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Off-the-plan property is sold on three promises — bigger depreciation, stamp duty concession, and a shiny new asset that "everyone wants". The promises are technically correct in narrow circumstances. The underlying maths over 10 years is far less flattering than the brochure, and the failure rate among off-the-plan investors is higher than any other strategy in Australian residential property.

This post compares an off-the-plan apartment in Brisbane Fortitude Valley (4006) against an established Bulimba (4171) house at similar entry price, over 10 years, with realistic numbers on both sides. The gap in net wealth created is approximately $300,000 in favour of the established house.

What "Off The Plan" Actually Means#

You sign a contract to purchase a property that has not yet been built, off architectural drawings and a marketing brochure. You pay a deposit (typically 10%) at exchange. The balance is paid at settlement when construction completes — usually 18 to 36 months later.

The legal exposure is asymmetric. You are committed at exchange. The developer is committed only to deliver the building. Sunset clauses, design variations, and finance changes can leave you settling on a different product than you signed for, in a different market than the one in which you committed.

The Three Reasons People Buy Off The Plan#

Reason 1: "Bigger depreciation." Brand-new builds give the buyer the full Division 40 plant and equipment claim — they are the first user. Established properties bought after 2017 are locked out of Division 40 on second-hand items.

Reason 2: "Stamp duty concession." Some states (notably Victoria, though scope was significantly reduced) offer reduced stamp duty on off-the-plan purchases for owner-occupiers. Investors generally do not qualify.

Reason 3: "New is what tenants want." Marketing implies new properties command premium rents. The data does not support a sustained premium.

Each reason has a counter that the brochure does not mention.

Reason 1 Counter: Depreciation Doesn't Recover Lost Capital Growth#

The full Division 40 claim on a new $750,000 apartment generates roughly $5,500-$7,000 of additional annual deduction in year one compared to the same building bought as established. At a 32% marginal rate, that's roughly $1,900-$2,200 of extra tax saving per year, declining as the diminishing-value method takes its toll.

Across 10 years the total Division 40 advantage of off-the-plan over established is approximately $30,000-$40,000 of cumulative tax saving.

That sounds material until you compare it to the typical capital growth shortfall on off-the-plan apartments versus established houses. New-apartment markets in Australia have systematically underperformed established-house markets in the same suburb by 1.5-3.0% per annum over rolling 10-year periods, driven by:

• Continuous supply of competing new stock pushing rents and resale prices down
• Lack of land content (apartments are mostly air space; houses include the underlying land)
• High body corporate fees and special levies that erode net yield
• Build defects in the post-2010 cohort that emerge in years 3-7 of ownership

A $750,000 apartment growing at 2.5% per annum over 10 years reaches $960,000. A $750,000 house in the same suburb growing at 5.0% reaches $1,222,000. The capital growth gap is $262,000. The depreciation advantage was $30,000-$40,000.

The depreciation premium does not come close to offsetting the growth gap.

Reason 2 Counter: The Concession Is Mostly For Owner-Occupiers Now#

Victoria's off-the-plan stamp duty concession was scoped down sharply. For investors today, the concession only applies on contracts under $1 million where the buyer occupies the property as their PPOR for at least 12 months. Pure investment off-the-plan in Victoria pays full ad valorem duty on the full contract price.

Other states have either no off-the-plan concession for investors or thresholds so low they rarely apply.

For an investor, the stamp duty argument for off-the-plan is largely fictional in 2026.

Reason 3 Counter: Tenant Premium for New Disappears Fast#

A brand-new apartment may command a 5-8% rent premium over a 5-year-old equivalent for the first 12-18 months. By year 3, the premium is gone. By year 5, the building is competing against newer stock and rents drop relatively.

The "new equals high rent" argument is a year-one phenomenon, not a long-term yield play.

Worked Comparison: Fortitude Valley OTP vs Bulimba Established#

Both properties at $750,000. Both held 10 years. Both at 80% LVR ($600,000 IO loan at 6.20%).

Path A — Fortitude Valley OTP apartment#

Equity at year 10: $360,000 (gross of CGT) Cumulative after-tax holding cost over 10 years: approximately $95,000. Net wealth created (equity less holding cost): $265,000.

Path B — Bulimba established house#

Equity at year 10: $622,000 (gross of CGT) Cumulative after-tax holding cost over 10 years: approximately $58,000. Net wealth created: $564,000.

The Gap#

Path B (established house) outperforms Path A (off-the-plan apartment) by approximately $300,000 over 10 years. The off-the-plan structure costs more cash to hold and produces less than half the wealth.

Where Off The Plan Genuinely Works#

Three narrow scenarios:

Scenario 1: First-home owner-occupier with stamp duty concession. A first-home buyer in Victoria buying off-the-plan under the threshold accesses real duty savings. Not investment-relevant.

Scenario 2: Sub-1% gentrification thesis with strong fundamentals. A specific block in a tightly-held inner-city pocket where the new development is genuinely the best stock available, supply is constrained (e.g. by heritage rules), and the buyer has done suburb-level analysis. Rare but real.

Scenario 3: SMSF buying new for the full Division 40 advantage. Inside an SMSF where the 15% rate makes depreciation relatively more valuable, a new property can outperform an established equivalent. The maths is closer here than in personal name. Still rarely the dominant choice.

The Failure Modes Specific To Off The Plan#

Failure mode 1: Settlement valuation gap#

The contract price you signed at exchange may exceed the bank valuation 24 months later when settlement comes due. The bank will lend on the lower of contract price and valuation. A $50,000-$120,000 valuation gap forces the buyer to find that cash from their own resources or walk away from the deposit.

A worked example: investor signs at $750,000 in 2024 with 10% deposit ($75,000). Settlement in 2026. Bank valuation comes in at $680,000. Bank lends 80% of $680,000 = $544,000. Investor needs $206,000 to settle (purchase price less loan amount), of which $75,000 is already paid as deposit. Cash gap: $131,000. Investor either finds the cash or forfeits the $75,000 deposit.

Failure mode 2: Sunset clause termination#

Most off-the-plan contracts allow either party to terminate if construction is not completed by the sunset date. Some unscrupulous developers have used this clause to terminate contracts in rising markets, refund the deposit, and re-sell at higher prices. Recent legislative reforms in NSW and Victoria have tightened this, but it remains a risk.

Failure mode 3: Defects emerging in years 3-7#

Building defects (waterproofing, cladding, structural) often only manifest 3-7 years after completion. Special levies on owners corporations can run $20,000-$80,000 per apartment to remediate. The buyer holds the bill regardless of fault.

Failure mode 4: Settlement during a credit tightening cycle#

APRA serviceability assessments tightened sharply between 2017 and 2019, and again in 2022-2023. Buyers who exchanged off-the-plan in a loose lending environment found at settlement that they no longer qualified for the loan they had pre-approved. Forced cash settlement or contract termination.

What To Actually Do#

For most investors, established stock — particularly houses with land content in growth corridors — beats off-the-plan apartments by a wide margin over 10+ years.

If off-the-plan still appeals, run it through the Investment Optimiser and the Borrowing Power Calculator at exchange, and again at settlement. The serviceability test at settlement is the most likely point of failure — confirm it before exchanging contracts you cannot escape.

For more on choosing between strategy types, see our property investment strategy 2026 guide. For long-horizon portfolio sequencing, see building successful property portfolio guide.

Frequently Asked Questions#

Do off-the-plan apartments grow as fast as established houses?#

Generally no. Over rolling 10-year periods, established houses in the same suburb have outperformed off-the-plan apartments by 1.5-3.0% per annum on average, driven by land content, supply dynamics, and body corporate erosion of net yield.

Can I claim more depreciation on off-the-plan?#

Yes, in year one. The full Division 40 plant and equipment claim is available because the buyer is the first user. The advantage declines over 10 years and totals approximately $30,000-$40,000 of cumulative tax saving — well below the typical capital growth gap.

What is the sunset clause risk?#

Sunset clauses allow termination if construction is not complete by a stated date. Some developers used this to cancel contracts and re-sell at higher prices in rising markets. NSW and Victoria have tightened these provisions, but the risk has not been eliminated.

Can the developer change the design after I exchange?#

Yes, within the contract's variation provisions, which are typically broad. Layout changes, finish substitutions, and aspect changes are common. Read the variation clauses carefully and seek legal advice — settlement on a meaningfully different product is a dispute the buyer rarely wins.

What happens if my finance falls through at settlement?#

You are still committed under the contract. If you cannot complete, you forfeit the deposit (typically 10%) and may be liable for damages including any resale shortfall. Confirming finance at settlement, not just at exchange, is essential.

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