Off-Plan Property Investments

Are you considering buying an off-plan property investment? Investing off-plan does come with risks just like every other investment, however, it has numerous advantages. That’s why it is important to have an experienced agent to help guide you.

Discover everything you need to know about off-plan property investments.

Author: Sophie Hope

Digital Marketing Executive

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What Does Off-Plan Investing Mean?

Purchasing an off-plan development refers to buying the property before it is complete or before construction. The number of developments being built is growing due to the rising demand for houses and to combat the housing shortage in the UK. In growing cities there is a constant need for high-quality accommodation, meaning that if investors choose to buy in the right places, they have the potential to reach larger rental yields. Investors looking to invest off-plan can visualise the development with computer-generated images (CGIs) and show homes. With the help of CGI’s buyers can envision what the final project will look like.

Buying off-plan property is becoming increasingly popular. Surprisingly, as much as 37% of buyers purchase homes off-plan. This percentage has increased from 35% in 2020 and is expected to continue growing. A growing number of investors are buying properties off-plan as it has proven to be a highly beneficial investment strategy.

One of the main differences between purchasing a property that is ready to move in and buying a property that is still under construction is the upfront payment cost. In the case of a completed development, investors will usually put down a deposit and pay for the rest that is due in mortgage repayments or a single cash payment covering the total cost. However, in the case of buying off-plan properties, investors usually get the option to split their payments into instalments. The initial deposit is used to reserve the property and take it off the market. Followed by an exchange payment, and the final payment is due upon completion.

Benefits of Off-Plan Investing

When investing in property it is important to be aware of the positives and negatives that may come with the process. Many investors focus on 2 key attributes – capital growth and high returns. Investing off-plan has many benefits that investors should know about, which may make them more likely to consider off-plan developments based on their goals.

1- Peace of Mind

Investing in off-plan property may leave buyers feeling anxious as the property does not yet exist. However, once the purchase is finalised, investors can simply sit back and wait for the development to be completed. Once the property has been built, investors can continue to relax and let a management agency handle the rest.

Newly built properties usually come with a 10-year warranty, giving investors peace of mind when investing off-plan. Furthermore, there is often less maintenance required in the early years of a new build, compared to an older building. This is due to appliances, furniture and other components being newly installed, so they are less likely to need repairs. Leading to a smaller number of maintenance costs for investors, allowing them to keep more of the profit.

2- Lower Purchase Price

Investing off-plan usually costs less as the development is not yet built. These developments often sell for 10-15% below market value (BMV) in the early stages of development and 5-10% below market value closer to completion. With an off-plan investment, a smaller deposit is required, usually around 10-20%, making it a more affordable investment.

After the property is secured the completion payment is due at a much later date, so it is easier to gather the money. Additionally, once the development is complete, the value of your property would increase significantly if you purchased it below market value.

3- Potential for Higher ROI

Landlords may see a return on investment (ROI) sooner than usual, due to investing in the property below market value. Investing in off-plan means the developments are usually built in areas of high demand, with significant potential for capital appreciation. This is great news for landlords because as house prices increase, investors can release more equity from the property.

In recent months UK property prices have risen, growing by 1.3% month on month, which has led to the average asking price of new houses increasing by £4,500. Suppose an investor sells the property after the value has increased, the re-sale price will be higher than the purchase price, resulting in instant equity.

4- Meets Requirements

New builds often feature a modern design and are energy efficient. These factors make new-builds more desirable for young professionals and students who are looking to rent. With the development being newly built, investors also have the flexibility to pick which apartments they would like to purchase. Therefore, buyers can choose apartments based on their personal preferences. Investors can select their preferred specifications including balcony options, ground or top–floor availability, and bed count or apartment type. During construction, some developers offer buyers the option to select apartment features. Ability to choose decoration and flooring, makes each one unique to meet the landlord’s preferences.

5- Energy-Efficient

All new builds must adhere to sustainable specifications, making the developments more energy efficient. According to government guidelines, new tenancies in the UK must have an Energy Performance Certificate (EPC) rating of C or above from 2025. Some landlords are having to pay £27,000 to ensure their properties meet the new guidelines. However, new builds are now being designed with this in mind, creating properties with energy-efficient specifications. So, investing in these developments means you do not have to spend extra to upgrade your apartments.

Most new builds are usually fitted with the latest technology, from heating systems to kitchen appliances. This is a key selling point for tenants, as the demand for energy-efficient specifications is inflating. As a result, tenants are willing to pay higher rent for newer more energy-efficient accommodations, as this will make utility bills cheaper. This is good for investors as they could secure higher yields.

Things to Consider

When Investing Off-Plan

There are many things to consider when investing off-plan, from location to market conditions. Looking at these will decrease investor’s risks and will make your investments more profitable. Each city will have its strengths and weaknesses in investing. It is important to look at the opportunities available to see what developments would suit your goals.

Location

Location is one of the most important factors to consider when investing in property. It is important to research places to find out about upcoming regeneration projects aiming to grow the city, and current and predicted statistics such as population, house prices, and rental demand. The quality of local amenities is also something to look into. People want to be somewhere where there are essential services right at their doorstop and things to do for leisure. Residents also want to be able to easily travel when needed, so connectivity is key! All of these factors will influence economic growth, which will have a positive effect on the capital appreciation of property in the area. Investing in a thriving location will ensure investors can maximise the returns on their investment.

Look at our City Guides to discover more about locations to invest in.

Market Conditions

Investors need to analyse the market conditions to understand what they can expect from their investments. Investors can analyse housing demand, rental demand, property prices, mortgage rates and other predicted changes. The factors to focus on will vary depending on what goals investors have. Market conditions will change depending on the area where one is investing. For instance, some cities in the south have higher property price averages compared to houses in the north. Since the market is constantly changing it is important to keep on top of forecasted growth to get an insight into what the market will look like in coming months.

Fortunately, many new off-plan developments are in areas that are growing and in high demand. Developers research the best places to ensure their developments are in desirable areas that people will be interested in purchasing. The final decision is based on the property market forecast. Looking at predicted statistics and looking at the growth or fall of cities in the property market.

The Developer and Agency

It is vital to invest with a trustworthy agency and reputable developer to reduce the risks that come with purchasing off-plan. Here at CityRise, all of our developments, are chosen based on many aspects. We only partner with reputable, trustworthy developers who have a proven track record in crafting projects to an excellent standard. This puts our clients at ease throughout the process of investing, knowing we only work with developers producing high-quality, and energy-efficient developments in top investment locations.

If you are looking to start your investment journey or would like to know more about investing in off-plan properties, book a free consultation today.

Book a free consultation with us here.

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