As property prices continue to increase, savvy investors are looking across the market for the next best deal. Many investors are now looking to purchase a property before it has been completed and occupied. This is called purchasing ‘off-plan’.

What is Off-Plan Property?

Off-Plan Property refers to the practice of purchasing property while only seeing CGI images, mock-ups and floor-plans of the property. There are several advantages to this approach but also some pitfalls to keep an eye out for.

Why Invest in Off-Plan Property?

Off-Plan Property offers property purchasers several key benefits, with many of these linking back to off-plan purchasers gaining early access to the best apartment and home options in a development than those looking for completed property. We have compiled 8 key points to consider when purchasing off-plan property.

1) Reduced Prices

Developers will often look to sell off-plan at current market prices, meaning this is especially attractive for property buyers if they are looking to purchase property in areas currently experiencing high property price growth. By locking in a price at 2018 prices, purchasers will only have to pay once the developer has completed the property in the future. This allows investors to prospect on the future growth of the housing market and purchase a property at reduced cost and benefit from increased future rental yields or resale value.

For example, in a market such as Manchester, which is currently experiencing an extremely high property price growth of 7.4{32a70e766e49c95f504e78d863f700cc0bc860776959e311316a05ffc4828dc8} per year, an off-plan property buyer could make the following savings:

*Projected House Price Increase in Manchester Representative Example of an Off-Plan Purchase

2) Favourable Payment Plans

Alongside reduced prices, purchasers of off-plan property can also often benefit from favourable payment plans as buyers will only need to pay a maximum of 25{32a70e766e49c95f504e78d863f700cc0bc860776959e311316a05ffc4828dc8} of the total value of the property to secure the unit. This allows a property to be secured at a drastically reduced cost with the remaining payment to be made upon completion of the property.

3) First Choice

By purchasing off-plan, buyers will also benefit from being some of the first to access the stock of property, thus the ability to select the most desirable properties within their price range. This early access increases a purchaser’s chance to secure a property that offers them the features, location and view they desire. These factors can have a drastic effect on rental value and resale price.

4) Guarantees & Interiors

As with all new-build property, an off-plan property should be sold with guarantees on the quality of the work conducted by the developer and their contractors. This protects purchasers from any teething issues as they move into their new home or start to rent it for the first time. The quality of interiors and decoration on a new-build property is often of an extremely high standard and expensive to replicate in older properties.

5) Avoiding Potential Pitfalls

As with any investment, there are some potential pitfalls that off-plan purchasers need to be aware of before purchasing an off-plan property.

6) Property Completion

When purchasing an off-plan property, it is crucial to assess if the developer building the property is able to meet certain requirements. Some of the key questions to ask yourself before going ahead with a purchase are:

  1. Does the developer have the capacity to complete the property?
  2. Will the property be completed on time?
  3. Will the property be completed to the standard advertised?

An excellent way to help make this assessment is to conduct thorough research on the developer’s track record. Many developers will be happy to show previous examples of their work as supporting evidence to the quality of their upcoming projects. At Gower & Mae, we work with a large number of developers and assess each one on their ability to deliver what is promised and previous track record is one of the key factors we take into account.

7) Local Prospects

Another crucial consideration when purchasing off-plan property is the prospects of the local area you are purchasing in. If you are purchasing in an area that it is currently booming, it is important to understand if this boom will continue. On the opposing side, if you are purchasing in an area expecting growth, it is crucial to understand why this growth is being projected and what factors could potentially slow down or stop the growth.

8) Other Developments

While conducting research into an area, it is also important to understand what other developments are being built in the surrounding area. If you are purchasing for investment, this can cause saturation in the market and stop your property from achieving the expected rental yields or market value.

Is Off-Plan Property right for you?

In conclusion, off-plan property offers an exciting opportunity for home-owners and property investors. The ability to purchase a property at a reduced price offers many first-time buyers and investors an easier first step onto the ladder and offers seasoned investors high returns in the medium-term investment field.