Buying off the plan can seem like an attractive
proposition — secure a brand new apartment at
today’s price, pay a small deposit now, and
settle when construction completes.
But off the plan purchases come with unique
risks that every Victorian buyer must
understand before signing.
What Does Buying Off the Plan Mean?
Buying off the plan means purchasing a
property — typically an apartment or
townhouse — before it has been built,
based on architectural plans and
developer specifications.
You sign a contract and pay a deposit
(typically 10%) when you exchange.
Settlement occurs when construction
is complete — which can be 1–4 years
after you sign.
The Potential Benefits
Stamp duty savings
In Victoria stamp duty on off the plan
purchases is calculated on the contract
price minus the construction costs
incurred after the contract date. This
can result in significant stamp duty
savings compared to buying an
established property.
First home buyer grants
The $10,000 First Home Owner Grant
applies to off the plan purchases as
they qualify as new homes.
Modern construction
New builds come with builder’s warranty,
modern fixtures and fittings, energy
efficiency, and no immediate maintenance
requirements.
Capital growth potential
If the market rises between signing
and settlement you benefit from
buying at a lower price.
The Risks — Read These Carefully
1. Valuation risk
This is the biggest risk. If the property
market falls between signing and settlement
the bank will value the property at
settlement — not at what you paid.
If the bank values it below your purchase
price you must either:
- Make up the difference with additional
cash - Renegotiate with the developer
- Risk losing your deposit if you
can’t settle
In a declining market this can mean
tens of thousands of dollars shortfall.
2. Sunset clause risk
Victorian off the plan contracts contain
a sunset clause — a deadline by which
the developer must complete the project.
If construction isn’t complete by the
sunset date either party can rescind
the contract.
Historically some developers have
deliberately delayed construction to
trigger sunset clauses — allowing them
to resell at higher prices in a rising
market. Victorian law has been tightened
to address this but the risk remains.
3. Substitution of materials
What’s specified in the contract is not
always what gets built. Developers can
substitute materials and finishes if
the contract allows it. The apartment
you saw in the display suite may look
quite different from what you receive.
Always have your conveyancer review
the contract carefully for substitution
clauses and specifications.
4. Developer insolvency
Developers can go insolvent during
construction. If this happens your
deposit may be at risk depending on
how it was held and whether the
developer had insurance.
Always verify that your deposit will
be held in a trust account and that
the developer has appropriate insurance.
5. Settlement finance risk
Your finance pre-approval when you
sign may not reflect your borrowing
capacity at settlement 2–3 years
later. Changed employment, increased
debt, or tightened lending conditions
can affect your ability to settle.
Always get independent financial
advice before signing and consider
your circumstances at settlement
— not just today.
6. Body corporate uncertainty
For off the plan apartments the
owners corporation is brand new
at settlement. There are no financial
records, no meeting minutes, and no
history of how the building is managed.
You’re buying into an unknown
governance structure.
7. Oversupply risk
Melbourne has experienced apartment
oversupply in certain precincts —
particularly Docklands, Southbank,
and the CBD. Oversupply can suppress
rental yields and capital growth.
Research the supply pipeline in your
target area carefully.
How to Protect Yourself
1. Use an experienced conveyancer
Off the plan contracts are complex
and developer-friendly by default.
An experienced Victorian conveyancer
can negotiate better terms, tighten
specifications, and identify risky
clauses before you sign.
2. Research the developer
Check the developer’s track record.
Have they completed projects on time
and to specification? Are there
complaints or legal proceedings against
them? Ask for references from previous
purchasers.
3. Get independent financial advice
Understand your borrowing position
at settlement — not just today.
A mortgage broker can model different
scenarios and help you understand
your risk exposure.
4. Check the sunset clause
Understand when the sunset clause
triggers and what protections you have.
5. Verify deposit holding arrangements
Confirm your deposit will be held
in a statutory trust account and
not released to the developer during
construction.
Is Off the Plan Right for You?
Off the plan can work well for buyers
who:
- Have a stable financial situation
unlikely to change over the
construction period - Are buying in a strong demand area
with limited oversupply - Have engaged an experienced
conveyancer to review the contract - Understand and can absorb the
valuation risk at settlement - Are buying primarily to live in
rather than as a short-term investment
It is higher risk for buyers who:
- Have uncertain income or employment
- Are buying in oversupplied precincts
- Cannot absorb a valuation shortfall
at settlement - Are relying heavily on capital growth
The Bottom Line
Off the plan purchases offer genuine
benefits — particularly stamp duty
savings and first home buyer grants.
But the risks are real and have
caught many Victorian buyers out.
Go in with eyes open. Get experienced
legal and financial advice. And make
sure you understand exactly what you’re
committing to before you sign.
Disclaimer: This article is for
general informational purposes only
and does not constitute legal or
financial advice. Off the plan contract
terms vary significantly. Always engage
a licensed Victorian conveyancer and
seek independent financial advice
before signing any off the plan contract.
Vic Property Guide 
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