Off-plan Property: Should I Invest?
Updated: Jul 13
Investing in off-plan property requires a substantial amount of research to ensure that your money will not be squandered. Ultimately, your biggest potential risk of investing in off-plan developments is paying your required deposit, and the development never coming to fruition.
When buying off-plan property, once it reaches completion you will receive a 10-year building warranty; so if any issues arise from the building you are covered under insurance. The insurance also covers and protects the first 10% of any deposit paid to the development.
Where the research comes in, is in the form of getting to know the builder of the development and their track record. You need to ensure that you are fully aware of how the project itself is being funded and establish whether the finances are in place to build the development outright, or if the build is reliant on sales of units. These matters go into conducting your due diligence when investing in off-plan properties, but ultimately you need to know if your deposit is protected and secure.
Off-plan Vs. Re-sales: Why not buy a resale?
What we are experiencing currently in the resale market is substantial building flaws to properties and this is subsequently preventing buyers from securing mortgages. This is specific to the issue around cladding on ready-built property investments, as unsafe fire-hazard cladding on a property that has not been altered or removed is resulting in the banks refusing to lend to clients as their property is not regulated as safe.
Completed apartments in the re-sale sector often come with leases where the freeholder has inserted a clause to double the ground rent every 5 or 10 years. This poses big issues for those investors looking to secure a mortgage. Buyers don’t usually discover this until they are some way down the road in the legal process which can be very annoying, as well as disappointing. This type of practice by freeholders has now been outlawed by the Government for all new off-plan projects, which means investors can reserve an apartment safe in the knowledge there will be no nasty surprises.
Another issue with a resale investment property is that you are unable to have the freedom to choose which unit of the development you invest into. With off-plan developments you can dictate whether you purchase a unit that is south facing, water facing, has city views, is a corner unit, the opportunity for variety in this market is substantial. Investing in off-plan also suits many financial circumstances with the offers of payment plans to suit various clients, with the benefits of purchasing a property at today’s low price to achieve capital uplift. If you purchase a unit that is worth £150,000 today, by completion in two years or so, that unit could be worth £175,000.
Off-plan developments: Who do we work with?
We at LPC Invest work very closely with local Manchester-based property developer Salboy, owned and operated by Simon Ismail and Betfred Owner, Fred Done. We also have a great working relationship with the High Street Group based and operating in Newcastle upon Tyne. These two companies have displayed to us their reliability and fantastic work experience, leading us to work with them regarding multiple off-plan developments, including the landmark project The Residence at Anchorage redevelopment scheme in Salford Quays.
These are all frequent questions received from our clients and we confidently display to them our expertise in the market, ensuring they are well informed on all aspects of their investments, and where they will receive the best returns or capital growth possible.
If you are interested in asking us any questions, please feel free to contact us on 0161 713 3883 or alternatively contact us via our form.