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Why off the plan?
Buying off plan property has recently become very popular with many international property investors. New Zealand is relatively new to this style of investing; however the local demand for off plan property continues to grow with a widening awareness and understanding of the associated benefits.
In order for developers to obtain the necessary finance, lenders usually require a number of presales. Once developers have the necessary presales, they are able to proceed with the build, collect their profit, and begin the process all over again. To speed up their turnover, developers will often price their product accordingly, creating discounted prices. This is one of the main reasons property investors buy off the plan.
Off plan property offers several advantages over traditional forms of property investing. So why should I seriously consider off-plan investing?
- Instant equity - Many of our listings are available at a genuine discount on current market valuation. The difference between the market valuation and your purchase price is instant equity created from day one.
- Capital Growth - Location is one of the fundamental factors in achieving capital growth. For each investment opportunity we provide relevant demographics and information on the area.
- Delayed Settlement (completion date) - Although your deposit will be due when you go unconditional you will not be required to pay the balance of the purchase price until the property is available for your possession or benefit. You can take advantage of any capital growth during this period while only fronting with a deposit and an arrangement fee.
- Completion Premium - When your property is fully completed, it is not uncommon for it to substantially increase in value.
- Global market - Because you are buying off the plans your location is irrelevant. Viewing the plans is possible from anywhere in the world.
- Numerous options for the investor - You have the choice of reselling before or after completion or holding onto your income bearing investment. Selling before completion eliminates the need to find tenants and secure a mortgage.
- Cost efficiency and Warranties - Developers purchase their building materials in bulk, therefore making savings which they pass on to you. Building materials, fixtures and fittings are often accompanied by comprehensive warranties.
- Incentives - Depending on the type of investment developers will sometimes offer incentives to achieve a desired number of pre sales. The developer might offer to pay a homebond fee on your behalf, guarantee rental returns for the first few years or even present cash back on completion.
Below is an example of a property with a developer's list price of $400,000 with a 10% discount that we have negotiated on your behalf. Notice that our arrangement fee is 2% . We believe our fee to be very competitive.
New Zealand property prices have increased by an average of over 9% per annum over the last 15 years. Assuming only a very modest growth rate of 3% per year for the next 5 years, your equity will increase to over $99,000. The instant equity achieved as a result of the property being discounted provides you with a buffer against any possible fall in property prices.
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