Whether you are investing in property or buying your first home, one option that has gained popularity in recent years is buying property off-plan.
Off-plan property refers to purchasing a property before it is fully constructed. This approach has significant differences from buying a finished ‘second hand’ property.
The key points are discussed in this article to help you make an informed decision when considering purchasing off plan property.
Longer Payment Period
Developers often offer flexible payment plans, allowing buyers to spread their payments over the construction period, although the full balance will have to be paid at the completion date.
Whilst you will need to ensure payments are made on time and that they are protected against the developer becoming insolvent it allows buyers to maintain and manage their cashflow up to the point of completion.
This can make it more manageable for purchasers and reduce the immediate financial burden. You must of course be comfortable that you will have funds available come the completion date.
Choice of Specification
Off-plan buyers may have the option to customise certain aspects of the property, such as finishes, and fixtures, according to their preferences.
You may be able to negotiate this with developers and allow the required specification to be added to the legal contract. Developers will also retain the right to make minor changes to the specification.
Newer and More Energy-Efficient Properties
Off-plan properties are usually built with the latest construction technologies and materials, making them more energy-efficient and potentially leading to lower utility costs.
Investors should be able to rest easy knowing that there will be minimal repairs to be carried out to the property and building the first few years, keeping expenditure down.
New Build Warranty
For most properties bought off-plan, the developer provides the buyer with a New Build Guarantee from a recognised new build guarantee provider.
There are different types of warranty, some covering every part of the property, others only covering the structure.
You will need an experienced solicitor to guide you as to the strength and validity of the warranty and how these compare to others on the market.
The Consumer Code for Home Builders
The Consumer Code for Home Builders is a set of guidelines and standards designed to protect the rights and interests of new homebuyers.
It promotes transparency, fairness, and high standards of construction and customer service in the homebuilding industry.
Only builders and developers that are registered with a home warranty provider that has elected to participate in the Code must comply with its requirements. It is important to check whether your developer adheres to the code.
The Property and Building
The Developer will agree to build the property in accordance with all necessary planning permissions, the government building regulations, the standards required by the new build warranty provider, in a good and workmanlike manner and in accordance with the specification.
This is significantly different to a second-hand purchase where the condition of the property is not guaranteed and the principle of ‘buyer beware’ applies, with purchasers undertaking full surveys.
It is still sensible to engage a surveyor to monitor the build quality, and to undertake a snagging inspection for you at completion.
The Property and Building
The Developer would agree to build the property in accordance with all necessary planning permissions, the government building regulations, the standards required by the new build warranty provider, in a good and workmanlike manner and in accordance with the specification (subject to its right to make variations, which would be covered under the terms of the contract).
As most purchasers would obtain a full structural survey when purchasing second-hand, instead you can ask your surveyor to simply verify the planning and building regulation documents provided to ensure that the building is built to the correct standards. Again, this saves on costs in the long run.
Developer Reputation
The success of your off-plan investment will heavily depend on the developer fulfilling its contractual building obligations.
Your solicitor can negotiate the contractual clauses ensuring these are market standard, however, it is important to do your research and ensure that you are comfortable with the developer you are purchasing from, rather than having to fall back on court action It is prudent to research the developer’s past projects and financial stability to gauge their reliability.
Conclusion
Buying off-plan property can be a rewarding investment strategy. Before making a decision, carefully evaluate your financial situation, conduct thorough research on the developer, and consider your long-term investment goals.
By doing so, you can make an informed choice that aligns with your objectives and risk tolerance.
As always, there are risks when purchasing any type of property. At Quastels, we are open in our approach and help clearly explain and assess any risk to purchasing off plan, to negotiate the contract, as well as providing you with practical advice
To discuss any of the points raised in this article, please contact Meera Malde or fill in the form below.
