Buying Off-plan

Overseas buyers often find the holiday home of their dreams in the form of highly affordable off-plan options, often located on luxury, purpose-built resorts. Below we take a no-nonsense look at this type of purchase and its pros and cons.

For those unfamiliar with buying off-plan property, the prospect of parting with hard-earned money for a muddy hole in the ground, well before the first brick has even been laid can seem a tad daunting. But there is an art to buying on the strength of architects’ drawings and this has become a favoured option amongst many shrewd overseas property buyers.

What is off-plan purchase?

As is often the case, time means money: On the one hand, developers need to sell their product fast so they price their units temptingly low, thus achieving fast and valuable finance to proceed with constructing their development. They then repeat the whole process as soon as possible. On the other hand, buyers act fast to secure the lowest possible price and the best units on a particular development.

Homebuyers are delighted with having obtained the lowest possible price for their properties, while investors will often sell on their contract at a profit prior to completion, repeating the whole process again as soon as possible.

The pros and cons:

  1. Pre-release discounts

    Pre-release prices have obvious benefits for the developer, who gets instant finance to begin the project. Meanwhile the buyer, who gains instant capital, often around 20% of the sale price, prior to official launch when normal pricing levels then kick in.


    Be aware that after initially parting with your deposit, you will come away with nothing more tangible than a contract in hand. You will need to be entirely sure that an adequate bank guarantee is in place so that if the project doesn’t go ahead, your money is well protected and fully refunded if necessary.

    Research your market well and be entirely satisfied that prices will indeed be going up in the development and area you decide to purchase.

  2. Capital growth from the start

    If you decide to hold onto your unit and complete on the purchase, buying at last year’s prices, particularly in an emerging market, can produce excellent returns on investment. Profits can be quite substantial, reaching around 25-30% per annum in key locations.

  3. A simple, cost-effective investment

    Off-plan purchase allows you to reap in capital growth, without the need to apply for a mortgage or even complete on a purchase. Theoretically, you could literally walk away from the deal after having made a minimal capital outlay and never actually “owned” or lived in the property. You could then recoup your money, making a tidy profit and avoiding any stamp duty, mortgage set-up and many other related fees.


    Of course, your future buyers will need to be ready and waiting to purchase the re-assignable contract and this fact should never be taken for granted, particularly in today’s uncertain economic climate. You therefore need to accept that you may indeed need to take on a mortgage or other finance option in the event that there is no buyer waiting in the wings.

    Not all off-plan property can be sold on prior to completion without penalty and, as this is not always the case on every development, some will not publicise this fact to purchasers. It is advisable to avoid developments where selling on is not possible as this will limit your future options.

    Some developers say selling on prior to completion is permitted but include a clause in the contract stating you may sell only when they have sold all the other apartments within the development.

    You may not be allowed to sell for a lower price than the remaining apartments, or may be required to operate through the developer’s sales office who will then charge huge fees for the privilege!

    Be aware that developers normally charge 1-2% to transfer paperwork from one name to another but this is normally paid by the purchaser.

  4. Bulk buy discounts

    Many developers offer discounts on the market value in the region of 5-20%. This is usually easy to negotiate when bulk buying more than one unit at a time. Discounts allow extra equity to be locked into the purchase and give potential for higher profits at the time of reassigning the contracts prior to project completion.

  5. The early bird catches the worm

    Buyers who get in early at phase one of a development are usually the ones to benefit the most from the rich pickings. They get the chance to buy on the best plots with the most desirable views, while paying the lowest prices for the best units. If the first phase sells well and the development becomes popular, prices are normally raised for subsequent phases; therefore, if you buy at the start, you will usually get first pick of the best investments on offer.

  6. Payments

    Developers require stage payments from their buyers throughout the building process. Each development and country has different terms but typically these are around 3,000 EUR per unit as a deposit down payment or reservation fee, followed by 30% of the purchase price after 30 days with the balance payable upon completion.

    In this way, you can budget to afford stage payments without the need for a large one-off payment, effectively securing a high value asset for a relatively low initial capital outlay.

  7. Keeping in the market

    Some homebuyers purchase off-plan at today’s prices, knowing that if they can just about afford to buy now, they will not be priced out of the market once prices have risen at project completion in one or two years.


    If the price of an off-plan property does not compare favourably with that of similar finished developments in the surrounding area then you’ll gain nothing by buying off-plan. It’s therefore important to evaluate current market prices before making a commitment.

    Dreaded delays in completion do happen and if a penalty clause is not in operation, this can often mean extra costs and disappointment.

    Bear in mind that many overseas developers, agents and lawyers do a very poor job of keeping buyers informed on the progress of a property transaction or construction, so you may need to contact them yourself to keep up with the project’s status.

  8. Guaranteed rental schemes

    Many off-plan projects offer guaranteed rental income to their buyers for a fixed number of years. This guarantees you some valuable extra income to help pay off a mortgage, while you can simply sit back and watch capital growth take hold. Guaranteed rental agreements incite confidence that your holiday home can be funded adequately from other peoples’ pockets, with minimum outlay from your own.


    Some developers unscrupulously incorporate the cost of their rental guarantee into the sum of the purchase price. They may offer a gross rental guarantee of say, 5% of the purchase price, but in so doing they may raise the price by some 15%, more than covering the guaranteed rental they are falsely offering you.

    If this is the case, your developers will not be interested in obtaining a maximum rental value for your property as they have already made their money from you with the sale, essentially driving down rental values on your development. Once the guarantee period is over, you may then find that you cannot increase your rent to an appropriate level or, worse still, you may be unable to rent your property at all.

    Shrewd buyers calculate the value of the rental guarantee offer, then ask for a discount on the purchase price, confident in the knowledge that they can rent the property out themselves or through a reliable management agent.

  9. Tailor-made units

    Developers are geared up to give buyers a choice of fixtures, fittings, furniture packs and interiors, while on some projects, you can even have some input into how the property is designed.

  10. Hotspot locations

    Invariably, large developers are professional enough to construct in current or up-and-coming hotspots ensuring optimum potential for high returns on your investment. They should have already researched proximity to infrastructures including modern amenities such as schools, medical services, recreational facilities, public transport and places of interest or natural beauty.


    Don’t believe all they say; a careful check is always advised to ensure the off-plan development you choose is not too remote or further from the beach, cafes and shops than many people would like. In some developed property markets, it is often difficult or practically impossible to find off-plan property in the main resorts or beachfronts, forcing new constructions away to slightly less desirable locations.

    Specifications and dimensions
    You will be buying from architects’ plans, drawings and elevations and, with a bit of thought and practice, this is a reasonably achievable task.


    Forming an accurate perception of the space provided simply from a drawing is a rare skill. Finished property will often seem smaller than originally imagined. If, and only if, the show-flat has exactly the same dimensions and specifications as your prospective unit, you will easily be able to gauge dimensions.

    Make sure the room sizes stated on your contract are the same as those in the show home. If they are not, find out the exact difference in order to avoid any nasty surprises upon completion.

  11. Finance

    Some developers will offer pre-arranged mortgages as part of the off-plan deal. You are never obliged to take this mortgage, although you may save some arrangement costs and hassle in so doing.


    It is always wise to exercise caution and get competitive quotes from other mortgage suppliers before simply accepting the developer´s option.
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