Off-the-Plan vs Established Properties: Which Is the Better Investment?

The decision between an off-the-plan or established property is one of the first choices investors have to make. Off-the-plan properties offer reduced maintenance costs, tax benefits, and higher tenant appeal, while established properties offer greater predictability for rental returns and demand.

For investors deciding between off-the-plan and established properties, understanding the advantages and disadvantages of each is essential.

Comparing Off-the-Plan and Established Properties for Investment  

Maintenance Costs 

Off-the-plan investments result in a brand new property that is much less likely to have maintenance issues during the first few years after finishing construction. Investing in a new property build will generally come with warranties that cover various building problems - in Queensland, the Home Warranty Scheme covers the cost of major repairs for the property for 6 years and 6 months from the date of the contract.

Established properties do not have the benefit of maintenance warranty coverage. Older properties are more likely to require repair work. Investors should review the property's age and repair work history to gain a better understanding of its future maintenance needs. The costs of regular maintenance can add up over time and eat into the return on investment.

Tax Benefits

There are tax benefits of purchasing an off-the-plan property - investors can claim property depreciation across the full 40-year period. These depreciation claims also apply to appliances and furnishings of the investment property (plant and equipment assets). The depreciating value of air conditioning units, hot water systems, solar panels and carpets can be deducted from taxable income, resulting in more tax savings.

Property depreciation claims can still be made for established properties, but only for the number of eligible years remaining. Plant and equipment depreciation claims have a much shorter eligibility period and are usually unavailable when investing in an established property. 

Tenant Appeal

The appeal of living in a brand new home is highly attractive to tenants. Once built, off-the-plan investments often enjoy high rental demand from potential tenants.

Established properties offer a different appeal for tenants. Properties in well-developed neighbourhoods will be supported by a broader range of amenities and services, offering greater convenience for tenants.

Market Data

Established properties are often located in suburbs or regions with extensive real estate data. Investors can review market trends to obtain a realistic expectation of future investment performance and make decisions with more confidence.

Off-the-plan properties are typically located in newly developing regions, which have limited market data for investors to review. Off-the-plan properties in locations with some market data available can offer more certainty for investors.

Waiting Period 

Off-the-plan properties have a longer timeline before investors can start earning returns - the property can take anywhere between 1 and 2 years to be completed. Working with an experienced investment builder that operates locally can accelerate the building process, especially if investors choose a house and land package.

Established properties can be leased out soon after the property is purchased, making it an ideal option for investors who want to start seeing returns sooner. 

Potential for Future Growth  

Off-the-plan properties located in rapidly developing areas are likely to enjoy capital appreciation as the region continues to expand. Established properties in developed suburbs tend to experience slower growth compared to off-the-plan properties, as the market is already mature. 

Which is Better for Investment - Off-the-Plan or Established Properties? 

A July 2024 report by realestate.com.au revealed that close to a third of buyers (31%) in Australia are choosing to build or buy off-the-plan over an existing home. Both investment options have differing potential for investment, and the decision should come down to your individual investment preferences and goals.

As an investment builder in North Queensland, Builder Direct works with investors to capture a slice of Australia’s rapidly growing regional market. We offer off-the-plan house and land packages in Cairns and Mackay that are designed to maximise return on investment and tenant appeal. Get in touch with our team today to find out how we can help you build a lucrative investment property in Queensland.