The amount of off plan property for sale in the UK is on the up.
Government incentives to increase construction levels and an ease in planning regulations have enabled many developers to capitalise on the demand for new-build property.
Despite an overall need for new-build property, many construction companies need to raise the funding for their projects.
This has allowed people from all spectrums of the property ladder to enter off plan developments.
From first-time buyers to property moguls, off plan developments have become a mainstream option on the market.
What are the pros?
To attract investment, many off plan developments are sold at a slightly discounted price. Buyers are enticed by potential capital growth which may be achieved if property prices rise during the construction period.
Residential purchases often allow the buyer to pick their own fixtures and fittings (i.e. bathroom and kitchens). Many first-time buyers like the feeling of having a say about what their property will look like upon completion.
Unlike other property purchases, new-build off plan property often comes with a 10-year warranty period. Buyers have the peace-of-mind that their property is covered should it require maintenance in the warranty period.
When it comes to the buy-to-let market, landlords can usually command a higher rent in new buildings. This may help investors to secure a higher rental return.
What are the cons?
There is an element of risk when purchasing off plan property. Investors should check the development company’s track record and, where possible, should visit any completed projects they have constructed.
An experienced solicitor should be appointed to ensure that all documents are correct. Investors should check that their funds are held in a secure account and they should ensure that there are goalposts within the build phase for when funds are released.
Floor plans provide a good indication of the size of the apartment or house however, they may not provide a full indication of what the property will look like upon completion. Buyers should ask if there are additional marketing materials available such as CGIs or a video walkthrough. This will provide a better idea of what the property will look like once it is completed.
No one can control property prices and they may decline over the build period. Buyers should look at comparable properties in the area before buying to see if the property is priced in line with the market.
It is almost impossible to secure a mortgage on an off plan property which means that many people are priced out of this market. Investors should seek advice from their mortgage advisor before agreeing to invest.
Investors should not be put off by asking difficult questions. Find out if there are contingency plans in place if the developer goes bust or if the build cost overruns. Answering these difficult questions beforehand could save a lot of heartache in the long run.
Should I invest in off plan property for sale?
There are a variety of pros and cons when it comes to off plan property investment. Ultimately it is up to the individual to make the decision however, consider these points before buying.
• Seek financial advice
• Know your budget and stick to it
• Do your research and find out the price of comparable properties in the area (check their rental value too)
• Research the developer and where possible, visit their previous projects
• Appoint an experienced solicitor
• Ask about contingency plans/where your money will be held
• Find out who the Project Management Company is
• Find out if the build has a warranty
• Request regular construction updates
• Check the long stop date of the build
Want more information about off plan property for sale? Click here for more important questions to ask when considering property investment.