Benefits of buying off-plan
Purchasing off-plan is an easy way to get onto the property ladder or extend your investment portfolio. Here is a rundown of developers’ latest and most appealing off-plan offerings
Nobody could have foreseen the impact of the Covid-19 outbreak on life in general, let alone real estate. However, the digitalfirst property company PropertyFox anticipated a need for continued evolution of on-demand experiences in 2020 – and it was right on the money. With more millennials entering the market for homes, PropertyFox predicted that real estate companies would use big data and machine learning in smarter ways to make consumer experiences even more seamless. “At the end of a decade of property industry disruption, we saw homes sold online for the first time, with low commissions shaking up traditional notions of how property should be bought and sold,” says PropertyFox CEO Crispin Inglis. As investors are fast getting used to the idea of a purely digital purchasing experience, buying off-plan – with its bespoke offerings and benefits – is suddenly looking very attractive.
Contemporary living
“Now, more than ever, the discerning investor should be focusing on the basic fundamentals of property investment,” says Amdec Property Developments MD Guy Gordon. An investment where you don’t have to worry about maintenance is highly desirable. That is why a large number of investors are buying off-plan. “The Covid-19 crisis is reshaping the way people choose to live, so buyers and tenants need to be far more discerning before committing to a lease or a bond,” says Gordon. “Mixed-use developments such as Harbour Arch in Cape Town represent the pinnacle of convenient, contemporary modern living, making them an attractive proposition for savvy investors looking to take advantage of the lowered interest rate and favourable lending conditions.” The South African Reserve Bank’s latest reduction of the repo rate in May saw the prime lending rate fall from 7.75% to 7.25%. Buying off-plan is a great option whether you are buying to let or to live in the property yourself. Sectional title units are the most common type of real estate sold this way, with many developers offering a choice of layout or floor plan for units in various sizes within the same complex. Depending on when you buy into a development, you could be offered a range of fixtures, finishes and paint colours, allowing you to tailor your new spot to your taste.
Reasons to buy
If you purchase off-plan from a developer, the transaction does not incur transfer duty. It is also known as a good investment for rental returns. Time is on your side too, says Kent Gush of Kent Gush Properties. “When you’re investing in something like Ellipse Waterfall, a luxury high-rise tower in Midrand, there’s as much as a two- to two-and-a-half-year wait from when you buy the apartment until the date you take delivery of it. You’re enjoying the capital growth for that period, which is further enhanced as the precinct itself develops. “People who bought in the beginning are already seeing 10-15% growth in value. In addition, if a buyer puts down a 10% deposit at the current interest rate of 7.25%, they’re almost cash neutral from day one,” he says. “We haven’t seen that situation for some time in the property market.” Gush says his company never overpromises when it comes to rental yields. “We’re talking about 7-7.5% at Ellipse Waterfall.” According to Steyn City sales manager Lambert Bezuidenhout, purchasing off-plan has long been touted as the ideal way for investors or first-time buyers to purchase property, as their payment commitments start only on delivery. This can be up to 12 or 18 months from the date of purchase – sometimes even longer. “The price of these units typically includes VAT. That means the purchaser can finance the tax portion of the purchase price rather than paying transfer duties upfront in cash on private sales or resales, which puts a higher burden on cash availability for the buyer,” Bezuidenhout says. “Off-plan purchasers must realise that their property is forwardpriced to allow for financing and holding costs during the construction period.”