Buying off-plan property makes sound financial sense for the overseas property investor. Below we have gathered information on the advantages of off-plan options to South African property buyers.
Due to the shortage of homes and ever increasing prices, buying off-plan property has become a popular choice in South Africa. Property developers are keen to maximise on off-plan sales as an aid to financing a project. Buyers choose their properties from plans, elevations and computer graphics, and need to exercise their imaginations to envisage the end product. There is also a small element of risk attached to buying off-plan, therefore developers offer the property at low prices. As construction nears completion, the risk diminishes and the price start to rise. In addition, buyers can more easily see what the finished product will look like and are eager to snap up properties at, despite the higher price.
Property investors should act with extreme caution however and take steps to ensure that an off-plan option is the right one for their purposes. Among other factors, it needs to be in a good location and the developer must have a good track record. At Propertyshowrooms.com we have investigated a number of carefully selected developers and off-plan properties in what we consider to be the best South African locations.
Off-Plan investment property in South Africa in some areas such the Western Cape, Cape Town, Eastern Cape towns on the Garden Route and in the areas around Durban in Kwa-Zulu Natal have brought excellent profits for investors in recent times. High returns on off-plan of between 20 and 50% per annum have been known in a short space of time (in some cases under 24 months).
The first buyer of a ‘new’ property is exempt from paying Transfer Duty, which can offer savings on a property of ZAR 1,000,000 (GBP 72,000) of ZAR 25,000 (GBP 1,800).
Profits from off-plan properties can be free of capital gains tax if the property is sold before completion. Our tax experts will be able to inform you further about this approach.
Often the developer will pay the legal costs generated by a property purchase, such as the fees incurred through the registration of the title deed and the costs involved in raising a bond or mortgage.
Only a relatively small amount of money is needed up-front, usually about 10% of the purchase price.
The long construction time of at least 12 months means the off-plan purchaser can benefit from the increases in property prices over a year as well as have time to come up with the final payment upon completion.
In South Africa you will find many developers offering a variety of tempting off-plan options. We carefully scrutinize these proposals and work only with development companies that have the best, proven track records.
Besides the extremely attractive off-plan price, some greatly advantageous finance arrangements are in place. Initially there is only a 10% deposit and the rest of the payment is only due on completion. Furthermore it is possible to finance this through a mortgage.
Once you have made the decision to invest in off-plan, you will need to consider what type of investment strategy you wish to follow. We have access to experts who will help you work out the plan that is most suitable for your needs, either a "pure investment " or a "buy to let " strategy. Our experts will also help you to choose the best location for your circumstances.
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