Buying a property off-plan
Buying off-plan can seem daunting for purchasers as you are buying a property that is yet to be completed. On the upside, this has become a profitable approach to the property market and indeed, the proverbial early bird does then catch the worm. There are of course many factors to consider before such a decision is made.
Many property developers will have a show unit available where prospective buyers can view what the completed property will look like. Should a buyer be interested, he can then decide on a unit off the architectural and site plan.
Factors such as the estimated completion date should be considered at this point. The specific unit will then be reserved when the Offer to Purchase (OTP) has been completed and signed by the relevant parties. A deposit will also be required and is to be paid across to the transfer attorneys attending to the registration process.
Before this is done, prospective purchasers are advised to have a look at previous developments within the property developer’s completed portfolio. This will give a good indication of their reliability and the quality of the workmanship that can be expected. Further, purchasers should also consider what the price of a similar unit in the property market is.
Benefits of buying off-plan
One of the main advantages of buying off-plan is that the units may sell at a reduced price compared to what the value of the same unit will be after completion. This aspect has become an important selling point for purchasers and investors alike. Further, no transfer duty is payable as the developer will be a registered VAT vendor and this VAT amount payable is included in the purchase price.
Ensuring a good investment
Whilst the building process is underway, a number of people including the local municipal building inspector, structural engineers, bank assessors and the NHBRC inspector will monitor the progress to ensure that it meets the required building regulations.
It is advised that purchasers ask questions and be made fully aware of any additional costs. For example, it might be that specific finishes come at a higher cost than others.
Because buying off-plan can also be a lengthy process, if the property is being bonded, make sure that if interest rates do rise before date of completion, this does not stretch your budget too much. For investors, it’s wise to invest in developments where rental demand is high, as this will ensure that you are not left with a unit that is empty for prolonged periods of time.
After the unit has been completed, the developer or his representative will arrange a final inspection. Purchasers are advised at this point to do a thorough inspection and to go through their new home to ensure that all fittings, fixtures and workmanship is up to standard and meets the specifications as agreed in the OTP.
Written by Wessel de Kock
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