To a certain extent, the decision to buy off plan or a second hand home depends on the market concerned. In a fast moving market, off plan will be a far more appealing and practical investment than in a stagnant market. Here is a comparison and a list of potential advantages and disadvantages. First the difference between off plan and on plan needs defining. On-plan is a property that has already been constructed, perhaps even changed hands several times already. Off-plan is a property that is literally off the plans, meaning construction may not even have started yet. Some of the most important things to take into consideration when looking at off-plan investments are: The state of the market. Is it buoyant or stagnant? The reputations of the builder and promoter. Are they reliable? Do they have strong track record of completing projects on time and to specification?
- If you have an opportunity to buy early in the construction phase or even before the construction has started the investment value of off-plan properties can be very good in the right market. Initially the prices are often set below market value to attract investments. It is sometimes possible to re-sell the property before completion at a profit.
- If you purchase during the early stages, it is possible to choose the best properties.
- When you buy a property under construction you will buy directly from the promoter. Although you buy through an agent you only pay the price set by the promoter and you therefore don’t have to finance any agent fees.
- New buildings include a 10 year guarantee for main failures in the structure.
- As first owner, you can personalize it as you wish. You don’t have to pay expensive changes to things the previous owner has installed.
- The prices for new promotions are set by professional developers who often have a much greater knowledge of the market compared to private sellers. They are also likely to be more flexible when discussing price. Often a private seller is constrained by mortgages and needs to achieve a particular price.
- When you buy off plan you will not be able to see the finished product until construction is complete.
- Timing is important. To gain maximum benefit from buying off plan, it is invariably necessary to buy early in the development, which means a long wait before completion. Perhaps as much as several years.
- Developerâ€™s plans can change. New licenses can be issued after you have made a commitment, and the final area of construction may not match exactly the original plans.
- If you buy a property under construction in the final phase the investment value will be significant lower than an early purchase.
- A high percentage of new constructions are delayed either because of bad planning or problems with getting the final licenses. Make sure of a penalty clause in the contract
- The have been horror stories in the past of builders going bankrupt or the original specifications of the property are not being met after construction. Ensure a bank guarantee and insurance are in order.
On-plan or Second Hand Properties
- Buying a second hand property means the waiting time to complete the purchase is much less than when buying a property under construction.
- Although the investment value on average is lower compared to buying off-plan in an early stage it is still possible to find a good buy and it is almost always possible to negotiate the price.
- It is possible to visit the actual property and more than once if necessary to make sure that it is the right property and to go through and inspect all details.
- As every second hand property is different it normally takes a long time and many visits to different properties is necessary to find the right one.
- It is rare that the original building guarantee is still in place and transferable.
- Prices on second hand properties are set directly by a private seller and there is a great variation in price from property to property even within the same market.
This is an area where it is important to take advice from local legal representatives and a professional who knows the market. These are broad guidelines and not specific to a particular market.