Buying a house off-plan is an increasingly attractive option to South Africans looking to invest in property according to Bruce Swain, managing director of Leapfrog Property Group.
Buying “off-plan” effectively means buying a property before it has been built, and basing your purchasing decision on the developer’s current ‘vision’, promotional materials and architectural plans.
As a result the transfers are typically much longer than buying a pre-built home in South Africa and there is an added risk of factor of not knowing exactly what you may get. But it could also work out as a much cheaper option, noted Swain.
The benefits include lower or no deposits, delayed bond repayments, increased property values (as you typically buy the property 18-24 months in advance), no transfer duties and bolstered estate security.
Swain laid out the following checklist when looking at buying a property off-plan.
Checklist for Buying Off-Plan
The reputation of the developer and or builder
“The first thing I’d recommend buyers look into is the developer’s track record – has the company successfully completed previous projects? Have they done so in a timely fashion? Is the developer and the builder the same person or company? If not, then look into the builder’s work as well”, advised Swain.
Inspect the demo model
“It’s important to inspect a demo unit as artistic renders and sketches don’t necessarily translate into real life – spending time going through the model property will enable buyers to expect the quality of the workmanship and materials in person.”
Stay on top of the building process
“It’s critical to enquire about the materials that will be used in a buyer’s property as it may differ from the demo model’s in some respects. Buyers also need to take note that the majority of building agreements will allow the developer to deviate from the plans by between 5% and 10% without having to consult the buyer.”
“If buyers don’t stay on top of the building process they could well find themselves with a property that’s different to their specifications in a number of ways,” cautioned Swain.
Read the fine print
When purchasing a stand in a sectional title or estate development the standard contract provides that the landowner needs to erect their property within a stipulated period, failing which the homeowner’s association (HOA) may impose a penalty.
“This ensures that the development reaches its investment value within anticipated time frames and safeguards other owners from the implications of continuous building operations. The period generally ranges from one to five years.”
“It’s also important that buyers check the building contract carefully to see exactly what materials, fittings etc are included in the specifications and what would be regarded as extras which will cost extra. Communal facilities need to be clearly identified as well as rules and costs regarding pets, landscaping, security etc”, believes Swain.
“Finally the contract also needs to include a date by which buyers can take occupation of the property, specifying that the buyer will be entitled to cancel said contract should the home not be ready in time, allowing the buyer to be reimbursed for all monies spent thus far, including the deposit and progress payments made to the builder,” he concluded.