For off-the-plan investors, the deposit is becoming a capital allocation decision

For an investor buying an off-the-plan apartment, it is not only the property that needs to stack up. So does what happens to the deposit.

A conventional 10 per cent deposit on a $1 million apartment means committing $100,000 at exchange, potentially three or four years before the property is complete, the balance of the purchase price is due and the apartment begins generating rental income.

For investors, particularly those with existing property portfolios or capital deployed elsewhere, that creates another consideration alongside the fundamentals of the property itself: is handing over $100,000 in cash today the best use of that capital for the next several years?

"Across conversations with buyers, many have both the financial capacity and desire to purchase, but what they don't necessarily have is immediate liquidity, or the desire to lock away a significant amount of capital for the deposit, years before settlement," Deposit Power's Nick Rumpff says.

"Investors may have their wealth tied up elsewhere."

That could be cash sitting in an offset account reducing interest on another loan, money held in investments, or equity spread across an existing property portfolio.

Producing a cash deposit for the next purchase can therefore involve more than transferring money from one account to another. An investor may need to draw down savings, sell another asset or refinance an existing property well before the new apartment reaches settlement.

There is also the question of control.

An investor committing $100,000 or $200,000 as a cash deposit today loses the ability to use that capital elsewhere during construction. Over a three or four-year settlement period, circumstances can change, new investment opportunities can emerge and an investor's broader financial position can look considerably different.

It means the deposit carries an opportunity cost as well as an upfront cost.

As Rumpff puts it, investors, downsizers and other off-the-plan buyers are increasingly asking a similar question: "How can my money be working harder for me while my new property is being built?"

One alternative is a deposit bond.

Rather than paying the traditional cash deposit at exchange, an eligible purchaser pays a one-off fee for a financial guarantee covering the deposit amount. The purchaser retains the capital they would otherwise have handed over and remains responsible for paying the full purchase price at settlement.

A deposit bond does not reduce the cost of the property, increase the purchaser's borrowing capacity or remove their obligation to settle.

What it changes is when they need to deploy their cash.

Rumpff uses the example of a $1 million off-the-plan apartment requiring a $100,000 deposit over a four-year construction period.

Based on figures discussed by Deposit Power with Apartments.com.au, a bond calculated at three per cent per annum on the $100,000 deposit would cost $12,000 over four years.

The comparison then becomes what that $100,000 could otherwise be doing.

If it remained in an offset account against a mortgage carrying an interest rate of around 6.9 per cent, for example, the investor could continue reducing their interest costs throughout the construction period.

Alternatively, the capital could remain invested elsewhere or simply remain available to the investor rather than being tied to a property that will not settle for several years.

Deposit Power's savings calculator allows purchasers to compare the potential cost of a deposit bond against the potential benefit of retaining their deposit capital over the period before settlement.

The outcome will not be the same for every investor. Interest rates can change, investments carry different returns and risks, individual tax positions vary, and there will be circumstances where providing the deposit in cash remains the preferred approach.

But the longer the period between exchange and settlement, the more relevant the comparison can become.
The same consideration applies to investors whose wealth is primarily held as equity in other properties.

An investor with several properties may have substantial net assets without keeping $100,000 or $200,000 in cash ready for another purchase. Accessing that equity through refinancing can introduce additional borrowing costs and require the investor to restructure their finances years before the new apartment settles.

In a recent discussion with Apartments.com.au, Rumpff and Apartments.com.au CEO Mike Bird contrasted a typical mortgage rate of around 6.5 per cent with Deposit Power's stated three per cent annual bond fee.

The actual financial outcome depends on the term, the purchaser's circumstances and how the deposit would otherwise have been funded, but the comparison highlights the broader issue for investors: capital has a cost wherever it sits.

A deposit bond also does not require an investor to provide their existing property as security in the way a traditional loan might.

Where an applicant owns property, Deposit Power can consider the equity available when assessing the likelihood that the purchaser will be able to settle. Rumpff says the company does not take a lien or upfront security over that property as part of the process.

He says applications generally take around 10 minutes to complete, with approval and issuance often occurring within 24 hours.

Deposit bonds are widely accepted across the property industry, including for off-the-plan purchases, although purchasers should still confirm that a bond is accepted by the developer under the terms of their particular contract before proceeding.

The broader shift is in how investors think about the deposit itself.

Investor lending across the wider housing market softened in the June quarter of 2026, with the number of new investor loan commitments falling 8.6 per cent, according to the Australian Bureau of Statistics.

Yet within that broader decline, lending for the construction or purchase of new housing moved in the opposite direction, with HIA analysis showing investor loans for new housing increased 4.2 per cent over the quarter and 12.7 per cent across the 2025-26 financial year.

For those investors considering new apartments, the off-the-plan purchasing structure creates a financial equation that does not exist in quite the same way when buying an established property.

There can be years between signing the contract and actually paying for the apartment.

Deposit Power's broader off-the-plan transaction figures cited in Rumpff's recent Urbanity presentation put its average purchase price at $1.67 million, with an average $167,000 deposit and a 30-month build period.

That is a significant amount of capital to commit more than two years before settlement.

Whether retaining it makes financial sense ultimately depends on what the investor does with it, the cost of the bond and their individual circumstances. Keeping the money in an offset account is very different from investing it in an asset where returns are uncertain, just as accessing equity from another property creates a different equation again.

A deposit bond therefore should not be viewed as automatically better than paying cash.

Instead, it gives an investor another way to think about when their capital needs to be deployed.

For an off-the-plan investor, the question is no longer necessarily just: "Do I have the deposit?"

With settlement potentially years away, it can also be: "What is the best use of that capital until I actually need to complete the purchase?"