Is off plan still an attractive investment?

Construction site London

Across the world, the new build property markets are very different and investors will often wonder if off plan is still an attractive investment?

The answer is yes – off plan is still a very attractive investment prospect and here’s why.

Overall, the United Kingdom enjoys a prosperous property market, one that is resilient and has weathered many a storm economically and politically.

Throughout the Coronavirus pandemic, the property market has seen price growth and been supported by the government as one of the industries that is most key to the country’s economy.

In the UK the demand for housing outstrips the supply of homes to the market considerably. Each year the number of new homes built is around 100,000 less than the number needed to meet the levels of demand from households across the country.  

Any investor considering a particular market will want to understand the demand and supply – the UK property market is undersupplied creating an opportunity for investors.  

What is off plan property investment?

An off plan property purchase is when a person buys a property in advance of the completion of the build.

Typically the purchase will take place before any construction work has begun. Early investors who secure a property at this stage often have access to the lowest prices.

The price is fixed at the point of purchase – an investor will only pay a portion of the final purchase price to initially secure the property.

The beauty of off plan property is that whilst the property is being built it will usually increase in value.

Are new builds a good investment?

New builds are popular with home owners and tenants alike – the appeal is often in the newness. Tenants will often pay a premium for a new property.  

Convenience, modern finishes and designs and everything being in working order are amongst the many reasons that there’s a preference for newer properties.

Not only is a new build more likely to be chosen by a tenant over an older one but over recent years they have seen stronger price growth – as much as 48% since 2015 outperforming the regular housing market.

Can you negotiate the price?

There can sometimes be a little wiggle room but the real gain for investors can be the features that are included with the sale.

Developers will often add incentives, especially for the early investors, such as paying the stamp duty, including a car parking space or furniture pack.

These elements can often be more rewarding and beneficial than knocking a small amount off the purchase price.

What are the risks?

Certain questions are sometimes raised by potential investors surrounding the risks involved with purchasing a property that is yet to be built.

We recently wrote an article highlighting what happens in the instance that the developer should go bust which you might be interested in reading – click here.

The key to avoiding pitfalls is to buy only from a developer with a strong track record of quality and delivering in a timely manner.

Where to buy

There can be an element of risk in a location if you receive poor advice on where to buy – though average prices across the UK historically have risen and are likely to continue to do so, not all areas present equal opportunity.

An area might show the potential for capital growth but it could be based on plans for projects that are not yet approved, let alone in motion meaning you could wait a considerable time to realise financial gains.

Furthermore to generate steady and strong rental yields an area needs to appeal to tenants as soon as it is completed – be sure of the credentials in the exact location, not just that its generally within a particular city or towns borders – how far is it from transport? Amenities? Places of work?

As we carefully vet not only the developer and the particular development prior to recommending a purchase, our investors proceed safely in the knowledge that thorough due diligence has been carried out.

Learn more about the latest property hotspots by downloading our guide.

Can you make money buying off plan?

Done right, you can absolutely make money buying off plan.

This type of property investment can offer an investor considerable returns in capital appreciation and also a regular rental income.

The key to success is to buy within a development that has strong credentials, is located in a prime position and to purchase at an optimum time.

UK property investment consultants

As experienced investment consultants, we recognise windows of opportunity based on a matrix of factors.

The dynamics of the potential in different locations will change as regeneration projects take effect or improvements to infrastructure get underway, amongst other elements.

Location is vitally important in equal measure to the development itself.

A reputable developer and a quality build will outshine its neighbours, have greater appeal to tenants and see increased capital growth.   

Off plan is an attractive investment prospect and one that should be explored by any discerning investor.

To talk to us regarding your plans to grow wealth please do get in touch.

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