Everything You Need to Know About Off-the-Plan Purchases

Off-the-Plan Purchases Give You More Time to Save, But Settlement Still Catches People Off Guard

Buying off-the-plan means you sign the contract now and settle in 12 to 24 months when construction finishes. The deposit structure is typically 10% at contract exchange, sometimes staged across the build. That extended timeline gives you room to build savings, but it also means your lender will reassess your financial position at settlement, not at contract date.

Kellyville has seen consistent off-the-plan apartment releases around Kellyville Ridge and near Memorial Avenue, particularly targeting buyers priced out of houses in the suburb. The appeal is clear: stamp duty concessions in New South Wales eliminate transfer duty entirely on properties valued up to $800,000, and most off-the-plan apartments in Kellyville sit comfortably under that threshold. If the property is valued between $800,001 and $1,000,000, a sliding concession applies.

Consider a buyer contracting on a two-bedroom apartment valued at $680,000 in an off-the-plan development near Kellyville Metro. They pay a 10% deposit of $68,000, split into $34,000 at contract and the balance at slab pour six months later. First home buyer eligibility in New South Wales requires you to move in within 12 months of settlement and live there for at least 12 continuous months. That buyer qualifies for full stamp duty exemption, saving approximately $25,000. They're not eligible for the First Home Owner Grant because that only applies to new homes valued under $600,000 or land and build contracts capped at $750,000, and this apartment exceeds the grant threshold.

The catch: at settlement 18 months from now, the lender will revalue the property and reassess the buyer's income, debts, and credit profile. If interest rates have moved or the buyer has taken on additional debt, the loan might not proceed on the same terms initially indicated at pre-approval. That's not hypothetical. It happens.

How Pre-Approval Works When You're Contracting 18 Months Before Settlement

Pre-approval is valid for 90 to 120 days depending on the lender. Your off-the-plan contract settles well beyond that window. The pre-approval you obtain before signing the contract gives you confidence in your borrowing capacity now, but it's not a binding commitment from the lender to fund the purchase at settlement.

When you apply for home loan pre-approval, the lender assesses your current income, liabilities, living expenses, and credit history. They'll also assess the property based on the contract price or development plans, but the final valuation happens at settlement when the property is complete. If the completed apartment values below the contract price, the lender will only lend against the lower valuation. You'll need to cover the shortfall in cash.

Buyers in Kellyville using the Australian Government 5% Deposit Scheme face an additional requirement: both the purchase price and the lender's assessed value must be at or below $1,500,000 for New South Wales capital city and regional centres. That's not a constraint for most Kellyville apartments, but it becomes relevant if you're considering a townhouse or land and build contract in the suburb where values can push closer to or above $900,000.

The Sunset Clause Protects the Developer, Not You

Every off-the-plan contract includes a sunset clause, which sets a date by which the development must reach practical completion. If construction isn't finished by that date, either party can terminate the contract. Developers use this clause to walk away from contracts if property values have risen significantly since you signed, allowing them to resell at a higher price.

In a scenario where a Kellyville buyer contracted on an apartment in late 2024 with a two-year sunset clause expiring in late 2026, and property values in the development have increased by 10%, the developer has a financial incentive to delay completion past the sunset date and rescind the contract. The buyer gets their deposit back but loses the opportunity to purchase at the original price and may have incurred legal and conveyancing costs.

You can negotiate a shorter sunset clause or request that the developer cannot terminate without your written consent except in specific circumstances, but developers rarely agree to those terms in a strong market. Read the clause and understand who controls the exit. If the developer can terminate at will and you've structured your finances around that purchase, you're exposed.

Interest Rates Will Move Between Contract and Settlement

You're locking in a contract price today, but your loan won't be drawn until settlement. The interest rate environment at settlement determines your repayments, not the rate at contract date.

If you obtain pre-approval with a variable rate home loan expectation and rates increase by the time you settle, your borrowing capacity may have reduced. Some lenders will honour the original approval if your circumstances haven't changed, but others will reassess using current serviceability buffers and rates. Lenders add a buffer of 3% above the actual rate when testing whether you can afford the loan. If the variable rate at pre-approval was one level and it's higher at settlement, that buffer applies to the new rate.

Fixed interest rate options give you certainty on repayments once the loan is drawn, but you can't lock in a fixed rate 18 months before settlement. You'll lock the rate a few weeks before settlement when the lender issues final approval. If fixed rates have increased in that period, your repayments increase accordingly.

In our experience, buyers focus heavily on the purchase price and deposit but underestimate how rate movements affect their capacity to settle. If you're borrowing 95% of the property value under the 5% Deposit Scheme, a rate increase of even 50 basis points can reduce your maximum borrowing capacity by tens of thousands of dollars. The contract doesn't care. You either settle or you breach.

Kellyville's Off-the-Plan Market Targets Buyers Priced Out of Houses

Kellyville's median house price sits well above $1,000,000, which puts detached housing out of reach for most first home buyers relying on low deposit options. Off-the-plan apartments and townhouses in developments near the Kellyville Metro precinct and along Windsor Road offer entry points between $600,000 and $850,000, depending on size and inclusions.

The suburb benefits from the Metro Northwest line, with Kellyville Station providing direct access to the Sydney CBD in under an hour. That connectivity has driven developer interest, and multiple projects have launched in the past two years targeting downsizers and first home buyers. The trade-off is density. You're buying into a high-rise or mid-rise development with strata levies that typically start around $1,200 to $1,800 per quarter, and those levies can increase once the building is fully occupied and the owners corporation takes over from the developer.

Strata levies aren't included in the purchase price, but lenders factor them into serviceability. If you're borrowing at the edge of your capacity, those levies reduce how much you can borrow. A $1,500 quarterly levy translates to roughly $500 per month, and the lender treats that as a fixed expense when calculating your borrowing capacity.

Deposit Structures for Off-the-Plan Purchases Vary by Developer

Most developers require a 10% deposit, but the payment structure differs. Some require the full 10% at contract exchange. Others stage it: 5% at contract, 5% at a construction milestone such as slab pour or frame completion. Staged deposits give you more time to accumulate funds, but you need to have the full amount available by the specified milestone or you breach the contract.

If you're using the 5% Deposit Scheme, the government guarantee covers the gap between your 5% deposit and the 20% threshold, which eliminates Lenders Mortgage Insurance. The developer still requires 10% upfront in most cases, so you'll need to fund that additional 5% from genuine savings, a gift from a parent, or the First Home Super Saver Scheme. The FHSS allows you to contribute up to $15,000 per year into superannuation, capped at $50,000 total, and release those funds for a home deposit. Concessional contributions are taxed at 15% instead of your marginal rate, which makes it a tax-effective way to build a deposit if you're planning 12 to 24 months ahead.

The developer's deposit requirement and the lender's deposit requirement are separate. The developer wants 10% to secure the contract. The lender will fund 95% of the property value at settlement under the 5% Deposit Scheme, meaning you need 5% of the purchase price in genuine savings at settlement, plus settlement costs. If you've already paid 10% to the developer during construction, that amount is credited at settlement, and the lender funds the remaining balance.

Buying Off-the-Plan Means You're Buying a Plan, Not a Property

You're contracting based on floor plans, artist impressions, and a display suite. The finished apartment might differ in finish quality, outlook, or light depending on how surrounding blocks develop. Developers can also make variations to the design, materials, or layout within the scope allowed by the contract, and you won't know what those changes are until closer to completion.

The contract will specify what inclusions are standard and what constitutes a variation requiring your consent. If the developer substitutes a lower-grade appliance or changes the floor tiling, check whether that requires your approval. Most contracts allow minor variations without buyer consent.

Valuations at settlement reflect the completed property in its final state, not the plan you signed. If the development is completed in a softer market or the builder has cut finishes to manage costs, the valuation might come in below contract price. You're still liable to settle at the contract price, so you'll need additional cash to cover the shortfall between the lender's valuation and the amount owing.

Call one of our team or book an appointment at a time that works for you. We'll review your contract, confirm your deposit structure, and structure your home loan application so it's ready to settle when construction completes, not stuck in reassessment because your circumstances have shifted.

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