Buying property off the plan is a popular strategy for homebuyers, as it can offer a range of potential benefits. However, there are also risks and drawbacks to consider when deciding whether or not to go ahead with such an investment.
In this blog post, we will explore the pros and cons of buying property off the plan, so that you can make an informed decision about whether it is the right option for you.
What is 'Off the Plan' Property?
Off the plan property refers to the purchase of a property that is yet to be constructed or completed. It is essentially buying a property based on the plans and drawings provided by the developer, rather than a physical structure. This means that buyers often have to make their purchasing decision based on a virtual image or display home, rather than being able to inspect the property itself.
In many cases, the property may not be completed for several years, meaning buyers are investing in something that is not yet tangible. In order to secure the property, buyers usually need to pay a deposit, with the remainder due on completion of the project. Off the plan purchases are common in new developments, with developers offering apartments, townhouses, and other types of dwellings before construction has commenced.
While buying off the plan can be a good way to secure a property before it is completed, there are some potential risks and drawbacks involved. In the following sections, we will explore both the advantages and disadvantages of buying off the plan, helping you decide whether it's the right option for you.
Advantages of Buying 'Off the Plan'
If you are considering buying property, you may have heard of the term 'off the plan'. This is when you purchase a property before it has been built or completed, usually with the help of an architect's drawing or blueprint. While it may sound like a risky move, buying 'off the plan' comes with several advantages that are worth considering.
1. Lower Prices
One of the most significant advantages of buying 'off the plan' is that the price is typically lower than the market value of the completed property. This is because developers are looking to sell their property before construction has even started, so they may offer incentives like discounts, flexible payment plans or stamp duty concessions.
2. Customisation Options
When you purchase 'off the plan', you are given the opportunity to customise certain aspects of the property, such as fittings, fixtures, colours, and materials used. This means you can make it your own and create a space that suits your preferences and lifestyle.
3. Potential for Capital Gains
If the market grows and prices for properties in the area rise, you may be able to make a profit when the property is completed. By securing a lower price during the early stages of development, you have the potential to benefit from any increase in value over time.
4. Less Maintenance
New properties tend to have less maintenance issues than older ones. By buying 'off the plan', you have the peace of mind knowing that you won't have to deal with the wear and tear that comes with an older property.
5. Newer Designs and Technology
Developers will usually implement the latest technology and design features into new developments. This means you'll have access to energy-efficient appliances, the latest security systems, and smart-home technology, which can save you money on your utilities and improve your quality of life.
While buying 'off the plan' has its advantages, there are also some risks and drawbacks that you should consider. We will explore these in the next section.
Disadvantages of Buying 'Off the Plan'
While there are certainly benefits to purchasing a property off the plan, there are also some drawbacks that should be considered before making a decision. Some of the most significant disadvantages of buying off the plan include:
1. Delayed completion: When buying off the plan, there is always the risk of construction delays. This means that you may not be able to move into your new property on the agreed-upon date, which could cause a lot of inconvenience and financial strain.
2. Unforeseen changes: While the plans for the property may look great on paper, there is always the possibility of changes being made during construction. This could result in your property being significantly different from what you initially imagined.
3. Risk of developer insolvency: There is always a risk that the developer may become insolvent during the construction process, leaving buyers without a completed property or the possibility of recovering their deposit.
4. Lack of certainty around location and surrounding developments: When purchasing off the plan, there is always some uncertainty around the location of the property and what surrounding developments may be built in the future. This can make it difficult to predict whether the property will hold its value over time.
5. Difficulty securing finance: Securing finance for off the plan properties can be challenging as banks are often hesitant to lend for a property that doesn't yet exist. This means that buyers may be required to pay a higher deposit or secure more expensive financing options.
While these disadvantages should certainly be considered before buying off the plan, they should not necessarily be seen as deal breakers. By doing thorough research and seeking professional advice, it is possible to mitigate these risks and make an informed decision about whether buying off the plan is right for you.
Should You Buy 'Off the Plan'?
While buying a property off the plan can have its advantages, it's important to carefully consider your individual circumstances and goals before making such a significant investment. Here are some factors to consider when deciding if 'off the plan' property is right for you:
- Financial Stability: If you're considering buying a property off the plan, you need to be financially stable enough to take on the risks that come with it. This is especially important if you're relying on a mortgage to fund the purchase.
- Timeframe: 'Off the plan' purchases often involve long waiting periods before the property is completed and available for occupation or resale. This means that if you're planning on buying 'off the plan' for the purpose of reselling, you'll need to be patient and able to handle any unforeseen delays.
- Risk Appetite: 'Off the plan' property purchases involve a certain amount of risk due to unforeseen changes in the market, delays in construction, and other issues. If you're not willing to take on these risks, it may not be the best option for you.
- Your Property Goals: When deciding if buying 'off the plan' is right for you, it's important to consider your individual property goals. Are you buying to live in the property long-term, or are you hoping to make a profit on a resale? Your goals will have an impact on whether 'off the plan' is the right choice for you.
Ultimately, the decision to buy 'off the plan' depends on your individual circumstances, financial stability, and long-term property goals. Before making any decision, it's essential to seek expert advice and consider all of the pros and cons involved.
