Off-the-plan Property Jargon
If you are new to buying property, or just new to buying off-the-plan property, you may find some of the terms used confusing. We have put together a quick guide to decoding some of the jargon to help you understand what’s what when it comes to buying a new house or apartment in Brisbane or on the Gold Coast.
You would have signed a contract when you brought the property and whether or not you can resell it before settlement is subject to vendor approval and the written clauses in your contract.
The specific terms surrounding the cancellation of a contract is subject to what was outlined in the terms of the agreement which you signed off on.
This means if you now buy a property for $600,000, where stamp duty was formerly a little over $20,000, an additional seven per cent will add an extra $42,000.
The Palaszczuk Labor Government introduced the tax on foreign purchases of houses and apartments in its budget legislation last October. The new transfer duty is anticipated to raise about $90 million over the next four years.
In Queensland, the stamp duty doesn’t only apply if you live overseas and are buying here. You could be a foreign national who’s lived here for many years investing and still wear the extra levy.
The certificate will be granted for a specified development on condition that the dwellings for sale in the development are marketed in Australia. Developers can also choose to market the development overseas if they wish.
New dwelling exemption certificates will normally exempt prospective foreign persons from individually seeking foreign investment approval to purchase interests in new dwellings up to a total of $3 million in the specified development.
If they wish to purchase further interests in new dwellings, the certificate will not cover these purchases and the foreign person will individually need to seek foreign investment approval.
Foreign persons will then need to apply and gain approval for
The Foreign Investment Review Board is a non-statutory body established to advise the Treasurer and the Government on Australia’s Foreign Investment Policy and its administration about proposed investments in Australia.
It is important foreign investors understand and comply with the framework or a breach may result in civil or criminal action.
For more information visit: www.firb.gov.au
This is agreed upon by a contract between the potential tenant and the property owner. If a contract is not used or is not appropriately signed, the tenant is instead considered a squatter.
If a property decreases in value, then the taxation will be lower. The value is calculated by two different factors: Depreciation on Plants and Equipment, and Depreciation on Building Allowance.
Plants and Equipment refers to appliances and décor that belongs to the property itself (carpets and blinds).
Building Allowance refers to the construction costs of the materials that the house consists of.
This can be claimed against your taxable income, decreasing the amount paid on tax. Many evaluators can also be claimed on tax, making it a wise decision to keep track of the value of your property.
Some flippers work as a group to put a large deposit on the property, before using combined talents to renovate the property for an affluent market.
This strategy is often used on disaster-stricken (but not disaster-prone) properties, as damaged properties are easy to afford, but take a skilled renovation team to repair to a profitable price.
However, it is important to remember that location is more important than building status and can greatly determine the price of a home.
Often they come with a regular membership fee to cover maintenance costs, and members are encouraged to attend meetings in order to discuss and vote on important issues. While this can benefit both tenants and landlords, excessive fees can sometimes deter landlords.
The body corporate is a similar structure to a parliament, with a chairperson instead of speaker, a committee instead of senate, and common property instead of public service sector. However, votes are distributed based on amount of properties, meaning that someone who owns three lots will have three votes.
An important thing to remember is that a body corporate operates as a hierarchy where each level has a different role, but cannot act upon anyone whom they are not in a contract with (The body corporate has little influence over tenants unless a contract has been negotiated between both parties).
Body Corporate: A parliamentary-like system comprising of property owners.
Property Owners: Landlords with the ability to evict and enforce rules for tenants.
Tenants: Residents who pay rent, but must follow the rules of their contract.
Lot owners are automatically added to the body corporate as a legal requirement to the overall multi-dwelling.
Capital losses can be used to lower the capital gains in the same financial year, and gains can also be lowered if the previous year resulted in an overall capital loss.
CGT can be avoided by using the property as a
All properties purchased pre-1985 are exempt from the CGT.
They can act as reserves or a levy, meaning that property owners will not be forced to make a massive payment in order to fix something in the communal space. They may be used in times of restricted flooding (ie. a water pipe in a communal area burst, flooding only that area), for example.
High property prices often result when not enough houses are being built, or when average income is increasing. Other factors like location and demographics don’t affect the whole state, but are important when purchasing property.
High levels of inflation can decrease the value of a currency, causing the overall price of goods to rise and deterring the population from spending on luxuries or higher-end properties.
Inflation can often be caused due to over-supply of currency, under-supply of goods, high wages, or lack of competition. Banks commonly try to limit inflation levels to encourage investment without devaluing their currency, but supply-and-demand can sometimes have a drastic impact on inflation.
Commonly seen as a way to determine the cost-of-living, the CPI comes in two forms, reflecting rural communities, and metropolitan communities. While the metropolitan CPI is the standard (most of the population is urban or suburban), both are important to analysing the living standards of respective groups, especially rural communities.
The CPI is most efficient when used with other tools, as it does not account for luxuries, property values, or demographics.
NABERS uses a six-star system, and is important for calculating utility bills prior to purchasing a property. A one-star would potentially have wasteful appliances, and only have two windows that can be opened, while a four-star would have conservative appliances, and an internal ventilation system to allow cross-breeze from the window.
The NABERS company has hints and tips on how to improve your environmental impact, whether you are a tenant or a property owner.
These often have contained private living spaces that front onto corridors with elevators or stairs, and the units are often part of a single building, each with a balcony as opposed to a garden.
Strata titles also include a body corporatethat property owners are added to upon purchase, and must maintain the common areas.
‘Strata’ refers to high-density residential living in a vertical form, such as high-rise apartments or flats, generally where individually-owned floor plans are stacked vertically upon each other.
Be wary not to confuse with group title.
It does not mean making a profit, as unaccounted expenses could still result in you making a loss.
The LVR is used to assess the risk a borrower would default on the loan, and is vital to safeguard both parties in the mortgage arrangement. It is used along with income and credit checks to ensure the loan will be repaid.
It is often a percentage, comparing the mortgage amount to the value of the property (e.g if the mortgage is 300,000 and the property value is 600,000, the LVR would be 50%). The higher the percentile, the riskier the loan, and the less likely your application would be accepted.
If your deposit is a high percentage of the value, the LVR would be lower and therefore be more likely to be accepted. However, most first-home buyers would find it difficult to pay a 50 per cent deposit or such. Banks offer long-term mortgages, as well as alternative loans to decrease the LVR.
Beware, both usually have interest, and can drastically affect your credit rating. So it can often be wiser to just save up money until the required deposit amount is paid, and live within your means.
Borrowing against Property:
Borrowing against property often carries a danger based on the value of the property.
A potential investment property is $500,000 and requires a $50,000 deposit.
Would you borrow $100,000 against a $300,000 property, or pay more of the deposit by borrowing $200,000 against an $850,000 property?
In the case of borrowing against a property to purchase a property, you would always be in the same amount of debt, so it depends on interest and leniency towards LVR as to the mortgage’s quality and ease of management.
If the development you purchased off-the-plan is incomplete by the sunset clause date of expiry, then the contract is deemed void and settlement won’t take place. In the event this takes place, then your deposit will be refunded and you are legally entitled to walk away from the project.
You should fully understand all the obligations set out in the Sunset Clause. For instance, a Sunset Clause can lead to a contract being terminated before the settlement date.
In New South Wales (NSW) the Conveyancing Amendment (Sunset Clauses) Act 2015 (NSW) came into force as the new Division 10 section 66ZL of the Conveyancing Act 1919 (NSW) in November 2015. The NSW Government ensured developers who wanted to rescind a contract must first seek consent from the purchaser to go through with the termination. However, each different state and territory treats sunset clauses differently.
Your rights depend, in large part, on what is outlined in the contract of sale. Some things a contract of sale must include are:
Identify the property as well as explain the terms on which it’s being sold.
Attach important documents such as a zoning certificate, a drainage diagram (showing any sewer lines), a copy of the property certificate, a copy of the plan for the land, copies of any documents showing easements (the right of someone else to cross or use the land), rights of way, restrictions, covenants, etc.
Sellers of strata properties (generally units or townhouses) should also have attached a copy of the property certificate and strata plan along with a copy of by-laws concerning the use of common property.
If you negotiated a deal and are happy with the conditions on the contract of sale, then sign the contract documents.
Off-the-plan includes all financial and legal documentation which explains the contractual commitments, architectural plans and can include exterior/interior computer generated images.
If the apartment sits within your budget, then it’s time to make an offer! There are two types of offers – conditional and unconditional. If your offer is accepted, then you will exchange contracts with the seller. This is usually when the deposit is paid. If you are buying privately, you are usually required to pay a holding deposit (which can be anywhere between $2000 and 10 per cent of the purchase price). The deposit will be refunded in full if the sale should fall through. A cooling off period applies in most Australian states except for Victoria.
The date of settlement is when you will take legal ownership of the property. The balance of the purchase price should be paid when you take possession of the property. The length of the settlement period is one of the clauses in the contract. Settlement is usually 6 weeks (30 days in Queensland). However, the vendor can negotiate the settlement period with the buyer.
The Australian method of purchasing a property can differ from overseas countries which uses an instalment process.