Off-plan property investment: What is it?
Off-plan investment has been one of the most dominant investment vehicles for the last 10 years, providing private investors with the opportunity to invest in a more tangible and secure market than, for example, stocks and shares. Off-plan property investment refers to the purchase of a property whilst the development is still in the planning or construction stages.
As with any investment, whilst there can be risks in buying an off-plan property, there is also an opportunity for investors to capitalise. Purchase prices for off-plan property are substantially lower than completed developments and generally provide higher rental returns, making the off-plan property an attractive and lucrative option for investors.
Why invest in off-plan property?
There are plenty of advantages to off-plan property investment. Here are just a few:
Lower-priced investment and capital growth
Properties in the UK can be up to 55% below market value
prices if they’re off-plan due to the risk of the development not having been built yet. Investors will usually pay a deposit of anywhere between 20-50% to secure the sale, with the remaining fee to be paid on completion.
Over the course of the build, properties in areas where house prices are strong can usually expect an increase in capital growth which, coupled with a sustained rental income post-completion, leads to a strongly performing asset.
More flexibility and freedom
Freedom and flexibility are critical benefits of investing in off-plan property. Since the properties have yet to be finalised, investors can take the time to select the best unit by researching the available options and considering whether the specifications, facilities and amenities are going to suit future investment goals and objectives.
Staying at home during the pandemic encouraged renters to seek properties that better suit their needs, making off-plan properties with desirable attributes or surroundings high in demand the perfect choice for investors to attract tenants.
Sustainable modern buildings
New-build properties are rising in popularity in the UK for both tenants and investors, increasing demand from both sides. Students, young professionals and even families are attracted to them due to their stylish and modern look. Not only are they contemporary in style, but they also hold impressive sustainable standards and are often built with eco-friendly materials – making them incredibly energy efficient.
Is off-plan currently a popular option?
Buying off-plan property is the perfect way to either start an investment portfolio or diversify an existing one. Whilst the global pandemic caused housing markets to stall, the UK rental market proved extremely resilient as people took the time to re-think their living arrangements. According to Zoopla, the rental market has grown by 11% since Q1 2021, with the average rent now set at £995 per month.
According to Property Reporter, 37% of new homes sold in England and Wales were sold off-plan, which was up from 35% in 2020. In addition, whilst the lockdowns meant that homes with gardens and access to green space became more popular, the re-emergence of office life has led to an influx of people wanting to move back into city centres, ensuring investors will always have demand for their properties. The Guardian reported that off-plan purchases are particularly popular outside London. Figures from Hamptons estate agents showed 40% of new homes were sold off-plan in the capital in 2021, compared with 61% in Birmingham, 58% in Manchester, 60% in Liverpool and 45% in Leeds. Over the past couple of years, it is clear to see that off-plan property has risen in popularity and has become an attractive option to secure long-term capital.
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