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Benefits of Buying Off-Plan
Scott Picken, CEO, IPS
27 January 2007
Buying property “off-plan” is buying a property from a developer before it has actually been built. Instead of visiting the house and inspecting the property, the developer or agent will show you the plans for the development, from which you make your decision to purchase or not, hence the terminology buying “off plans”.
There are several advantages to buying properties in this way as opposed to buying an already built property. Many property investors make a lot of money by investing in off-plan properties, and these are some of the main reasons why.
Financially, buying off-plan makes a lot of sense. New properties don’t incur Transfer Duty, which is the government tax levied on property sales. The first buyer of a new property does not have to pay this tax, which amounts to R25,000 on a R1m property.
The other major costs involved in the property buying process are the attorney fees: there is a fee for registering the title deed (the Transfer Attorney fee), and a fee for registering the bond or mortgage if you require one (the Bond Attorney fee). Together, these fees can range from R15,000 to R30,000 on a purchase price of R1m. When buying off-plan, one or both of these legal fees are often paid by the developer.
Thirdly, many new developments only require a small deposit when you sign the agreement, anywhere from R10,000 to 10% of the purchase price, which means you don’t need a lot of money up-front to get onto the property ladder.
The long construction-time before your property is built is also a major advantage. New developments usually take between 12-18 months between the launch and the completion dates. You can sign a contract to buy the property today, but you only start repaying your mortgage on completion, giving you a lot of time to save for a “rainy day”.
You are also effectively buying a property in 12 months time, but you’re paying today’s prices. If the property market goes up in value, you can end up paying less for the property than what it’s worth when you get it - an excellent idea for any budding property investor!
Lastly, you get all the advantages of having a brand new property itself. If you’re buying from a reputable developer (which is very important!), you can rest assured that the quality will be top-notch, the architecture and finishes will be modern and fashionable, and the interiors will be absolutely spotless. You don’t have to worry about scratched kitchen counters, stained carpets, broken tiles, dirty walls, leaking geysers, and so forth. And your maintenance costs in the first few years should be a lot lower.
You also get to choose your own finishes – the carpet colours, the tiles, the counter tops, kitchen cupboards, taps and handles are usually all chosen by the buyer.
Lastly, and very importantly, it is that much easier to buy a property off-plan when you are living abroad. You need a rough idea of where the development is situated, and the rest is all available in the floor plans, specifications and layouts – the exact same plans and information that you would have if you were attending the local launch yourself!
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