Over the last few years we have seen significant growth in demand for off-plan property right across the UK. When you consider that demand has outstripped the supply of new build properties for many years now, it makes sense for investors to reserve up-and-coming property developments at the earliest stage. There are numerous benefits when buying into a property even before building starts which we will cover below. It is also worth noting that modern day property development companies offer a full range of services for investors; from finding a suitable development through to tenant management.
Regional off-plan investment continues to grow
In recent times we have seen significant switching of property investment funds from London to regional markets with this trend expected to strengthen going forward. One particular area which has benefited from off-plan property development is Manchester. Companies such as Alliance Investments have a particularly strong focus in this area with the Oxygen Towers development – on the doorstep of a future HS2 terminal – attracting a lot of attention.
Securing your property
The process of securing an off-plan property investment is fairly simple with an initial reservation fee. Once the appropriate documents have been signed and exchanged, developers such as Alliance Investments offer attractive payment terms. They will require a deposit of just 30% with the balance paid on completion. This reduces the outlay of an investor, assisting cash flow, and incentivises developers to complete their projects on time.
Capital gains
Once you reserve a property, complete the documents and put down the deposit, you have to all intents and purposes acquired the property. While the final 70% instalment is not required until completion, there is the potential to enjoy capital appreciation from the moment you reserve your investment. Strong demand for new developments can lead to a significant uplift in valuations with the potential to make a short to medium term paper profit even prior to completion.
Legal issues, funding and more
Buying an off-plan property does not change the process of due diligence and legal advice. Modern day property development companies are able to offer a full range of services, from research into relevant properties through to the raising of mortgage funds, independent legal advice and more. This ensures that you are able to focus on finding the right investments to suit your portfolio and investment strategy.
Mortgages
Off-plan mortgages are a specialist area of the UK mortgage sector. As a consequence the majority of property development companies will work with lenders to offer tailored services to investors. This ensures that investor finances are not overextended and the funding structure best suits their situation. The fact that mortgage funds will not be required until the development has been completed offers a welcome degree of security to investors.
Additional services
Once you have secured your property and the development has been completed, it is time to find a tenant and turn on the rental income stream. If we look at the Oxygen Towers development in Manchester, available through Alliance Investments, we see apartments starting at £238,000 with a projected 6% rental yield. Aside from property development opportunities, Alliance Investments offer a range of additional services which include:-
• Legal advice
• Contracts
• Mortgages
• Screening of tenants
• Furnishing property
• Property management
• Tax advice
• Solicitors
As your property portfolio grows it can be challenging to find time to manage tenants, carryout general maintenance and keep up with new legislation going forward. Property development companies such as Alliance Investments have long-standing experience in the sector and are also able to assist landlords in maintaining an orderly property portfolio. By taking away the day-to-day chores associated with property management, this allows investors to focus on developing their portfolios and researching other potential investments.
Summary
There is still an ongoing shortfall in the number of new builds across the UK compared to growing demand for homes. Various governments have failed to adequately address this issue prompting strong demand for high spec off-plan developments. The increase in off-plan property investment is now spread more evenly across the UK with regional markets such as Manchester a prime beneficiary.
Property development companies such as Alliance Investments offer exposure to high spec off-plan properties, attractive payment terms and additional property management services. There is also the opportunity to secure attractive rental income streams.