Buying off plan property

Buying Off-Plan Property & New-Build Developments

So here you are, thinking of investing in property but undecided as to what part of the property investment sector to tackle. The options are numerous and include commercial property, buy to let, student accommodation, development land and even off-plan property developments. To help you make up your mind Investment Property Partners have put together some valuable information focussed on buying off-plan property and new-build development opportunities which makes for essential reading before you take the plunge in to the world of property investment.

Buying Off-Plan Property

The first point to consider for any prospective property investor is do you want to invest in off-plan property, new-build developments or existing, older property?

For many property investors’ off-plan and new build properties have so much going for them that you may decide there is no need to look elsewhere.

Consider the facts: newly constructed properties are nearly always so much more energy efficient and therefore a great deal more economical to run than older properties, you will almost certainly be offered structural and other guarantees from the builder or developer, such properties will in most instances complement contemporary lifestyles – and it will not be necessary to spend both time and more importantly, money on decorating, refurbishment and repairs!

You will also find that there is a great variety of newly built property on the market so that there should be something to suit your tastes and/or requirements.

What about Off-Plan & New-Build Developments?

Convinced about buying off-plan and new-build property? Then it’s time to take a look at two options with regard to your investment.

Is it better to buy before the first brick has been laid – known as “off-plan property” – or to wait until the property has been built and you can therefore see exactly what you will be getting for your money?

Investing in Off-Plan Property

Let us consider the opportunities associated with buying off-plan property, which it has to be said, is becoming increasingly popular with many property investors.

One of the big advantages with buying off-plan property is that you as the buyer will find that you will be offered a significant discount off the current market price by the developer.

Indeed, if things go well for you and market values go up by the time the property is actually built, its value may already have increased.

It is important to bear in mind however, that it is also possible that property prices may fall in the interim, so you should also take this scenario in to account when preparing your investment plan.

In some instances, if you make your move right at the start of the development process, you may be able to choose fittings such as flooring, bathroom tiles and various appliances.

The Disadvantages of Buying Off-Plan Property

All very well you might say, but surely not everything in the garden is lovely, there must be draw-backs to the off-plan approach… and you are right!

One of the disadvantages to buying off-plan property is that your new property may not turn out quite as you had visualised it.

It is all very well seeing plans and detailed specifications, but it is not the same as seeing the finished property.

One of the more common disappointments is that rooms are not as big as purchasers thought they would be.

There is also quite often, not quite as much space between your property and the other properties on the site as you had been led to believe.

It will often pay you in the long term to make some extensive enquiries before you commit yourself to any binding contracts with builders or developers.

For example, see if it is possible to inspect homes that the developers have built elsewhere and talk to previous investors/property owners.

You can glean valuable information from them about how things went, whether there were any unexpected surprises, how responsive the developer and his team were to problems etc.

You should also look to investigate the reputation and financial stability of the developer/builder, look at the validity of any guarantees offered, the proposed construction programme and key dates for completion, financials and phased payment dates etc.

At this stage you may wish to consider getting professional advice from someone who can help you with your due diligence investigations.

Due diligence could be even more important when considering overseas off-plan property developments where you may not speak the local language and are less familiar with the legal processes involved.

If your off-plan property forms part of a larger development you should also have a good look round the main site where your property is to be built and satisfy yourself that everything is being properly run.

What’s involved in Buying Off-Plan Property?

Having decided that all is in order with both the developer and his plans then you need to familiarise yourself with the processes involved in buying off-plan property.

Typically, you will be asked to reserve your property by paying a reservation fee, which becomes part of the deposit, there will then be an exchange of contracts when a further deposit will be required.

After this exchange of contracts stage you would normally need to wait for the construction work to complete – a stage commonly known as “build completion”, and that is followed by legal completion which involves paying the balance of the purchase price.

When all this has been correctly completed the property is legally yours and you are free to move in.

How long will an Off-Plan Property Take to Complete?

A question that most off-plan property buyers ask is… how long will all this take to complete?

It is not usually possible to be precise about completion dates because there are so many factors to take into consideration, not least the weather, but when you reserve the property you will be given some idea of when your new property is likely to be completed.

To get a better understanding of this part of the process it is often helpful to ask the developer for a detailed programme of works that will identify key dates along the way, including build completion.

With this detailed construction programme you will be able to track the developers progress against his plan and quickly identify any delays or problems.

Buying New-Build Property

What about the purchase of a new-build property that has recently been constructed?

As we have already identified the big advantage to buying new-build property is that you can see it, walk around it, physically touch it and inspect it for problems or defects.

The big disadvantage in buying newly constructed property is that it will almost certainly cost you more than if you had purchased it off-plan, although there may be some room for negotiation on the price.

Remember, you have nothing to lose by haggling over the advertised price for the property – and maybe quite a bit to gain.

Developer Incentives for Off-Plan & New Build Property

If the time is right you may also be able to cash in on various discounts and financial incentives on offer from the builder or developer, sometimes because off-plan or newly constructed properties are not selling all that well, sometimes because it is the end of the developer’s financial year and targets have to be met.

It is always good to ask about buyer incentives as they may not be openly advertised, and could include furnishing packages, appliances, legal fees, reduced or no deposit etc. and these are a great way of reducing your overall acquisition costs.

For buyers who are owner-occupiers you may also find that there is a part-exchange facility on offer, so that if you are not a first-time buyer you can sell your existing property to the developer and therefore avoid all the hassle, and possibly frustrating delays of selling your existing property on the open market.

If you are lucky you might even receive a discount on the property you are buying.

Always make sure however, that you get a fair price for your own property by seeking a number of independent valuations.

What is Included in the Price of the Property?

As for your new property, always be clear in your own mind as to what is included in the purchase price because developers do vary significantly in what they offer.

Ask for a schedule of what is to be included in the price and what is excluded… don’t get stung by some hidden add-ons that you were not made aware of.

New-Build Property Inspections & Building Guarantees

If you are buying a new-build property always make a thorough inspection before committing yourself to any payment, looking for any defects that there might be and preparing a detailed list that can be given to the builder or developer.

You should also check that your property is covered by a structural warranty from a reputable provider such as the National House Building Council (NHBC).

Getting Professional Advice

Finally, as with any property purchase it is always advisable to seek professional advice, in this case either from a conveyancing solicitor or licensed conveyancer experienced in the process of buying off-plan property and new-build developments; and possibly a qualified construction specialist or building surveyor to examine the building itself.

Property Investment Solutions

As a leading independent property and land investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.

If you are a property investor searching for off-plan property and new-build investment opportunities please contact us today to discuss how Investment Property Partners can help you.

Further reading…

More information about off-plan property… here →