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Buying off-plan property in the UK for buy-to-let investment

Buying off-plan property involves investing before or during construction. Investors can achieve attractive returns and additional benefits through this kind of buy-to-let investment.

In 2020, 33% of new home completions were sold off-plan in England and Wales, according to major London estate agency Hamptons. This equates to 49,000 homes. The share of off-plan house completions rose from 29% in 2019 to 30% in 2020, but flats are more likely to be sold-off plan.

The government is striving to bring more new-builds forward to ease the housing shortage. Investing in off-plan property is expected to increase in popularly with a number of new developments planned across the UK.

What are the benefits of purchasing off-plan?

Purchasing a property that is not developed yet but the plans are in place has a number of benefits for buy-to-let investors. For starters, some developers offer discounts of up to 5% for early investors.

When investing in off-plan, many developers allow investors the chance to customise their property by choosing the layout, decor and appliances. Additionally, if you get in early, you can select a specific plot or property.

New-builds are appealing for both investors and tenants. Higher energy efficiency rates that comes with new properties and cheaper bills, in addition to the ‘newness appeal’, attract a wide range of tenants. New properties also typically have lower levels of repairs and maintenance.

Many of these new-build properties that have off-plan opportunities are build-to-rent developments, a sector that has seen record investment throughout the COVID-19 pandemic. These types of developments usually come with attractive amenities and a better sense of community, which are appealing to modern tenants.

Where are the best places to invest in off-plan property?

Throughout 2020, there were more flats sold off-plan in the north of England than anywhere else in England and Wales, according to figures from Hamptons. In the north-east, 80% of flat completions sold off-plan. The north-west followed with 68% of flats.

In the past few years, investors have been more likely to invest in off-plan property than any other buyer. This is becoming increasingly popular, especially in the north. These regions are seeing the strongest performing housing markets. House prices are increasing the most there, and buying-off plan can maximise this.

How to get a mortgage

Lenders have varying criteria and products available for off-plan properties. Most mortgage offers run out after six months. Because of this, you may need to reapply if the development takes longer to be built. This comes with risk of the lender changing their offer later on.

To minimise this risk, regularly communicate with the developer or investment company. Everyone should be open about the anticipated completion date. It can be helpful to use a mortgage broker to help you find the best mortgage for your circumstances.

Tips for investing in off-plan

Some investors are unsure about purchasing off-plan properties as they are buying a property they haven’t seen. However, off-plan developments can provide computer-generated imagery (CGIs). This allows buyers and investors to be able to see what the finished product is likely to look like. Take the time to look closely over all of the plans.

When buying off-plan, conduct thorough research on the developer. Make sure the developer is reliable and has brought forward quality developments on time. Additionally, spend time researching the property’s location. It is best to invest in an area with strong appreciation potential and rental demand.

Choose an off-plan property in an up-and-coming location. Difficult market conditions could mean the mortgage valuation survey comes back lower than the price originally agreed. However, investing in a property in growing areas with strong investment and development prospects can minimise this risk.

Some investors decide to ‘flip’ the property. This involves purchasing an off-plan property, then reselling before completion once the value has increased. However, all property investment strategies should be entered with a long-term outlook. Read our article for more tips on investing in off-plan property.

BuyAssociation has a range of off-plan property investment opportunities across the UK. Get in touch for more information. Or sign up for free to receive early access to our best deals, direct from the developer.

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