Do Off-Plan Properties Benefit from High Yields?

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 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.

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.