With demand for new build, energy-efficient homes at an all-time high, property investors are becoming well aware of the considerable advantages available through investing in property in the formative off-plan stages.
Equity from completion, best choice of units, extended payment terms through construction, and comprehensive building warranties are just some of the tangible advantages of purchasing a property during the launch and off-plan phases.
For many years, the accepted model of buying a property in the UK was to look at existing, finished properties. This enabled the buyers to walk around their prospective purchase, providing buyers with a tangible sense of security, safe in the knowledge that they would be purchasing or investing in a completed and 'ready to move in' property. In recent years however, there has been a growing trend for investors and owner occupiers to purchase a property 'off-plan,' based on detailed and accurate video walkthroughs, 3D simulations and floorplans.
Today, investors purchasing a property during the 'off-plan' stage are as likely (if not more so) to have a detailed understanding of the property which they are about to purchase. As importantly, as they are involved from the formative planning stages, they are often allowed to have personal input into the property they are investing in, and today it is not uncommon for investors to dictate the style of kitchen, floorings or even colour schemes throughout the property they're investing in.
1) Opportunity To Purchase A Property Below Market Value (BMV).
It is common for developers to incentivize investors to purchase properties during the off-plan phase, and these incentives typically take the form of lower prices to encourage early-stage investment in a particular project. As the development moves forward throughout the construction process, the average unit price within the development will gradually rise as the development is 'derisked.' In particular, during the earlier launch stages, developers will offer a smaller portion of properties at deliberately lower prices to generate interest and provide impetus to the early-stage investment process.
So How Can Pure Investor Help Me Benefit From Investing Earlier In The Off-Plan Process?
Having specialised in off-plan property sales for over 12 years, Pure Investor benefits from excellent working relationships with all the major property developers throughout the North West of England. As such, we're able to offer our clients early-stage access to the very latest off-plan developments, often during or even the crucial launch phase. This ensures our investors get access to the very best units available on the development, offering long term advantages in respect of renting your property out, or even selling it in the future.
2) Buying 'Off-plan' Allows You The Opportunity To Secure The Best Units
Corner apartments and higher-floor units will always be the homes people want to move into in an apartment block. Likewise, corner houses often mean larger gardens in a housing estate. When you buy off-plan you can choose the homes most people will want to live in. This means, of course, they should be the homes that are rented out quicker because they’re in demand. You will also be able to charge a premium for these ‘sought-after’ properties when renting them out. As importantly, ensuring you own the best unit in the building offers significant value protection in regards to your exit strategy. In the same way as you chose your unit, other investors will want to own the best units in the building, as these are the ones which command a rental premium in the market.
Here at Pure Investor, we manage a large number of city centre apartments, and as such we've considerable experience in renting out apartments located in large-scale developments in city centres. This experience has taught us the considerable benefit of owning well-located units within a development. Higher floors, better views, proximity to utilities such as bin stores, lift shafts and large communal areas all need careful consideration when selecting a unit as an investment for the long term. In the same way that investors want to buy the best units, so tenants want to live in them. By working with our clients early on in the off-plan process, we're able to secure our investors the best choice of units which offer long-term security on their investment.
3) Capital Appreciation Throughout The Build And Construction Stages.
In many cases, the property you purchased at the off-plan stage will have appreciated in value by the time the development is complete. This can be quite a substantial amount, especially if you bought at the start of the development and it isn’t complete for 1-2 years. In Manchester, for instance, house price growth is currently 6% per annum. This means that an apartment purchased today at £250,000 'off-plan' could be worth in excess of £280,000 on completion two years later.
4) Investors Can Benefit From Developer Payment Plans
The benefit of extended payment plans offered by off-plan property developments has come into sharp focus in recent months, primarily due to the sharp increases in interest rates (and subsequently mortgage payments) over the course of the past twelve months. During this period, here at Pure Investor we've experienced a considerable increase in the interest levels of off-plan developments offering extended payment terms during the construction process.
Whilst the fact that investors can benefit from developer payment plans is number 4 in our list, the reality is that at present this is arguably the most important consideration amongst our investors at present. As interest rates continue to rise, the ability to lock in today's purchase price, whilst retaining as much of your capital as possible is a crucial factor in deciding which development many investors choose to invest in. It should be noted that these longer term payment schedules, during the construction progress also offer the opportunity for lower interest and borrowing rates in the medium term when the opportunity arises.
5) Have An Input Into Your Property
This isn’t quite as important for a property investor who is going to rent out the property anyway. But, for someone who intends to live it – or who is interested in interior design – then it’s definitely a bonus to be able to choose your own tiles, kitchen units, carpet colour etc.
6) High Rental Demand For New Build Properties
New Builds are in big demand with tenants. Most people love the idea of being the first ones to live in their home. Everything is brand new and untarnished. You shouldn’t have a lot of difficulty renting out your property – and you will probably be able to do it straight away, since because it’s a new development there will already have been a lot of marketing for it.
7) Building And Construction Warranties
Most New Build’s come with a 10-year warranty from the National House Building Council (NHBC). Not only does this provide peace of mind should anything go wrong with the structure of the building, but you’ll also have financial recourse.
8) Energy Efficiency
Building performance and energy efficiency are increasing important considerations when purchasing a property for the purposes of generating long-term rental income. Recent legislation has resulted in increased focus on energy performance in particular. New build properties from leading developers are built with these requirements and overall energy compliance in mind. This not only offers investors peace of mind, but also represents a significant cost saving in relation to more traditional, older-style properties which require renovation in order to ensure compliance.
Interested in buying off-plan property and would like a guiding hand to help? Then get in touch with us here at Pure Investor. We have been sourcing and investing in off-plan property for our clients for a number of years now. That’s because many of them are based overseas and rely on us to do the research and negotiating.
We always provide regular feedback on developments and rest-assured we carry out thorough due diligence on any development we recommend, as well as the development company itself. Having been in the industry so long we have managed to build up an impressive network of developer, investor, surveyor and architectural contacts.
Call us for a chat, tel: +44 (0) 161 337 3890. You can also write to us via email: firstname.lastname@example.org.
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