How to buy a property off-plan

What's the point of a Home Information Pack?

A Home Information Pack brings together essential information needed by buyers at the very start of the home-buying process, and ensures that important information, such as the energy-efficiency of a home, is made available to the prospective buyer. For buyers, the Pack is provided free of charge (although a reasonable charge may be made for copying and postage).

Off-plan property launches

Often, large investment companies will be given the opportunity to buy a number of units for a discounted price pre-launch. The remainder are usually then opened out to individual investors at the launch itself. Sometimes agents do get pre-launch homes to sell and they will try to sell these to serious investors already on their database. Either way, the estate agent will provide you with all of the relevant off-plan marketing material and you will have the chance to assess the units on offer, usually by inspecting a show home. The show home is designed to be a typical property equipped with the level of specification you can expect from your own investment.

The earlier you get access to the property for sale, the greater the chance of securing one of the better units and of getting a discount on the price. Your negotiating position should be determined by the demand the development is attracting. The higher the demand, the less chance you have of negotiating the price down.

You can search for thousands of new-build homes from the country’s leading developers right now on Primelocation.com. You can also read our guide on how to buy a new-build house or flat for more information and advice on buying a new-build property.

Do your research

As with any property purchase, particularly if you’re looking to let the property afterwards, it’s important that you do your homework thoroughly. If you fail to research the development, surrounding area and the potential demand for rental property before you buy, you could leave yourself in a very vulnerable position financially. So, what things should you consider before buying a property off-plan?

Location

It’s a cliché, but it’s all about ‘location, location, location’. It’s a critical factor in understanding the potential of the property. Is the wider area being regenerated? Is the necessary infrastructure in place already? How close are the appropriate transport links, shops, restaurants, parks and schools? You can find out the proximity of local amenities to a particular development by conducting a property search on Primelocation.com.

Know your market

If you plan to let or sell the property on completion, you should establish the target market for the type of property you’re planning to buy. Discuss this with local estate agents to understand where the demand is likely to be coming from. It’s also sensible to establish how many other units have been sold to buyers planning to let them out upon completion, as your property could end up competing with a large number of other properties in the same development.

Price

You should also try and see what similar properties in the area are being sold or let for. This will give you an indication of the possible return you could expect to see when you come to sell or let the property. Be aware, however, that the market can change a lot over a 12-month period, so you can’t always be certain that you will eventually achieve the prices being realised in the current market. You can either view the latest sold prices in England & Wales, or you can search for property to buy or property to rent in the local area now to see what asking prices similar properties are being marketed at. In some cases, the developer will guarantee a certain value of rental yield in the first year or two. Find out what’s on offer.

Is there a large supply of local new-build properties in existence (or coming to market soon)? If so, there is a danger that the market could become saturated if lots of developments reach completion around the same time. Have a look around the area and check with local estate agents for any other developments already planned or expected in the near future.

The property

Look at the details, dimensions and specifications of the property. If you’re looking to sell or let upon completion, will the property be suitable for the target market? A family will have slightly different requirements from a single professional, for instance. Make sure the property is suitable for the market you are hoping to attract, whether buyers or tenants. Also, find out if there are likely to be any additional charges associated with the development, such as service charges.

The aspect and views from the property are obviously more difficult to assess on a property that has yet to be built. However, you shouldn’t rely on computer generated images (CGIs) or the developer’s sales pitch alone. Try and visit the actual development plot and check out where the roads and, if applicable, the railway lines are, and work out where your property will be and what the views are likely to be like from the finished product.

While not always possible, try to secure a property with one of the best positions, as you’ll be rewarded with better rental yields and capital appreciation. Try to find a property with a unique selling point, such as a nice view, parking, or access to outside space.

Steps to buying off-plan

The following points illustrate the steps you are likely to need to follow when buying a property off-plan:

• Find the right development in the right location
• Arrange the appropriate finance for the purchase well in advance
• Reserve your chosen property and pay the reservation fees (usually between £500 and £1,000)
• Arrange a surveyor’s valuation of the property, which your mortgage lender will require after an offer has been made
• Make sure all the mortgage paperwork is complete and ready to go
• Exchange legal contracts and pay the deposit (usually between 5% and 10%)
• Conduct a snagging survey about two weeks before final completion and check the property for any defects
• Be ready for completion (there are usually two dates, a ‘short stop’ and a ‘long stop’ – the former is the date by which the developers expect to have finished the building works, the latter is the date by which they must have done so).

Assess the property market

Research local property prices to find out how the market has performed over the last few months and try to gauge the direction of prices. Get up to speed by reading the latest Primelocation.com House Price Index for the latest property market trends.

Buying off-plan in a market where prices are depreciating can put your investment at a greater risk. However, get it right and buying a property off-plan can be extremely rewarding.

The content provided in the Primelocation.com guides is for information only. In all cases, independent and professional advice should be sought before buying, selling, letting or renting property, or buying financial services products.