5 Benefits of Buying Off-plan
Category Advice
Buying off-plan property has become a popular choice for many South Africans due to to the myriad of financial benefits. By avoiding cumbersome expenses such as transfer costs, which you would usually incur when buying an existing property, buyers can have more financial freedom and improve their capital appreciation. Buying off-plan can be a sound, low-risk investment provided that buyers do their research on the property developer and the future of the area. Here are just a few of the numerous benefits which come with purchasing off-plan:
1. Delayed bond repayments
You do not have to make any bond repayments until the construction is complete which can take up to 2 years. This provides buyers with ample time to adjust their cash flow and ensure that their finances are in order before their property is completed.
2. Lower deposits and no transfer costs
Off-plan properties typically have flexible and lower deposits than existing properties as in the beginning the investment can be a higher risk than buying an existing property as there is always the risk of not getting what you had envisaged. The deposits can be as low as a couple thousand rand per unit and an investor can negotiate a lower or even no deposit at all. When you purchase a property from a developer, you do not have to pay the cost of the transfer duty, which applies whenever a property changes ownership. This can be a highly costly expense and buyers who purchase existing properties often have to budget 10-15% more to account for transfer duties.
3. Capital appreciation
When you purchase an off-plan property, you buy the property at current property prices and by the time it is completed and transferred to you, the property could have appreciated in value by up to 30%. Investors can enjoy excellent capital appreciation without having to pay a large deposit upfront.
4. Low Risk
Off plan buyers are well protected in the event that the property developer goes out of business because of the bank’s policy of paying in segments. If the building stalls at any point of the construction process, the developer will only have been paid a portion of the money. The bank will only pay the developer the full amount of money after completion of the building and if the building is not completed, the bank can use the rest of the money to pay for another contractor to complete the building.
5. Quality Control
Within three months after construction, consumers have the right to instruct the builder to rectify the non-compliance or deviation from the original terms, plans and specifications of the binding agreement. Within 12 months after completion, consumers can also instruct the builder to repair any damage such as roof leaks, due to poor workmanship or materials. Finally, within 5 years consumers can instruct the builder to rectify major structural deformities caused by not complying with technical building standards. It is also important to ensure that the builder you have chosen is registered with the National Home Builders Registration Council, as this was established to protect your interests and ensure of quality control when it comes to building and construction.
There are a handful of financial benefits when it comes to buying a property off-plan and buyers can enjoy a low risk, high return investment provided they are cautious and do their research. Contact one of our agents about our latest developments and find out more about the benefits of buying off-plan.
Author: Dormehl Property Group
