With the Brexit saga still persisting, the UK has continued to see stunted growth across all areas of the economy. For property investors, this impact was probably more obvious than in other markets, with homeowners and investors taking the view of “weathering the storm” before things become clearer post-Brexit.
With the coming months unlikely to have any significant changes in store, it is likely we will see more of the same going forward. There are, however, a glut of options for those looking to make a property investment, with many of these options providing to be highly profitable and secure in the relatively unstable market.
One such property investment type is off-plan property. Off-plan is growing in popularity for a variety of reasons, the main reason for which being the shift in lending since the 2008 financial crisis. Traditional lenders have become more risk adverse through fears of default and this has created a lack of investment funding for property developments and other construction projects.
This has created an ever-increasing number of developers and construction firms seeking alternative forms of investment through a number of private companies and investors.
Benefits of going off-plan
Off-plan property is proving to be popular in the market, despite economic uncertainty. The reason for this being the ability to purchase property at a discounted price – often as much as 15% off of the realized asset value. In addition, the property benefits from capital growth, whereby any increase during the construction process is reflected in the value of the property once completed.
The biggest benefit however over a typical buy-to-let is that the investor receives annual returns on the property investment throughout the construction process. Off-plan investors finance the project through a property developer and therefore the construction company makes interest repayments on the debt.
Some key points to consider when investing
If you are considering making an off-plan investment, the first thing you must do is to set out your expectations. As with any property investment, make sure you have set out what you aim to accomplish before making an investment. Look at the investment itself, the potential returns and carefully consider the risks when making an investment.
Once you have established this, you must critically identify the property type you are going to finance. Whether this is residential and commercial, you need to critically identify the property type that you will invest in – this is particularly relevant with off-plan as there will be a long gap between the issuing of debt and development coming to completion.
You will have to consider the location of your off-plan investment. You cannot think short-term with this; you have to consider the long-term outlook for the location of your investment. For instance, when looking at an off-plan student property investment, you have to consider the universities reputation, development of the city and a huge number of other factors.
Off-plan property has fantastic potential to any property investor looking for something a little different in the market. As ever, exercise a degree of caution and do your research before opting for an investment of this kind.