10 Jan 2023

Do Off-Plan Properties Benefit from High Yields?

Category: Off-Plan Property

Off-plan properties are often some of the highest-yielding properties on the market. Despite this, some investors are hesitant to invest off-plan, with concerns that the property does not physically exist. Some may fear that the project will not reach completion and if it does, the building may not look like the one they invested in.

While these are completely reasonable worries, people familiar with off-plan properties will be able to navigate the field and find the perfect opportunities more easily. In the property industry, reputation is vital. Successful property investment agencies, like CityRise, will only work with reputable developers. This is to protect the investors and guarantee developments reach completion, to a high standard. There are many benefits to investing off-plan, but there is one question investors are asking, do off-plan properties yield higher?

Author: Sam Whalley

Digital Marketing Executive

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Below Market Value

If an investor is looking to buy property off-plan, they are often able to acquire the asset below market value. Typically, before construction or during the early stages of development, the property is available at 10-15% below market value. However, as the development nears completion, this may drop to around 5-10%. Therefore, investors have the possibility to gain instant equity upon completion.

Purchasing below market value means investors can maximise their yields as they will have invested a smaller sum of money, and outgoing maintenance costs will be low. Therefore, landlords may see a return on investment much sooner. Also, for investors focusing on capital growth, off-plan properties in desirable areas offer the fastest growth.

High Rental Prices

Developers often look for high-growth areas in key postcodes when planning their build. These are areas with high employment, lots of amenities, and a strong community. These are all factors that skilled professionals look for when finding a residence. Therefore, through researching the area, investors gain full confidence in the development and whether it can achieve high rents.

Buying in the right area can be difficult, after all, two identical properties in the same city will not always hold the same value. Therefore, it is key to identify areas with high levels of rental demand. For those struggling to identify an area of interest, it may be helpful to use an investment agency for guidance. Experts in the field can provide investors with local market expertise to help them find a property that can help achieve investment goals.

High Specification

An off-plan property usually comes with high specifications, with many properties adhering to government guidance. There are rules in place to keep new-build apartments safe and energy efficient for tenants. Many older properties require large levels of further investment and maintenance to get to the standard of new properties.

This is also the case with white goods. The newest technology is used so that developers can compete in a competitive market. Furthermore, in some high-budget developments, there are amenities such as roof terraces, cinema rooms, gyms, swimming pools and concierge services. When considered, all of these factors increase rental demand and prices as they are desirable to tenants.

High Rental Demand

Rental demand is usually extremely high with newly built accommodations. This is a result of the amenities and facilities available to tenants looking to save on their utility bills. As many tenants cannot replace white goods and redecorate under tenancy agreements, new and fresh décor is very appealing.

It is not unusual that tenants are willing to pay higher rents if they can secure a space with lower utility bills. Furthermore, off-plan properties are built within areas which are desirable to tenants. This is to assure that investors will experience high rental demand on their properties and achieve the largest growth possible.

Low Maintenance Costs

The cost of maintaining a property can be incredibly high, as plumbing, electrical and general upkeep costs add up overtime. Typically, with older properties, landlords are far more likely to need to pay for call-outs and repairs. However, newly built properties are usually fitted with all brand-new appliances and facilities.

The cost saved on maintenance will generate short-term returns, as landlords will not have to pay out thousands on call-out charges and replacement parts. In most cases, if an issue was to occur, the building is usually covered by a 10-year warranty such as NHBC’s Buildmark.

CityRise Verdict

At CityRise, we believe that off-plan property is the best place for investors to look. It is often going to see far higher returns and cost the investor less long term. While investors can potentially achieve high rental yields, off-plan properties offer instant equity upon the completion of the development.

Once the property is complete, the management, maintenance and tenanting are far easier than with older properties. This is because the rental demand is extremely high. Due to the location, new technology and amenities are all factors that tenants take into consideration when renting, rental prices are also higher.

If you would like to speak to a CityRise investment consultant, simply ask any questions you have, here.

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