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Posting Date: 2023-02-14

About Off-Plan Property: What Is Buying Off-Plan?

First things first, before understanding why off plan property investment could be beneficial to you, you need to know what this type of investment is and how it works.

So what is off plan investment, how does it work, and what are the different options available?

Off-plan property is a property that has not yet been completed. Construction may still be underway, or the project may still be in the planning stage.

Buying off-plan involves purchasing a property that has not yet been built, typically a year before the completion date. Not only do developers reduce their own risk by agreeing to sell the property early-on in the process, but investors can often get the property at a lower price than may be anticipated – creating a deal that suits both parties. The investor will typically pay a 10% deposit for the property to secure the purchase, followed by instalments to pay-off the remaining balance.

When investing in off-plan property, there are a number of risks:

The developer goes bankrupt - Almost certainly the biggest risk associated with off-plan property purchasing is the potential for the developer to go bankrupt before completion. The investor then loses any money paid up to that point, unless there was insurance in place.

A good way to mitigate this risk is to work with trusted, reputable and experienced developers who are an established business.

Property value decreases - Property prices can fluctuate - something that is accepted within the property market - but if it becomes a more long-term issue then it may be a result of poor research on the part of the investor.

Look for a development that is within a location known for strong investment, with a good economy, good transport links and ongoing regeneration.

Mortgages -  Mortgages can be harder to obtain for off-plan properties due to the fact that lenders find it difficult to establish the value of a property that hasn’t yet been built. It is also more difficult for buy-to-let investors to secure a mortgage on new builds as the lending criteria is much stricter – this is due to the higher house prices and consequently the lower yields produced as a result.