Buying property off the plan: what you need to know



Investors looking for new avenues to invest in 2023 may consider buying off-plan properties. It’s also a viable option for aspiring homeowners.

Naturally, there is always some doubt about whether to buy a property that is still under construction, as one wonders if it might be safer to wait a bit.

Michael De Lucia, director of business development at the De Lucia Group, which has been in the real estate industry for more than 45 years, explained that buying a property off-plan means basing the purchase decision on the developer’s “vision”.

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“Off-plan properties are bought with the agreement that they will be completed in the future – usually between one and five years – and can be bought for prices below market value, because their value is expected to increase once “end”. explained.

“This makes off-plan property often more affordable and gives the buyer a great opportunity to buy at a bargain price and wait for the property to appreciate once construction is complete. So you’ll be buying the property at current prices , but by the time you transfer and start paying the bond, the value of the property could have gone up by 20% to 35%,” he added.

What if property prices fall after buying off plan?

De Lucia advised that it was important to consider what will happen if property prices fall after buying off-plan.

“The price of the property is determined at the time of purchase, and there are no guarantees that the price will not drop in the future.

“Potential buyers may need to make an informed decision about which of these steps to take if the property is to fall in price.

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Some of their options include holding it until completion, selling it at current prices or selling it at a reduced price,” he said.

Are there any advantages to buying a property off the plan?

De Lucia believes that buying off-plan property is a great way to enter the property investment market at an affordable price.

“These off-plan properties are often located in nearby neighborhoods with excellent infrastructure facilities, and units in new developments are often built in accordance with the latest design trends, meaning the buyer will have a modern and attractive unit to present to the rental market..” he said.

The group listed additional benefits as follows:

• Units are often built using the latest construction technology and building materials, resulting in longer investment longevity.

• There are no crucial repairs or extensive maintenance to be done for at least three to four years as the building and its fixtures and fittings are new.

But with the many benefits of buying an off-plan property, there are just as many risks.

What are the risks to consider when buying off the plan?

A big risk is that investors could lose their deposits if the development does not proceed, for example, local authorities do not grant the necessary permits, or a public electricity company cannot supply power. Or simply financial mismanagement by the developer.

Likewise, De Lucia warns that the construction of the building may take longer to finish than was initially planned by the developer.

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“This could be a significant hurdle for homeowners, who may have to find alternative accommodation to live in, until construction is complete,” he said.

It can also pose a problem for investors if the property’s rental income is critical to their cash flow.

“The market price could drop between the time of signing the contract and the transfer of the property later. While this may seem unlikely, it is a risk factor that investors should be aware of,” he said.

Another risk to consider is obstacles to development, such as roads that have not been laid out afterwards
registration of the transfer. This can lead to paying the mortgage repayment before the property can be
busy

Do your homework

De Lucia concludes that smart investors definitely need to do thorough and comprehensive homework that covers all risks.

“Naturally, you want to make sure you’re making the right decision before you invest your money in real estate or take out a loan for a property.”

*Additional reporting by Devina Haripersad.

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