Savvy home buyers are switching on to the idea that purchasing off the plan is a smart move in New Zealand’s hot housing market.
As house prices continue to rise, buying off the plan locks in many future benefits for people who are ready to purchase a home now.
The most obvious benefit is that you’ll secure your home at today’s price and, if the current market is anything to go by, it will likely have increased in value by the time you move in.
But there are additional financial incentives. You only need to pay the builder a deposit to secure the home until it’s built, with no progress payments. The deposit sits in the builder’s solicitor’s trust account until settlement.
Start your property search
Banks are usually able to accept a lower deposit for new builds, compared to existing homes. And if you qualify for the government’s First Home Grant, you can receive up to double the amount you would if you were buying an existing home - up to a maximum of $10,000 to put towards your deposit.
In major housing developments being delivered by Kāinga Ora in the Auckland suburbs of Northcote, Mangere, Mount Roskill, Tāmaki and Hobsonville Point, most of the homes are sold off the plan. And while it is an adjustment for some people who are used to the traditional open home, offer, or auction scenario, it’s proving to be a popular way of getting on the property ladder.
Buying off the plan means purchasing a home before it’s built, based on the detailed plans and renders provided by the developer.
You’ll have a clear idea of what you’re getting, including the layout, materials, colour scheme, and interior finishes. And you’ll have time to save more, get your finances in order, and buy a few nice pieces of furniture while you wait for construction to be completed.
Mike Greer Homes, New Zealand’s largest privately-owned construction company, has been selling homes off the plan for more than 20 years.
The 101 apartments they’re building as part of Kāinga Ora’s Mangere Development will all be sold off the plan.
Mike Greer Homes is selling KiwiBuild apartments off the plan at Bader Drive in Mangere Development.
Mike Greer Homes National Sales Manager John Callaghan says the biggest hurdle buyers have to get over is trusting that what they sign up for is what’s going to be built.
Kāinga Ora aims to give buyers confidence by only working with builders with a proven track record of delivering high-quality homes.
“Once a client realises the scale of Mike Greer Homes and our reputation, they start to gain trust in our company,” Callaghan says.
“This is backed up with communication to the buyer throughout all the stages of consenting prior to starting on site.”
Callaghan says the guaranteed fixed price is a significant benefit for buyers, but many people also prefer the convenience and simplicity of buying off the plan.
Anyone who has tried buying a property in the current market will be familiar with the stress and disappointment of competitive multiple-offer situations and auctions that can drive the sale price up.
Colliers National Director Pete Evans says buying off the plan is nothing new, but it's increasing in popularity.
“Potential buyers can see what is available for sale, what suits their needs and budget and sign-up and secure a property by signing a fixed price contract. This is unlike established properties where buyers spend months looking for their dream home only to be outbid at auction, therefore no purchase, more time and expense wasted for no result.”
Evans says Colliers Residential Project Marketing sells over 95% of new homes off the plan, with less than 5% sold on completion.
All homes in Kāinga Ora developments are sold at a fixed price, not by auction or tender.
“Buyers should not wait till completion as usually the best homes are selected off the plan,” he says.
The new homes in Kāinga Ora developments are seen as good value for money as they’re well-built using quality, durable materials, and in desirable locations, close to public transport and local amenities.
Buyers also have the advantage of buying a brand new, low-maintenance architecturally designed home that’s built to a minimum 6 Homestar standard, which means it’s easier to keep warm, dry, and cheaper to run than a typical new house built to the Building Code.
“We have all our homes valued by a professional and this number is our sale price,” Callaghan says.
“This gives the purchaser confidence that it will value up when they need to draw down their mortgage.”
Callaghan says while buying off the plan means the design and layout of the home can’t be changed, you often get to choose from a range of options, especially if you get in early. Buyers can also typically choose from lighter or darker colour schemes and add a personal touch with furniture and decor.
While there are many great reasons to buy a home off the plan, it’s still important to do due diligence. That can include researching the company’s previous developments, visiting a show home, and seeking legal advice.
Mortgage brokers and banks also tend to view buying off the plan as a good investment.
“It is smart,” says Squirrel founder and mortgage broker John Bolton. “I think new builds are better value for money and buyers don’t get caught up in the hype.”
He says that new builds tend to be priced rationally and can sell “at a bit of a discount” simply because they are not built yet.
However, buyers should be aware that lenders generally only approve finance for up to three months so they may need to reapply closer to settlement.
“The advantage with a mortgage broker is that they can talk to you throughout the process and keep any approval alive by renewing it every 3-4 months.”
Bolton’s advice to anyone considering buying a new home off the plan is: “Go for it.”
Just make sure to get some expert advice and support from someone who’s familiar with the process.
Callaghan says he thinks buying off the plan will be “the norm” until housing supply outweighs demand, so it’s likely going to remain a popular option for years to come.
- This content was supplied by Kāinga Ora
