Key takeaways
- Off-the-plan lets you lock today's price on a 10% deposit, with the balance due 2–3 years later at completion — the appeal, and the risk, both sit in that gap.
- The main danger is a valuation shortfall at settlement: if the bank values the finished apartment below your contract price, you must fund the difference in cash or lose your deposit.
- Interest rate risk cuts both ways. The cash rate was 3.60% in October 2025 and is 4.35% as at July 2026 after three increases, with cuts not expected before 2027 — a live example of why finance should never be assumed at today's rates.
- New builds allow capital works depreciation over 40 years, and typically command higher rents than comparable older stock.
- For foreign buyers this is not one option among several — new dwellings are the only category open until 30 June 2029.
The thing that goes wrong with off-the-plan is almost never the building. It is the valuation on settlement day.
You sign in 2026 at A$700,000. You settle in 2029. The bank values it at A$660,000 and will lend against that number, not yours. You are now A$40,000 short in cash, on top of the deposit, and you have four weeks to find it. That is the risk. Everything else is manageable.
I want to walk through this properly, because most articles on off-the-plan are written by someone selling it — and the honest version is more useful to you than the enthusiastic one.
What changed, and why it matters more to you than to anyone else
The RBA cash rate is 4.35%. It came down through 2025, then went back up across 2026, and cuts are no longer expected before 2027.
A rate move affects an established-property buyer once, at purchase. It affects an off-the-plan buyer twice: once when you sign, and again three years later when the bank reassesses both your borrowing capacity and the property's value before releasing funds. You are exposed to a market you cannot see yet.
And that market has not been kind. CoreLogic had Melbourne house values down 1.2% and units down 0.2% over the year to June. Anyone showing you a worked example where a A$600,000 apartment becomes A$700,000 by completion is describing 2021, not now.
The rewards are real — with the conditions attached
You fix the price, not the outcome
A 10% deposit holds the property while you keep the other 90% earning elsewhere for two to three years. If values rise, that leverage is genuinely powerful.
The condition: it cuts both ways, and right now it is cutting the other way. Buy off-the-plan for the payment structure and the new-build stock, not because you have been promised growth by completion.
Depreciation is the reward nobody oversells
This one is unambiguous. A new building can be depreciated at 2.5% of construction cost per year for 40 years, and on a new build you can also claim plant and equipment — the appliances, carpets, air conditioning. Buyers of second-hand residential property have not been able to claim plant and equipment since 2017.
On a A$700,000 apartment that is commonly several thousand dollars a year against your rental income. Get a quantity surveyor's schedule; it pays for itself in the first year.
New stock rents faster, and to better tenants
Melbourne vacancy has been sitting near 1%. A new, energy-efficient apartment near transport or a university leases quickly and holds a rent premium over older stock in the same street — and your maintenance is close to nil for the first few years.
Time to arrange your affairs
Two to three years is enough to restructure lending, sell something in Singapore, or time a child's move to Melbourne. For a family buying ahead of a university intake, the construction period is the feature rather than the cost.
The risks, in the order they actually bite
1. The valuation gap
Covered above, and it is the one that ends purchases. Before you sign, work out what you would do if the valuation came in 10% under contract. If the honest answer is "I could not settle," reduce your price bracket now rather than discover it in 2029.
2. Your borrowing capacity in three years, not today
Banks assess you at settlement, against the rules and rates that exist then. A pre-approval today is not a commitment for 2029. Foreign-income borrowers are assessed more conservatively than residents, and lenders have tightened and loosened that repeatedly over the last decade.
3. Delays, and the sunset clause
Construction runs late. Budget for it. The clause worth reading is the sunset clause — the date after which either party can walk away. Historically some developers used it to cancel contracts and re-sell into a risen market.
Victoria has since tightened this: a developer generally cannot rescind under a sunset clause without either the purchaser's written consent or an order of the Supreme Court. Confirm the protection is in your contract and note the actual date.
4. The costs that are not in the brochure
As a foreign buyer in Victoria you pay the standard stamp duty, plus 8% foreign purchaser additional duty, plus an FIRB application fee that scales with price. Then annually: land tax, and the absentee owner surcharge on top of it.
On a A$700,000 purchase the foreign purchaser duty alone is A$56,000. If your yield calculation does not include it, your yield calculation is wrong.
5. What you are actually buying
You are buying a floorplan and a schedule of finishes. Ask which apartments face a future development site, which levels get afternoon sun, and what the expected owners corporation levy is per quarter — not what it is at launch, what it is at year three when the amenities are running.
Who off-the-plan suits right now
It suits you if you are buying a home for a child to live in and the timeline matches their studies; if you want the depreciation and the low-maintenance years of a new build; or if you are a foreign buyer, in which case new stock is essentially your only option until the established-dwelling ban lifts on 30 June 2029.
It does not suit you if you are relying on capital growth by completion to make the numbers work, if a 10% valuation shortfall would stop you settling, or if you need certainty about your income three years out.
The five questions I would ask before signing
- What happens if the valuation comes in 10% under contract — can I still settle?
- What is the sunset date, and what are my rights if the developer tries to rescind?
- What is the total cost including foreign purchaser duty, FIRB and the absentee surcharge?
- What is the projected owners corporation levy at year three, not at launch?
- What is the developer's completed track record — buildings finished, not buildings announced?
If the person selling you the apartment cannot answer all five without checking, that tells you something in itself.
If you want this stress-tested
Send me the project you are considering and your budget. I will come back with the full cost to completion including every Victorian surcharge, the net yield rather than the gross one, and an honest read on whether the settlement risk is one you can carry.
If the answer is that you should wait, or buy something completed instead, I will say so. Losing a sale costs me less than a client who cannot settle.