, it can go towards furnishing the home, it can go towards your mortgage payment. So I think there's real benefit in that. But again, it does change from state and territory across Australia.

Brent: With a few minutes to go, there's just a couple of other questions which I wanted to get your take on, and that's around, you know, you do hear scary stories about buying off-the-plan, but what I'm sensing from you is it enables us to get into the market sooner with a lower deposit. You need to do your homework with a builder and/or developer. You can customise your home. You need to look into the contracts, so it's worthwhile getting a lawyer or solicitor to look at the contract there, but it's probably not as scary as one would first think in buying off-the-plan. I just wanted to get your thoughts...

Tanveer: That's correct. So fear is easy to sell, right? If you look into this, a lot of people have made an enormous amount of wealth just in last 10 years. I'll give you an example: if you look at the property average price in Officer, for example, or Truganina, the average price was about $250,000 10 years ago. Hypothetically, you were interest only until the last 10 years, and you would have never paid a single dollar on principal. Your growth was 160% or 170%, considering today's price. Same money, let's say, at that time, $250,000 - that time you needed 10% deposit, $25,000. If you put it in S&P 500*, it would have grown about $64,000-$65,000, and if you've been paying an extra $500, it would still be $150,000, so the difference of growth in this, and this is enormous. So if you get into the right area at the right time, you can make actually, enormous amount of wealth. The beauty of this is leveraging, basically.

*Editor’s note: The S&P 500 is a stock market index that tracks the performance of the 500 largest US public companies.

Brent: Yeah, what I pick up there is, it may not necessarily be the timing of the market, but it's time spent in the market. Procrastination does creep into a lot of people that, you know, they might think that they've missed the boat. And often people say, you know, when was the right time to buy? Was it 20 years ago? And what I say, it's today, the time to buy is now, if you're wanting to get into the market because, as history tells us, it is continuing to grow. But what we do need to do, as you've rightfully said, is to do your research. Speak with a finance broker first before you embark on your journey, is probably one thing that you keep referring to. Look at the opportunities with the government grants, and also the stamp duty savings in your relevant state or territory, is probably another. But the overwhelming benefit is that you can customise your home. You can get in with a lower deposit at times and also, depending on your deal structures, you may not have to pay any money until it actually does settle. So there's a lot of upside when looking at buying off-the-plan, and there's a few things to look at. And I think it's just with good interrogation and investigating reputation of builders and developers that it can be a smooth process. Probably the last point is, you know, what advice do you give to anybody embarking on home ownership when they're coming to you for financial advice?

Tanveer: You know, I tell them a) do not go for a dream house right away. Keep your borrowing power in your hands. Just go for a smaller house. Just get through the market. Just get into the market. Leave that borrowing power, because the idea of owning a property is a wealth creation. It's not just, you just go for a house, because you can live in any house. If I am doing a mortgage in, let's say, outer southeast, I can comfortably live in two bedroom house in Hawthorn or Toorak, for example, which is very central location in Melbourne. The idea is to create wealth in the long term. So how you do that is play a small game, like get into a smaller property that you can comfortably afford, understand the market. You can rentvest, if you want to move into the city, you can climb up the property ladder using that. Like I said, leveraging is the beauty of this game.

Brent: Using leverage in time is what I'm hearing, is a real great wealth creation vehicle, but it's to get into the market. Don't let fear take over. Don't let procrastination take over. But take that leap of faith and get into the market. I think it's been great advice that you've been giving to our listeners and viewers, Tan, today. Key thing is leverage is key, but do it within what you can afford. It's what you can afford, don't overstretch.

Tanveer: Because the interest rate can go up, down, sideways. So you need to leave that room in your borrowing power and have a safety net.

Brent: Have a safety net so you've got some money there, in case there's any bumps along the way.

Tanveer: A smaller house. The beauty of a smaller house, I invest a lot in three-bedroom, single garage houses. The reason I love them is it's recession proof. When the market comes down, people want to downsize. Where are they going to go? This one. When the market goes up, first home buyers want to buy something affordable. What are they going to buy? A three-bedroom, single garage. So if you buy the right property, you will always have returns for it. Like my first house - three-bedroom, single garage in Officer, I bought it for $330,000 I still have that one. Beautiful property.

Brent: Buy and hold. So, you're taking a long-term approach. Get into the market. Look at leverage, but in a comfortable way that you can actually afford it. Get some advice from a financial broker - is critical to those steps. Do your research on your builder and developer, but you know, take that first step, make that journey and get on the property ladder. Thanks for joining us today, Tan, it's been really informative, and really appreciate and value your time.

Brent: Thanks for listening to the Live proud podcast, brought to you by Frasers Property Australia, where we share real stories and insights shaping the Australian property market today, subscribe to hear more conversations that remind us why finding a home and community you're proud of is one of life's biggest milestones.