You’ve seen your dream home – the only problem is it isn’t built yet. Is it ever a good idea to buy off plan?
The short answer is yes – there are many advantages to buying property before it’s been built.
The trick, as with purchasing property of any type, is due diligence – and when buying off plan that means some investigation into the detail.
Some of the positives of buying off plan are that you can often get the property you want in a good location within a development, and at a lower price when you get in early. Prices can often rise as a development nears completion, especially if it is proving popular.
By buying early you are securing a property in the market and can benefit from any market price increases over the period of construction. In some cases, we’ve seen this as high as 16-20% growth by the time the property is completed.
The potential negative is that you don’t end up with the property you thought you were buying. There is the risk that it’s built and finished to a different standard than you expected. There is always the possibility that the market may drop between the time you purchase and the time the property is completed.
Here are some things to think about before committing to purchase an off-plan development property:
Check your sources. Once you’ve found a suitable development property, do some homework on the developer. What projects have they been involved in previously? How successful have they been? Do they have a track record of happy customers or a litany of complaints?
Be visionary. If you can, visit the development site and figure out where your chosen property fits. How much sun and natural light is it likely to get and at what times of the day? How much outdoor space and privacy will you have?
What will the views be like? Make sure you have a clear picture of how big the property and all the interiors will be. Don’t rely purely on plans, artist impressions and show homes.
The devil is in the detail. You need to go over the purchase agreement thoroughly. Most disputes arise because buyers are disappointed the finished property is not up to their expectations. Make sure the contract covers everything the developer is responsible for. You should be clear on how much the developer is permitted to deviate from the original plan during construction and what your rights are.
Contracts can also include a sunset clause which allows buyers a way out should the project completion be excessively delayed. However, buyers should also be aware that these clauses have, on occasion, been used by developers to cancel contracts.
If you have questions, be sure to ask them so that you know exactly what you’re purchasing. When you go in with “your eyes open” purchasing off plan can be very rewarding, both personally and financially.
Principal of Harcourts Platinum
Director of Harcourts South Africa