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Prices of the housing market are on the rise all across the globe. This makes it a lucrative investment opportunity but also difficult for investors to get into real estate.
This is why many Asian investors seek affordable but yet profitable real estate investment alternatives.
One of such alternatives is off-plan, or pre-construction property.
Real estate investors in Asia are always looking for opportunities to maximize their profits. Off-plan property is also a similar opportunity that allows you to secure high returns on your investment in one to three years.
Even though the idea of buying a property that is not yet constructed doesn’t make sense for many. Yet, it is one of the most profitable real estate investments for investors.
But only if done right…
The idea is to secure the property at a lower price, and as the surrounding area develops, sell it for a higher price in few years. This makes sense for Asian investors who want to invest in profitable real estate markets around the world but can’t afford high housing prices.
Similarly, investors who can wait on their investments for a year or two for higher profits can also find pre-construction property as a good investment option.
But, just like any other high return investment, there are risks involved. For buying profitable off-plan property, it is extremely important to buy at the right place, at the right time, and from the right developer.
In this buying guide, I’ll not only help you understand how to buy the off-plan property but where to buy and how to make sure of high returns from that investment.
What is Off-plan property?
The simple definition of off-plan or pre-construction property is – “a property or piece of land without any construction or structure on it”.
The off-plan property mostly makes sense for early adopters, and real estate investors who seek cheaper property, that they believe can increase in value in coming years.
It is also a good investment for you if you want to pay a low initial deposit. In most cases, the off-plan upfront price is only 10% to 40% of the total cost.
With higher upfront deposit, you can always negotiate discounts on final price as developers seek fast early cash.
In some countries, the upfront deposit is even less than 10%. This allows you to secure better terms on finances borrowed from lenders.
It also allows you to save a lot of money if compared to buying an already constructed property. For example, you can easily find a low-cost pre-construction property in areas that are not populated or not yet connected to the city.
But if there is an ongoing or future road project that connects that part to the city, with other under construction projects, the place can become a good option for you or other people to live.
Even though, buying a property without actually seeing it first is not for everyone, but it is rising trend all over the world.
What are the benefits of buying Pre-construction property?
Buying off-plan property comes with a lot of benefits. I have listed some of the most prominent below.
a) Lower Price
The most prominent benefit of buying off-plan property is its low price. You’re buying a property at its current price, which is approximately 30% – 35% less than the value of the property when it is developed.
In almost all cases, you pay much less than the actual price when it is completed. This allows you to sell immediately for instant profit.
This also makes it a lucrative investment for real estate investors as it has a larger upside than buying and selling already finished property.
If you’re an early buyer, you can negotiate a higher discount. At the time of the launch of the new project, developers seek early sells to get up front quick payments to start construction.
This allows you to negotiate a better price as developers look to sell as much as possible at the start to secure early finance.
With early finances secured, developers keep increasing the price for remaining inventory. This is why buying early is important.
c) Easier to Own a Home
The off-plan property also makes financial sense for many of us. You’ve to pay a low deposit, and the remaining cost is payable in regular installments.
For small Asian investors, this makes a lot of sense as they don’t have to secure a large sum of money to invest.
Low deposit and regular installments also allows you to avoid the mortgage.
d) Customized Finished Property
If you’re buying the pre-construction property at early stages, you can discuss the design and features you’re looking for in your finished property. This way, you can have a customized end product that is tailored according to your specifications.
But for this, both developers and buyers must agree on proposed changes to the original construction plan.
What are the benefits to buy an Off-plan property?
Well, to begin with, the off-plan property is brand new, looks nice and has slower depreciation if compared to established properties.
Established properties also have a higher maintenance cost. In comparison, off-plan properties are easier to sell or rent as they are newer than 2nd hand properties.
In the United States, the construction industry is growing with rapid pace for last few years as demand outpaces supply for pre-construction properties, according to National Statistics.
This shows people have growing interest in the off-plan market if compared to established properties.
Mostly, because it is affordable, easier to manage, and offers higher returns on investments.
Where can I find Off-plan property listings?
I have compiled a list of online sources to find and buy off-plan properties in some of the most lucrative markets from around the world.
In the UK, there are various websites with off-plan property listings some of which include Galliard Homes, Property UK, UK Off-Plan, Links Property UK, and Property Showrooms.
You can also do your own research online before talking to a realtor. If you’ve interest in any particular development project, you can also talk to the developer directly or buy through real estate agent.
Similarly, you can find a lot of online sources with off-plan property listings in the United States like Tranio. You can also contact the developers directly or state agents.
We’ve already covered a complete buying guide to help our Asian readers with their questions about buying property in the US.
Australia is one of the hottest markets for off-plan property investments as it is becoming a top tourist hub in the world, with a lot of new development projects under construction. It is also getting increasingly popular among expats.
You can easily find many online real estate websites with off plan property listings. Some of the top websites are realestae.com.au, I Buy New, Apartment Developments, and Australian Life.
New Zealand is another great place to buy off-plan properties for high returns. To find the listings, you can visit websites like realestate.co.nz, Landlords, Housing New Zealand, or OCKHAM Residential.
Other than that, you can also look for real estate agents who deal with off-plan properties in New Zealand. You can also find developer’s website as well with their project details like Hobsonville Point to deal directly with the developer.
Canada is another hot market for off-plan property investment. You can find plenty of online sources to find off-plan listings in Canada.
Some options are The Mike Stewart Realty Network, Assignments Canada, Canada Home Sales, New in Homes, The Move Channel and others.
For off-plan property listing in Thailand, you can check out websites like Vauban Real Estate, Tropical Homes, pattaya-property.net, Thai Property, FazWaz, and many more.
You can also read our general property guide for Thailand here.
There are not many online sources as some other countries in our list to find off-plan listings in Cambodia, but you can find some at one of the largest real estate website in the country, Phnom Penh Real Estate.
Malaysia is another hot market for pre-construction property investments due to a high number of expats living in the country, and the increased number of yearly tourists.
As there are always expats moving in and looking for new homes, it is one of the most profitable markets for real estate investors.
Here are some sources to find off-plan property listings in the country – Knight Frank, Property Guru, Holprop.com, etc.
After Vietnam changed its foreign ownership rules in 2015 to make Vietnam friendly for foreign buyers, the county became one of the top places to buy off-plan property for Asian investors.
With newer and faster transport links with China, there is an upsurge in Chinese investment in real estate in last few years.
One of the top online sources to find property listings in Vietnam is Easy Property.
Other than the top options in our list, you can easily find off-plan property listings online for any country. Other top countries with good returns on real estate investments include UAE, Qatar, and France.
What are the risks when buying off-plan property?
Just like all other high return investments, there are also risks involved in buying an off-plan property. Listed are some common risks with buying pre-construction properties.
a) The Market Drops
This is the common risk associated with the real estate investments and off-plan property is no different. Even though there is a risk of falling prices, it is still less risky than investing in a traditional housing market.
As the prices of the off-plan property are already low, you may have to experience only a short-term fluctuation. If you are planning for a long term investment, the short-term fluctuations will not bother you as in most cases, they are temporary.
This is a rare case as you’re mostly buying at a location with development projects under construction. This means, with the completion of each of these projects, the property value will increase.
This mostly happens when you have purchased a property without a thorough research in a wrong location.
b) Delay in Property Completion
This is one of the most common risks with pre-construction properties. What happens if the developers are not completing their projects in time in the area?
This will be a problem if you’ve invested in an off-plan property with a timeline in mind. For example, if you’ve a projected selling price after two years, you may have to renegotiate the time or the price.
But again, this also depends on your research.
Are you buying property in an already over developed market?
Are you buying property in areas that are notoriously known for the delay in projects like Span in the past?
Again, you need to do a proper research. For example, in Dubai, over 50% of the projects are delayed by one year on average since 2008.
On the other hand, there are other markets where delay in project completion is rare.
To counter this, you can also look for or even insist for the contracts with developers that include penalties if the project is delayed. You can also seek help from solicitor if this happens.
Also look into the developer’s history. It’s better to work with a renowned developer than a newbie. If the developer goes bankrupt, you’ll lose your deposit.
c) Completed Construction is Not What You Expected
This is another common risk. What if the finished property is not what you were expecting? This may significantly reduce the property value especially if there are visible defects in the construction.
Again, this risk can be reduced by buying the property from the renowned developer who is known for past projects and their quality.
Should I buy off-plan property through a real estate agent or directly from the developer?
Even though most people used to choose real estate investors in the past, but with easily available information about the developers and projects in the market, buying directly is becoming a common trend.
There are simple reasons for this. First, you can easily learn about the developer, their pricing, their past project, location, and other important information on the internet. This allows you to understand who you’re dealing with.
Second, dealing with realtor means additional cost in the form of commission fees that you’ve to pay to the real estate agent for finalizing the deal for you.
On the other hand, negotiating directly with the developer at early stages allows you to negotiate a better price with higher discounts on upfront deposit.
By dealing directly with the developer, you’ve the control over your dealings. But with control, comes responsibility. You need to be well researched, more thorough in documentation and more proactive if you’re by passing real estate agent.
But it all depends on the country you’re buying the off-plan property and the local laws. If you find it risky and do not have knowledge about local laws, it is better to deal through a local realtor who understands the market and local laws.
For example, UK is a good market where you can deal with developers on your own as local laws provides security to your investments. In the UK, the National House Building Council (NHBC) offers a 10-year structural warranty on off-plan properties.
On the other hand, you may want to work with a real estate agent in countries like UAE, Spain, and Australia. You can also find and work with a solicitor if you don’t want to hire a real estate agent but also want to minimize the risk involved.
Overall, working directly with developers is more cost effective and fruitful in most cases but if you don’t understand the local market and property laws, it is better to deal through real estate agent.
Buying Off-Plan Property: Quick Checklist
a. Is the area where you’re buying property suitable for long term investment?
b. Have you checked the prices of other similar projects in the same area?
c. Is there any rental demand in the area in next few years?
d. Are there other mega projects, new roads, or other development projects under construction if the area is not yet populated?
e. Is it an area that offers strong capital growth?
f. Are you buying the property from the trusted developer?
g. Are you dealing through real estate agent or on your own with the help of solicitor?