AS the term suggests, opting for an off-plan property means purchasing something that hasn’t yet been built. But according to Jacques Van Embden, Managing Director at Blok Property Developers, choosing to buy a place off-plan comes with numerous long-term benefits. “There are major advantages to pursuing the off-plan route. The important thing is to know what you’re getting yourself into, and understand how to mitigate risk,” says Van Embden.
Why purchasing off-plan is a great idea
Buying an off-plan property can be financially beneficial.
Off-plan properties are brand new and they tend to require far less maintenance, especially in the first three to five years after being purchased. Buyers also won’t have to fork out transfer fees and deposits tend to be lower for off-plan units. Buying earlier can also mean that property value increases over time, making a case for substantial return on investment opportunity.
It can be easier to get a bond
If a development has already been approved by a bank, a potential off-plan homebuyer may find it easier to obtain a bond from the same financial institution. Banks will also give preference to off-plan buyers who have received pre-approval. Buyers also won’t need to pay their bond until the unit is complete, giving them time adjust and plan their budgets before moving in.
“One of the most significant benefits of buying into a sectional title scheme is you’re only expected to start paying when the whole development, or your section, has been completed,” explains Van Embden. “This can be very valuable for buyers who are mindful of their budgets and want to have a clear view of how their bond payments could impact them once the development is complete.”
Shielded by the Consumer Protection Act (CPA)
For those a bit concerned by the risks of an off-plan purchase, the CPA protects buyers by giving them the right to ask the developer to fix any structures that don’t match the original plans, within three months of the request. A buyer is also within his CPA rights to request the repair of any roof leaks caused by poor workmanship for the first year after purchase.
Good return on investment
For those looking to rent out their unit, a previously unoccupied property is often more attractive to prospective tenants. Value appreciation could also mean that an investor is able to charge a rental fee that matches or exceeds the bond payment.
“An off-plan unit can appreciate considerably during the construction period, which means significant capital growth between the time you make the deposit and take ownership of the transfer,” says Van Embden.
How to off-set the risk of buying off-plan
Do your research and be more engaged
Be sure to do all the necessary research of the building plans and renders, and importantly do your due diligence by engaging with the developer and asking as many questions as possible. Visit the developer’s website, and ask about their completed projects – this can all help give you a clearer perspective on whether it’s the right investment for you.
Get pre-approved
Developers are increasingly organised and fine-tuned to alleviate the anxieties of their clients, and are always ready to up their game. Nevertheless, one should always factor in construction setbacks that could shift completion dates out, says van Embden. With loan offers typically lasting between three to six months, a delay in development has the potential to affect your ability to secure a bond. To prevent this, it’s important to get pre-approval to guarantee you have the necessary funds to secure a home loan when the time is right.
Protect your deposit
Securing your deposit on a new build is essential. “It’s important to make sure any deposit paid for an off-plan unit is held in a trust by a registered estate agent, and that if the development does not proceed within a certain timeframe, it is repaid with interest. It may also be worth seeking out deposit protection for added security,” says Van Embden.
