The Complete Guide to Off-Plan Property Investment

What is off-plan property?

Off-plan property investment is when property is purchased while the development is still in the planning or construction stage. The demand for off-plan property is increasing due to the benefits that it can offer investors, such as discounted prices and a better choice of unit.

Benefits of investing in off-plan property

Investing in off-plan property can provide investors a range of different benefits. One of the primary benefits is that, in many cases, the developer will offer off-plan units at a discounted rate as an incentive for investors. This creates greater potential for capital growth as, once the development is complete, the valuation of the property could be much higher than the discounted purchase price.

Another benefit of off-plan property is that investors can often get the choice of which unit(s) they wish to purchase. This means that by investing early you could get your hands on the more in-demand units as well as have a say in the design of your unit. However, this aspect may appeal more to a buyer who is looking to live in the unit themselves rather than an investor who will be looking for something that has more of a mass appeal to attract tenants once the development has been completed.

Potential risks of off-plan property investment

While off-plan property has a plethora of benefits to offer investors, there are also some risks that are important consider if you’re thinking about investing in an off-plan unit.

Risk of Non-Completion

One of the primary risks with off-plan property is that there is always the possibility of the development or developer going bankrupt resulting in the non-completion of the development. This means that your property will never come to fruition. In this case, you could be at risk of losing your deposit as well as any other instalments you have paid toward the property.

Expiring Mortgage Offers

While not quite as extreme as the property never being built, it isn’t uncommon for the construction of developments to be delayed. This can cause investors issues as mortgage offers aren’t set in stone, so if the property isn’t completed by the time your mortgage offer expires you may have to re-apply for a new one.

Fluctuating Markets

Property market fluctuations can also pose a risk to off-plan investors. This is due to the fact that if you purchase a property at an 8% discount but by the time the development is complete, property values in the area have fallen 10% you could see negative capital growth.

However, don’t fret as property values could increase leaving you with a more positive capital growth on your investment.

Key considerations

Every investment has its own drawbacks and risks and off-plan property is no exception, so it’s important to consider certain aspects in order to ensure that you set yourself up with the best chance of success.

When it comes to off-plan property, it’s essential that you consider the following:

• Market Predictions – Researching market trends and predictions can be a good indicator as to the level of capital growth that you may be able to expect from your off plan investment.
• Developer Track Record – Does the developer have a good track record of completing developments on time and to a good standard? Investing in an off-plan property with an unreliable developer can result in numerous problems down the line.
• Unit Positioning – Have you chosen the right unit? By choosing the right unit you could increase the level of demand for the property since not all units are alike and may have certain features that are more desirable such as a better view or easier access to certain amenities.
• Selling – Selling an off-plan property can have certain caveats if the development is still under construction so it’s important to consider your current financial position and determine whether you’ll be able to afford your investment being delayed.

Should you invest in off-plan property?

Off-plan property investment can be a good option for experienced and new investors alike. Off-plan property provides a range of attractive benefits such as discounted rates and big capital growth potential.

However, it is important to weigh the risks up against your personal goals and financial situation in order to determine whether you could maintain your investment if things were go awry. For example, would you be able to continue with your investment if the development were to encounter significant delays?