Buying London property off-plan can offer many benefits for a property investor or buy-to-let landlord. When buying property as an investment you will be looking for one of two things; namely a high rental yield if you are planning to rent the property or high levels of capital growth.
As we wrote in March 2018, London was recently voted the top global location for foreign property investment by the Association of Foreign Investors in Real Estate, and as such, there are real opportunities for the wise property investor when buying London property off-plan. Here’s our guide to maximising your investment funds and what you should consider when buying off-plan.
Developers will usually wish to secure a certain number of sales before construction is complete so that they can advertise the desirability of their project. You should be in a position to negotiate the purchase price, especially if you are one of the first or last prospective buyers and agree a below market price. This is especially advantageous with a drop in sterling exchange rates.
Read our guide to London property for the overseas investor
Another bonus of buying property off-plan is that if you buy a property with a completion date in two years’ time, by the time construction is completed the value of property should have increased in line with the market. As a result of this, you will see extensive capital growth that will enable you to maintain existing and invest in new properties further down the line.
As reported by the National Association of Estate Agents, the price of the average UK home will rise by 50% over the next decade, with the average London house price forecast to rise to £931,000 by 2025.
Many developers will allow you to make staged payments when purchasing an off-plan property. These payments help spread the cost and remove the stress of having to find the money for a large deposit all at once. You can keep the funds in the bank for as long as possible, then use the interest accrued for white goods or furnishing packs.
Discover the secrets of furnishing a rental property
On the topic of furnishing; another advantage of purchasing property off-plan is that you have a completely blank slate to work with. Consequently, you can negotiate with the developers in regards to the interior design, aspect and furnishing of the property. Having this extra involvement in the construction phase will mean you have more control over how the property looks and therefore design your property with your ideal tenant in mind.
Today’s new-build properties are designed with safety and security in mind. Smoke alarms, fire doors and fire-redundant materials are a given as well as high-level security locks and alarm systems, not to mention the 24-hr concierges, which so many new developments offer now.
Another benefit of buying London property is that a parking space can be reserved at the time of purchase, saving you a considerable amount of money compared with buying one at a later date.
Why a parking space is worth the upfront investment
Through opting to buy off-plan you will also have a level of control as to where your property is situated in the development. Aspect and whether your property has a private balcony or terrace can make a huge difference to the rental yield which can be achieved.
When buying property off-plan, it’s good to do your research to ensure the area you choose is upcoming or in a regeneration area, meaning your property is situated within an area that the Government is actively investing in. Typically this will mean great transport links, shops, amenities and green spaces.
As Gavin Stewart, Sales Director at leading developer Barratt London says, it’s crucial to understand what is important to tenants. “Landlords and investors should always have the potential tenant front of mind when making decisions on where to purchase. We frequently work with buy-to-let purchasers, advising on key factors, tenants and indeed all homeowners are looking for in a property. Top of the list in London is connectivity, but this doesn’t just refer to proximity to the Tube. Londoners are astute at using all travel methods the city has to offer, whether it be the River Boat Taxi, the Thames Cycle Path, London Overground, Underground or bus. The quality and availability of services and amenities also feature high on tenant wish lists. When looking to buy an investment property, we urge buyers to look at the whole package, such as the provision of concierge services and residents’ fitness suite for tenants, through to the customer service facilities available that give owners piece of mind their property is being taken care of.
Learn what makes the perfect rental home
Yet another advantage of purchasing property off-build is that it will come with a 10-year National House Building Council’s (NHBC) Buildmark warranty. Consequently, as a prospective homeowner, you can feel secure in knowing that your new property is built to a high standard and that the any costs that arise due to failure to meet these standards during construction will be covered.
Of course, even with the best intentions, problems can occur and that is why we highly recommend that snagging should be carried out prior to completion. On a recent inspection, we found 47 defects on a new-build property which the developer then rectified, saving the property investor time and expense further down the line.
Learn more about our snagging service
Finally, it may seem obvious, but one of the main advantages of purchasing property off-plan is the simple fact that it means you are guaranteed to have a property upon completion. While others will be left to acquire any remaining properties at market value or above, you can sit back and relax in the knowledge that you have a new property built to your tastes and standards.
If you would like to see what rental yield could be achieved in a particular development, use our instant free property valuation tool or talk to our team about London’s property hotspots via our contact us page.
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