In a competitive housing market, an off plan property could be the differentiator you’re looking for – but there are pros and cons to weigh up with this approach.
In this guide, I explain what an off plan property is and how to find one.
I’ll also weigh up the typical advantages and disadvantages associated with off plan properties.
Off plan property sales account for just over a third – 37% – of new homes sold in England and Wales, according to Property Reporter.
In other words, the majority of property purchases are not off plan. But the new UK government has pledged to build 1.5m new homes during this Parliament, suggesting that there will be an influx of off plan properties available soon.
Let’s start by exploring what an off plan property is exactly.
What is off plan property?
Buyers purchase off plan properties before the developer has completed construction.
When you buy off plan, you’re agreeing to purchase a property based on architectural plans, designs and computer-generated images rather than viewing the finished structure.
Developers market these properties through the use of brochures and show homes, or video tours for prospective buyers unable to attend in person.
These marketing materials give buyers a good idea of what the finished property will look like. However, the final product may differ from these representations.
Such properties are popular among investors, looking to secure a property early in its development and hoping that its value will increase by the time of completion. But many buyers also purchase these new build properties with a view to living there themselves.
Off plan properties are not the same thing as off market properties, but there is some overlap.
An off market property is available for sale, but not publicly listed or advertised. Many off market properties are complete and have had previous occupants.
They go on sale privately – for example, through real estate networks or word-of-mouth. Off market property sellers may prefer discretion or want to avoid a public listing.
However, new build developers sometimes sell off plan properties through off market channels. This approach combines off plan and off market selling – the developer:
- Hasn’t built the property yet (off plan) and
- Doesn’t publicly advertise the sale (off market)
In this scenario, developers may want to gauge market interest before a wider launch, offer exclusivity to a select group of investors, or maintain discretion for luxury developments.
They typically use a network of investors or work with trusted estate agents who have access to interested buyers.
How to find and buy off plan property
The majority of properties you’ll see online are not off plan ones. Therefore, you’ll need a slightly more targeted approach to find off plan properties.
For example, you could try:
- Asking an estate agent about off plan properties
- Researching new build property developers
- Looking out for new development launch events
- Filtering by ‘new homes for sale’ on property portals like Rightmove
- Joining a real estate investment group (REIG)
For more details, here’s my advice on how to choose an estate agent. Also, take a look at my London property investment guide.
It’s important to note that financing an off plan property can differ from buying a completed home.
Some lenders offer specific mortgages for off plan purchases, these mortgages often come with conditions related to the property’s progress and completion date.
Buying off plan property involves several typical steps, including:
- To reserve the property, you must pay a reservation fee
- Following this, you need to pay a deposit e.g. 10-20% of the property’s value
- The remaining balance is due on completion of the construction
Pay close attention to the developer’s track record when considering an off plan purchase. Always review an off plan contract thoroughly, including any clauses related to potential delays or changes in the construction process.
When the new build property is complete, you’ll receive a completion notice and have a couple of weeks to pay the outstanding balance via your solicitor and/or mortgage provider.
Otherwise, many aspects of buying an off plan property are similar to the purchase journey for a regular house or flat. It’s crucial to commission a survey to look for any issues.
Read my first time buyer checklist for a comprehensive guide to a typical property purchase process.
Advantages and disadvantages: Buying an off plan property
There are many potential advantages to buying an off plan property. But equally, it’s important for any prospective buyers to weigh up the additional risks that come with putting down a deposit on a property that’s not yet finished.
Advantages
- Lower purchase prices: Developers may sell off plan properties at relatively lower prices to attract early buyers or receive funding.
- Capital growth opportunity: The property’s value may increase during construction, providing a return on investment before you even take possession.
- Customisation options: Off plan purchases often allow buyers to personalise aspects of the property – such as fixtures, finishes and sometimes even the layout.
- Chain-free: You do not need to wait for a previous owner to complete another property purchase, as you will be the new build’s first ever buyer.
- Modern design and energy efficiency: New build properties typically incorporate smart home technology and high energy efficiency standards. This can lead to lower utility bills and reduced maintenance costs in the long run.
Find out how to improve an EPC rating (your property’s energy performance certificate).
Disadvantages
- Construction delays: These can affect your moving plans and potentially your mortgage agreement.
- Differing expectations: There’s a risk that the finished property may not look how you expected it to or reach the promised standards.
- Market fluctuations: If the market declines, you might end up paying more than the property is worth upon completion.
- Difficulty visualising the final property: It can be challenging to accurately imagine what the finished property will look like based on plans and computer-generated images.
- Limited mortgage options: Some lenders are reluctant to offer mortgages for off plan properties, which can limit your financing options.
In a worst-case scenario, the developer could become insolvent or go bankrupt before completing the project.
It’s vital to carry out due diligence. Look into their track record and reputation before choosing one of their off plan properties.
Final thoughts: Off plan property considerations
Carefully weigh up the pros and cons before buying an off plan property. You’ll be purchasing a modern, energy-efficient property but also need to trust that the new build developer will deliver against the original plan.
I hope you’ve found this guide useful. For other informative articles, take a look at the Fine Living blog.
Recent articles include explanations of using a process agent for property buyers overseas and what is a guarantor for rent agreements?
London is one of the most popular locations for off plan property sales in the UK.
Here at Fine Living there’s a wide range of beautiful London properties available to buy, including several new builds and off plan properties. Browse our portfolio for more details.
If you have any queries or would like to get in touch, please don’t hesitate to contact me.
Want to discuss the advice on this blog – or anything else?