Sunday Times Off-Plan Article

April 30, 2010  

The revival of off-plan buying
 Imagination and the willingness to take a risk can bag you a bespoke home for a bargain price.

Last year David and Sara Bailey bought themselves the perfect seaside getaway, a three-bedroom house on a hillside overlooking the spectacular Talland Bay, in south Cornwall. However, six months after exchanging contracts, David, 53, Sara, 42, and their three children, Isabella, 13, Samuel, 19, and Joshua, 9, have yet to enjoy a bucket-and-spade weekend at their new holiday home. 

That is because the property was bought off plan and the family invested about £350,000 after inspecting the bare site and studying computer-generated plans of what the house would eventually look like.

“It was a challenge, certainly, and you have to use your imagination,” says Mr Bailey, who lives in Romsey, Hampshire, and is a senior executive at Microsoft.

“There is also an element of trust in agreeing to buy a house that has not yet been built.” The family chose The Bay development (thebaytalland.com) partly because they couldn’t find a completed home that they really liked and partly because of the chance to be involved in the build. They have visited the site, between the lovely towns of Looe and Polperro, regularly and requested tweaks
to the original design, including adding a storm porch, outdoor decking and extra windows.

And the Baileys are far from the only buyers putting their faith into off plan, with agents and developers reporting a buzz around pre-sales that hasn’t been seen since before the recession. 

Overseas investors are driving the boom in Central London because they are keen to take advantage of the weak pound, while UK investors are looking for better returns than they are getting from the banks. Meanwhile, a dire shortage of finished property is driving buyers such as the Baileys towards off-plan deals, too.

A key incentive is price. Sebastian Warner, of Knight Frank, says that buying off plan can save you about 5 per cent on “real value” prices in London and a little more — perhaps 8 per cent — elsewhere.

The enthusiasm for off plan can be seen all over the country, and at all prices. Almost a third of the 27 new homes on the gated Princess Square development in Esher, Surrey (princesssquare.com) — priced from £1 million to nearly £3 million — have been sold. The development went on sale in August last year and will be finished by the end of the year.

In Cambridge, for those on a more modest budget, the Kaleidoscope development by Crest Nicholson (www.kaleidoscopecambridge.com) is also selling strongly. By about 2012 there will be more than 400 homes on site, in 11 separate blocks, including the Sepia Building, currently under
construction.Half its 51 units have been sold off plan since they went on sale in October, with one-bedroom apartments starting at £230,000 and two-bedroom flats from £265,000. The first residents will be able to move in this summer.

Another recent phenomenon is that of developers sending marketing teams overseas, particularly the Far East and Russia, where they are selling huge
chunks of new developments before they launch in the UK. 

Take the Printworks development of 97 flats priced from £199,950 to £540,000 in Elephant and Castle, South London. Julien Mills, a director in the Savills new homes team, explains: “We launched the development’s marketing campaign overseas in South-East Asia this year. We were targeting 30 sales but have sold 49.”

The remaining flats will go on sale in the UK at the end of May (savills.co.uk) and the development is due to be finished by July.

All developers agree that part of the reason for the current vogue for off plan is expediency: there is little else for owner-occupiers to choose from and buying a property will give a better return than leaving money in the bank. The challenge is having enough imagination to be able to envisage what the property will look like when it is built and — to put it bluntly — be willing to take a punt. 

During the boom, making an off-plan purchase was a surefire money spinner, with buyers snapping up homes early and selling them on at a hefty profit as soon as they were finished. However, in a falling market, off-plan buyers could find themselves stuck in negative equity before they have even moved in.

Craig Hallam, new homes director at the developer Badger Holdings, says that buyers need to play the long game: “The benefits of off-plan investing, if taking a long-term view, far outweigh the risks — however, if you are taking a short-term view and intend to buy and sell very quickly, then be careful.”

If you are willing to take the risk, and are willing to be patient, then buying off plan requires imagination and a healthy dose of skepticism.

David Jones, developments director at Q Developments, says that some companies are not above using a little sleight of hand to sell their properties. 

“I would advise to check the dimensions and measurements carefully,” he says. “Some developers will draw double beds into both bedrooms on the plans
for a two-bedroom apartment, but the second bedroom may not be a substantially sized double, so don’t assume that it is a double bedroom.

”Getting your timing right is also crucial, and waiting until the tail end of a sale can have its advantages. “You may be able to negotiate a good deal at the end of each phase, because developers usually want to sell out of one before moving on to the next,” Jones says. Similarly, large companies often want to sell up in time for their year end, most commonly at the end of the tax year in April.

Back in Romsey, the Bailey family are expecting to take possession of their house at The Bay within the next few weeks.

“The lesson we have learnt is to visit the site regularly to see how it is going, and also to look at the other houses as they are built and stealing
any ideas they have had that would work well for us,” Mr Bailey says. “We will, I hope, end up with a house that is really well appointed and exactly
what we need.”

How to get a good deal
• Play hardball. Off-plan prices are not fixed and a developer may be willing to accept an offer below the asking price, especially when there are only
 a few flats left and it wants to get rid of them.

• As with all property purchases, location is critical.

• Don’t be dazzled by the incentives. How much — in cash terms — are they really worth? Research local property prices in similar (completed) developments
 to make sure that you are getting best value for your money.

• Don’t assume that bedrooms marketed as doubles are going to be spacious. Get the dimensions and measure them out at home to get a clear picture of the
size the rooms will be.

• A show flat is designed to look fantastic, and developers will also use tricks, such as three quarter-sized beds, to make rooms look bigger.

• Ask to see previous examples of the developer’s work. Pay special attention to the quality of the finishes.

Pros and cons 
Pros 
Many developments held back last year because of the recession are now being launched, so there is a good choice of homes.

You will have first pick of properties and can grab the best locations and selection of price ranges.

You can usually specify what finish you want.

If the market rises you will be in profit by the time you move in.

Developers often offer incentives, from free wardrobes to paying the stamp duty. Others are accepting 5 per cent deposits — good news for first-time buyers.

Cons 
If the market falls you will have paid more than the property is worth when you move in.

It can be hard to visualise the property’s final look.

If buying at the early stages of a development, you will have to live with building work around you, possibly for years.

You won’t be able to confirm a mortgage more than six months before completion. If you paid a deposit you may find that, by the time you get a mortgage,
prices have fallen and you must make up the difference or lose your stake.
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Comment   
Anne Ashworth

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