Why it pays to invest in off-plan property

Bricks and mortar will never fail to be a solid investment. But what if the property hasn’t been built yet? Off-plan investments allow you to secure sought-after developments at competitive prices to maximise your yield.

‘Off-plan’ refers to properties that are still under construction. Despite their ongoing development, they present a reliable and profitable investment asset. In a lot of cases, they’re actually better than a completed build.

Why? We’re going to explain why it pays to buy off-plan property, especially in popular markets such as Manchester.

Lower purchase prices

The foremost reason for off-plan procurement is how much less you’ll pay for it. Compared to a 100% market-ready apartment or rental home, you’ll likely save tens of thousands of pounds. The earlier you buy, the cheaper it will be.

It’s simple – your funds will go further, in a location that (like Manchester’s 5.76% projected yield growth) rewards fast movers who can then retain more cash for other investments. You may also be given a discount for purchasing several properties at once.

This is, of course, because you’re resting entirely on the guarantee and credibility of those who are building it. All you have is the promise of the developer. That being said, a worthy off-plan developer will tell you everything you need to know. You could also ask to see an apartment they’ve built already, on another site, to grade the finished décor, utilities and floorplan.

Some of your questions may be:

What makes the site an attractive prospect for those who will be living there?

What rental prices are you likely to secure in the current climate?

Is there a realistic growth forecast for similar homes in the area?

Which amenities, fittings and service features will be included?

What is the timeframe for completion, and is it realistic?

Most developers will have an investment brochure that answers these questions. Their website should include timescales, visualisations and market valuations. Piece by piece, you’ll form an impression of the rental site, and how trustworthy its leaders are.

Larger gains upon selling

Developers want to sell their units as quickly as possible; that’s why prices are lower for early adopters. By purchasing off-plan, investors stand to net higher returns when they come to sell.

Let’s say a property is due to be finished in late 2020… An investor may secure it in January 2019, then take advantage of rising house prices between then and the completion date. Property remains a strong asset, relative to more volatile investments such as stocks or government bonds.

For example, house prices in Manchester increased by 7.4% over 2017/18. It’s the most significant rise in the UK, echoing years of continual residential interest. There’s no shortage of people looking to buy or live there. If you’re hoping to sell before the apartment is habitable, that 7.4% is only a small indication of what you’ll gain in 12 months or fewer.

Our Axis Tower development is one such example of a promising development in its off-plan stages. Many of the units have been sold, even though the site hasn’t reached completion. Off-plan investors have already made 33% on their residential stake. That’s without a single foot in the door…

The ability to stage your payments

For many investors, the largest setback is staking a deposit. If you choose a buy-to-let mortgage, there’s often pressure to pay a large, upfront sum. But off-plan developers can give you more flexibility. Payments can be split over several weeks or months, reducing the burden on your bank account.

Property Alliance Group, for example, offer a £5,000 exchange fee when the contract is signed. That secures the property for you. Afterwards, you’re able to pay 30% upfront, and 70% of the value on completion. You might get a special offer too. Property Alliance Group ask for 15% down payments on our Enigma and River Plaza sites. It’s another level of assistance for our clients, who may struggle to afford the investment straight away.

Don’t forget to check the contract and ensure you’re protected. A segmented payment plan has to carry a lot of trust – both for you and the seller.

So – why should I buy off-plan development?

Let’s run across the core benefits of off-plan builds again for reference:

They’re cheaper to buy initially. Since they aren’t yet finished to a rentable standard, there’s a lower price tag.

You can sell up before the build is done, and thereby get a swift return that takes advantage of the momentum in a local market. House price forecasts are the best judge of whether that’s feasible.

Or instead, rent the apartment for a certain period of time and then sell it. You’ll benefit from the cheap purchase and receive great yields in a city that’s courting much rental attention.