Of all the trends currently shaping the property market, buying off-plan has become a popular option for investors looking to take full advantage of real estate as an asset class.
In summation, buying a property while it is still under construction is a popular way for buy-to-let investors to make attractive returns via two streams – long-term capital growth and rental income.
And with new-build developments rapidly springing up across the country in a bid to meet the UK’s growing housing needs, there are ample opportunities on offer for those exploring off-plan options in both established and up-and-coming markets.
What’s more, making an off-plan investment is no more complicated than making a standard property purchase if approached with diligence. Having a clear understanding of recent market trends can ensure investors are well placed to benefit from this asset.
The benefits of buying off-plan
Buying off-plan can be an attractive option for those looking to make strong returns on their initial outlay. For one, investors stand to benefit from significant discounts on the price of the property; some can even receive discounts of up to 15%.
Meanwhile, if the local property market experiences a growth in house prices, then buyers will also benefit from capital growth of the asset over the construction period. Say average house prices grow by 5% year-on-year, then the asset will appreciate in line with this. In time, the property could be worth significantly more than what was originally paid by the time that the buyer moves in or begins to rent it out.
Combined with regular income in the form of rent, the potential for capital growth makes this a desirable route to property ownership. As an added bonus, the day-to-day management of the property is commonly taken care of on-site, removing much of the burden of the daily upkeep associated with traditional properties.
Considering buying off-plan? Here’s what to keep in mind
As with any significant investment, strategic planning is key to success. So for those who are new to the market or considering investment into an off-plan property, here are a few key pointers to keep in mind…
Choosing the right property
It might sound obvious, but having a clear understanding of what kind of property you are looking for is the ultimate first step in the journey towards off-plan investment. After all, not all properties will be suited to your needs, so being aware of all the options on offer is crucial.
Student accommodation, hotels and residential flats are just three of the many routes you can take. To determine which type of investment is best suited to your needs, it is important to ask the following question – will this be an income-generating asset or something that will be sold to market in the short-to-medium turn? It may seem like an obvious step, but establishing this from the outset will help inform important decisions further down the line.
Finding the right location
Now that you’ve determined which type of asset you’d like to invest in, make sure you choose an area where you’ll be able to enjoy regular rental yields and strong capital growth. This comes down to choosing a location where there is significant demand for rental accommodation.
Let’s consider the student accommodation route. Investors are encouraged to choose popular university towns or cities, with one or more established universities, where there will always be a high demand from students for comfortable and convenient living spaces. There’s a reason why cities like Liverpool and Newcastle have seen a spike in the number of new developments being built – they are both world-renowned university towns home to a large student population.
Seek out guarantees
To lay any concerns about the quality of the finished product to rest, investors are also encouraged to seek out developments that offer warranties such as NHBC Buildmark.
As a 10-year scheme that offers protection for newly built or converted homes, NHBC Buildmark also provides buyers with some form of protection starting from the initial exchange of contracts. What’s more, it can be used to cover any remedial work if any problems do arise as a result of the builder failing to meet certain standards.
While the prospect of buying a property that has not yet been built might seem daunting at first, conducting comprehensive research and working with an experienced team can help you secure a lucrative investment.
At the same time, the number of new-build developments springing up across the UK means that there’s no shortage of opportunities up for grabs. The challenge is finding one best suited to your investment strategy and long-term financial planning.
Jerald Solis is the business development and acquisitions director at Experience Invest, a company that provides property investors in the UK and overseas access to exclusive investments across a variety of asset classes. He is also a director at Opto Property Group; a construction firm committed to creating developments that have a long-term, positive impact.
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