If you’re considering property investment in the UK, one of the strategies you might be looking into is acquiring an asset at the off-plan stage – meaning construction work is still ongoing, or may not have even started yet.
For many buyers, the most appealing aspect of this approach to real estate investment is the opportunity to secure early discounts, which can significantly increase your scope to achieve capital growth once the property is on the market.
This is why off-plan property can be a particularly attractive target for ‘flipping’ – buying at a discount, waiting for prices to go up and selling when the time is right.
The appeal of off-plan property investment
In the wake of the 2008 financial crisis, with lenders more reluctant to provide start-up capital for property developments, individual and institutional investors stepped in to fund real estate projects. This marked the beginning of a trend of growth in off-plan housing investment that has continued for the past decade.
An increasing number of investors were willing to make this commitment to seize low entry prices, in the confidence that the market would recover from the effects of the financial crisis and come back stronger.
This proved to be the case, with house prices returning to pre-2008 levels by mid-2014, according to the Land Registry.
Another advantage of off-plan property investment is the fact that it can help you move early to acquire real estate in desirable living areas, where demand is high and available homes usually come at a premium.
Offloading your asset
Flipping property isn’t just about the acquisition of course; you need to be able to sell your asset at the right time, with minimal stress and difficulty.
Fortunately, in a traditionally busy sector like the UK’s, where demand for housing has long exceeded supply, offloading property on the open market is usually fairly straightforward. It can be made even easier with the help of services like Yieldbase.
It’s true that the coronavirus outbreak has caused a significant slowdown in transaction activity so far this year, but past trends have shown the resilience of British property, and investors can feel confident that housing demand and price growth will return once the current crisis has abated.
Minimising the risks
Like with any investment, it’s important to evaluate potential risks associated with an off-plan property purchase, which could include:
- The developer experiencing financial difficulties
- Project delays
- Negative price trends after purchasing
The most successful and experienced investors will do in-depth research into these and other risks, and take steps to mitigate them. Some of the most effective ways to minimise risk in off-plan property investment include:
- Working with a well-established and reputable developer
- Ensuring there are procedures in place to keep you updated on construction progress
- Researching your asset class and location to get the best possible understanding of capital growth potential
To discuss your investment plans and current off-plan opportunities in more detail, you can book a consultation with Experience Invest, or call us on +44 (0)207 834 1113.