Turnkey vs Progress Payment: A Practical Guide for New Build Investors

If you’re investing in new builds, you’ll quickly notice there’s more than one way to pay for an off-the-plan property. And choosing the right payment structure can have a real impact on your cash flow, borrowing capacity, and overall return.

For investors used to purchasing existing homes, off-the-plan contracts can feel unfamiliar at first. But with the current tax settings heavily favouring new builds, understanding these options has become essential rather than optional.

When buying off-the-plan, you’ll typically come across one of two contract types: progress payment or turnkey.

Progress Payment Contracts

Progress payment contracts are most commonly used for house-and-land packages. Instead of paying everything at settlement, you make payments at different stages of the build.

How a Progress Payment Build Usually Works

Example:

• Purchase price: $550,000
• Land value: $175,000
• Deposit (10%): $55,000
  • $17,500 allocated to land
  • $37,500 allocated to construction

Key payments:

• Balance of land: $157,500 payable five working days after title is issued
• Build payments released in stages, for example:
  • 15% once foundations are completed
  • 35% at roof-on stage
  • 30% once GIB is installed
  • Remaining balance payable within five working days of CCC (Code Compliance Certificate)

The Trade-Off

Downside:

You begin drawing down lending as construction progresses, which means you’re paying interest throughout the build period. If construction is delayed, these holding costs can increase.

Upside:

Because the developer isn’t funding the build upfront, progress payment contracts are often priced lower than turnkey equivalents.

This option can suit investors with strong cash flow and higher risk tolerance.

Turnkey Contracts

Turnkey contracts are far more common for townhouses and apartments and are generally the preferred structure for most new build investors.

How Turnkey Works

• You go unconditional and pay a 10% deposit, held in the developer’s solicitor’s trust account
• No further payments are required during construction
• Settlement occurs once the property is completed and CCC is issued (often 6–18 months later)
• At settlement, you pay the remaining 90%, typically made up of an additional 10% deposit and an 80% mortgage

Why Investors Gravitate Toward Turnkey

• No payments during the build
• Simpler budgeting and cash-flow management
• Minimal interest costs before settlement
• Often easier to obtain bank approval, particularly in today’s tighter lending environment

For many investors, turnkey removes much of the stress associated with construction-phase risk.

Turnkey vs Progress Payment: Which Makes More Sense?

Since the tax changes introduced under the Labour government, existing properties have become significantly more expensive to hold — often around 40% higher in ownership costs compared to new builds.

As a result, investors are increasingly shifting toward off-the-plan purchases to benefit from:

• Interest deductibility
• Lower deposit requirements
• Stronger long-term cash-flow outcomes

But while new builds make sense, the contract structure you choose still matters.

Final Takeaways

Off-the-plan investing offers powerful advantages in the current market — but only when the payment structure aligns with your financial position.

• Turnkey is usually the safer, simpler option, especially for investors focused on lending approval and cash-flow certainty.
• Progress payment can deliver cost savings, but requires confidence in managing interest costs, timing risk, and construction uncertainty.

Before committing, speak with your mortgage broker and advisor. The decision you make at contract stage can materially influence your borrowing power, holding costs, and long-term returns.

Choosing the right structure isn’t just about today — it’s about setting your portfolio up properly for the future.

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