Before You Buy: The Terrifying Risks of New and Off the Plan Property

Are you looking to buy a new property or considering purchasing an off the plan property?

I know many investors are considering this since the recent federal budget, which leans heavily towards supporting brand-new property.

There is also a seductive story being told about buying off the plan or brand new: no repairs, no defects, no surprises, plus a nice stamp duty saving to sweeten the deal.

It's an appealing pitch, and according to two experts with a combined 40-plus years in construction and finance, it's also one of the most dangerous property investment stories.

Greg Hankinson, Director of Metropole Construction with over 20 years in the building industry, and Dorian Traill, Senior Wealth Planner at Metropole (also 20-plus years in the game), let us in on what really happens when investors buy off the plan or brand new.

What follows isn't theory — it's what these two see behind closed doors, every week.

You're buying a promise, not a product

The first problem starts before a single brick is laid.

Greg puts it very well…when you buy off the plan, you're buying a promise, not a product.

Contracts at this stage are rarely detailed enough to specify exact specifications and finishes.

You've inspected a display suite, admiring the stone benchtops, timber floors and gold tapware, and assumed that's what you're getting.

Most off-the-plan contracts are heavily weighted in the developer's favour, giving builders the right to change appliances, kitchen finishes, tiling and more between the day you sign and the day you settle.

And there's a real cost to waiting, too.

Developers and builders typically need a certain number of pre-sales locked in before construction even begins, meaning purchasers may face six, nine, or more months of dead time before the property is even underway.

That's an opportunity cost most investors never factor in.

"New" doesn't mean "defect-free"

One of the biggest myths Greg wanted to bust: buying brand new does not mean it is compliant or defect-free.

"Just because you buy new doesn't mean it's not going to be non-compliant or have a bunch of defects."

In his experience, a large proportion of defects in new builds relate to waterproofing and flashing. And the cruel part is that these issues often don't show up for 18 months to four years, long after the resulting water damage begins.

By then, the builder is long gone, the developer has moved on, and the mess, including the regulatory nightmare, is entirely yours to fix.

Greg shared a live example: his team was midway through due diligence on a new build that appeared flawless on the surface.

A proper building inspection uncovered waterproofing problems, roof flashing issues, and several other defects that would have gone unnoticed by an average buyer — until the bills started arriving.

The off-the-plan trap: a two-year waiting game with no guarantees

If construction risk wasn't enough, Dorian's side of the story adds financial and legal risk as well.

Valuations can crash before you even move in.

Dorian pointed to Brisbane's high-rise market as a cautionary tale: a wave of resale listings at prices below the original off-the-plan purchase price dragged down valuations for properties still under construction.

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Buyers who'd contracted at $600,000–$700,000 found their completion valuations were $50,000–$100,000 short and had to either cover the shortfall in cash or walk away and forfeit their 10% deposit.

Worse still, if the developer resold the property for less than the buyer's contract price, the developer could sue the buyer for the shortfall.

Legislation and lending rules can shift under your feet.

Dorian recalled that roughly a decade ago, lenders exited the market for financing off-the-plan purchases within self-managed super funds, forcing buyers to scramble for new lenders mid-contract.

Around the same time, mortgage insurers began restricting entire postcodes for buyers borrowing above an 80% loan-to-value ratio, meaning finance approval was never guaranteed.

Your contract is tied to the property - not the developer.

If a developer goes broke mid-project, the contract doesn't disappear - it remains attached to the property, now controlled by whoever takes over (a mortgagee in possession, a liquidator, or a new developer).

Buyers are typically locked in for years because sunset clauses that allow an exit usually can't be activated for four or five years.

If a new developer takes over, they may completely rework the design. Dorian knows of a Sydney case where a replacement developer used a standard contract "variation clause" (allowing up to 5–10% design changes) to squeeze an extra unit onto every floor - quietly shrinking every existing buyer's unit by 10% in the process.

Finance approval has a use-by date.

Off-the-plan purchases typically require an unconditional contract with a 10% deposit up front - but finance pre-approval is usually valid for only three to six months.

If construction drags on for two years (as high-rise towers often do), your original approval will expire long before settlement.

At that point, the lender reassesses everything: your income, your serviceability, and a new valuation.

If your circumstances have changed - job loss, reduced income, or anything - or the valuation comes in low, you can be left unable to secure finance, in default on the contract, and facing the loss of your deposit.

So what should you actually do?

The advice from both experts was blunt and consistent.

From Greg (construction):

• Avoid off-the-plan purchases altogether unless you're genuinely weeks away from completion.
• Don't let stamp duty savings be the deciding factor - it's a minor benefit, not a strategy.
• Always commission an independent, thorough building inspection before you buy, so you understand what's really behind the walls, not just what's in the display suite.
• If you don't have the expertise to assess a build yourself, pay someone who does. It's a small cost against a potentially enormous downside.

From Dorian (finance):

• The simplest way to avoid these risks is straightforward: don't buy off the plan.
• If you proceed with a new or near-completion property, understand exactly how long your finance approval will remain valid and what happens if it lapses.
• Read the fine print on sunset clauses and variation clauses before you sign - know exactly how tied you are to the contract, and to the property, not the developer.

The bottom line

While it can be difficult, take the emotion out of the decision.

Too many buyers fall in love with a display suite and skip the due diligence that would protect them.

If you're going to buy new, make sure it's a near-complete property, back it with a proper independent inspection, and go in with your eyes open about financing risk - not just the sticker price and the shiny tapware.

As Warren Buffett's first rule of investing goes: don't lose your money.

Buying off the plan, or brand new without proper diligence, is one of the fastest ways in property investing to break that rule.