As uncertainty continues to shape Australia’s housing market, the challenge for many off-the-plan buyers is not necessarily deciding whether they want to move. It is working out how to commit to their next home without selling their current property too early, accessing expensive equity or tying up a significant amount of cash.

In a recent conversation with Apartments.com.au’s Mike Bird, Deposit Power Head of Sales & Distribution Nick Rumpff discussed why deposit bonds are increasingly being used to bridge that gap, and why developers are beginning to treat them as a proactive sales tool rather than something offered only when a buyer asks.

More than $1.2 billion in off-the-plan transactions

Deposit bonds are not a new product, but their role in the off-the-plan market appears to be expanding.

According to Rumpff, Deposit Power currently works with more than 230 unique developers, while deposit bonds have been used on more than $1.2 billion worth of off-the-plan property transactions over the past 12 months.

The appeal is relatively straightforward. Rather than handing over the cash deposit when purchasing off-the-plan, an eligible buyer can use a deposit bond as a guarantee to the developer, with the deposit ultimately paid at settlement.

For buyers who already own property, that can remove an awkward timing decision: selling their existing home well before their new apartment or townhouse is ready.

As Bird observed during the conversation, that flexibility becomes particularly relevant when established-property conditions are softer or uncertain. A buyer can secure an off-the-plan property while retaining greater control over when they eventually sell their existing home.

Keeping buyers in control of their equity

The financial equation is another part of the discussion.

Bird contrasted the approximate three per cent cost of a deposit bond with an indicative 6.5 per cent cost associated with accessing equity through additional home lending. While individual circumstances and financing costs vary, the broader point is that a deposit bond can provide another option for buyers who have wealth tied up in property but do not necessarily have a large amount of cash readily available.

That makes downsizers an obvious audience.

“Downsizers are often asset-rich, cash poor, or they just don’t have that cash sitting in their account ready to hand over,” Rumpff explained.

The product is not limited to downsizers, however. Deposit Power also sees use among rightsizers, investors and first-home buyers supported by a parental guarantee, with deposit bonds available nationally.

Importantly, Rumpff said Deposit Power does not need to take security over the buyer’s existing property. Instead, its assessment looks for sufficient equity, with approved bonds typically issued within 24 hours.

From a buyer solution to a developer conversion tool

Perhaps the more significant shift discussed by Bird and Rumpff is happening on the developer side.

With inquiries still coming into projects, the problem can be converting interest into an unconditional commitment. Developers have traditionally responded with incentives, reducing prices, upgrading finishes or adding inclusions, but each can erode project margins.

A deposit bond tackles a different part of the equation. Instead of changing the value of the apartment, it addresses one of the financial barriers preventing a buyer from proceeding.

Rumpff said Deposit Power has seen a noticeable change in recent months from developers simply accepting deposit bonds when requested to actively incorporating them into the sales conversation.

One example illustrates the potential impact. At a project on Sydney’s Lower North Shore, Deposit Power worked closely with the developer during the first six weeks of sales. Of $95 million in sales over that period, Rumpff said $72 million, or 77 per cent, involved a deposit bond.

For sales teams, that suggests a different question to ask prospective purchasers. Rather than waiting until a buyer says they cannot proceed, identifying whether they own an existing property, and explaining the deposit alternatives available, can happen much earlier.

What developers are actually accepting

For developers, accepting a bond inevitably raises the question of what stands behind it.

Rumpff said Deposit Power bonds are backed by HDI, which he described as an AA- rated global insurer, providing what he said is a level of security equivalent to Australia’s big four banks.

That backing is important because the deposit bond is ultimately a guarantee in place of the buyer handing over the cash deposit at the beginning of the transaction.

For Bird, the broader opportunity is about removing a point of friction that neither buyers nor developers necessarily need to accept as fixed.

In a market where developers cannot control interest rates, government policy or established-property conditions, the mechanics of getting a willing buyer from inquiry to commitment are one area where there is room to move. For buyers reluctant to sell too soon or access additional debt, and developers looking for alternatives to discounts and costly incentives, deposit bonds are increasingly becoming part of that conversation.