Outlined below are some of the reasons why off-plan property in the UK can be beneficial to international investors.
Many developers in the UK offer beneficial payment schemes. Payment schemes currently on offer allow you to buy property off-plan, ie. before or during construction when the price remains low, with down payments of between 15% and 40% of the total price.
By the time the property is finished, prices rise due to market forces and the greater general appeal of a completely finished property that is ready to move into. Investors therefore sell the property on to another property purchaser and in so doing, enjoy some excellent returns of between 15% and 60%, whilst never having paid the full purchase price. Depending on the down-payment and speed of construction, profits from off-plan deals can range from a staggering 40% to 100% per annum, although in the current market it is safer to assume an average growth of between 11% and 15% per annum in prime locations.
Investors should however exercise due diligence and choose wisely, making sure that the property is located in an area where they will resell quickly and easily or where there is a high rental demand for their buy-to-let option. With an off-plan investment, even in the “worst case” scenario if the property cannot be sold upon completion, the final balance due can often be financed by the developer himself, typically over 4 years or more. Furthermore, the rental income may pay off the finance of this loan and yield further eventual return on investment.
In order to limit financial risk and debts, the developers of any project will wish to sell units off-plan. They understand that if buyers cannot see a physical property at the beginning, they will demand a lower price, while relying purely on the developer’s reputation, the property location, artistic impressions and computer simulations on which to base their decision to purchase.
In addition to the excellent off-plan price, some highly beneficial finance structures are in place. You sometimes need to pay only around 20-40% of the purchase price in the form of a deposit, while the rest is payable upon completion. This may be financed by a mortgage if necessary.
If you decide to invest in off-plan property, you will need to decide which strategy you will adopt to achieve your return on investment. Our experts will help you to choose the most appropriate plan, creating an investment programme suitable to your needs, whether this is "pure investment" or a "buy-to-let" strategy. We will also assist you in finding the most appropriate location to suit your investment needs.
Prices never remain low for long and, as construction progresses, prices begin to rise steadily. In the UK, as in any other market, it is important to buy as soon as possible during the early stages of development when prices remain very competitive but are already beginning to rise. Early investors will invariably see the greatest returns.
Early purchase allows investors to choose the most sought after properties on any given development. The best units always offer higher capital appreciation in the smallest time frame and can often demand the greatest rental incomes. Penthouses are often firm favourites.
As the development begins to be constructed, the value of the units begins to rise. A completed show home is normally available for viewing at this stage, while buyers are taking less of a risk as they now do not need to rely 100% on plans.
As more units are sold, the price of the remaining units rises. Units sell faster when buyers are able to physically see them. There is often a phase payment structure in place which mirrors the increasing value of the properties. As an early investor, this means that, should you decide to sell your property, it will be worth considerably more at this stage than when you made your initial purchase and paid the 30% deposit.
Investors are currently making some potentially strong investment choices in the UK and we are dedicated to helping you to pick the best property options available to suit your particular needs. In this way, you can generate personal wealth through safe and intelligent off-plan investment.
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