Off plan benefits Do you think that off-plan is more attractive because people have more time to pay ???
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When I first got involved in the off plan market in spain it was before mortgages were available and purchasers would make stage payments until completion. Because of the lack of builder finance at the time, builders tended to complete projects a bit more quickly in order to be able to move onto something new. By the same token, an offplan project was usually priced about 20-30% cheaper than a built one because it was implicit that the purchaser was taking a risk and was, in fact, to a certain degree a partner in the construction process enabling the builder to actually build.
And, the same as in the current market, purchasers would try and unload before the next instalment was due in order to make a quick turn. Then builder finance and mortgages for ex pat end users became widely available and changed the face of the market.
Over time, at least in Spain, builders began to realise they had actually provided a "financial instrument" for speculators to participate in. Over a short period of time the spread between finished and off plan projects narrowed until, eventually, there was no real advantage, as far as purchase price was concerned, in buying offplan or ready. It became a speculative product and this aspect started to drive the market rather than the desire to provide cheaper property.
So what are the benefits of offplan property today. I think in Egypt that providing accomodation of a certain standard is one of the issues. Older resale properties generally just dont make the grade for a first world investor so this sort of inventory needs to be provided - and the investor (or even lifestyle buyer) is basically making all this possible by pre buying which allows builders access to levels of finance they would not normally have in order to complete projects. Are they cheaper than buying turnkey. Too early to say in Egypt as very little like for like product has hit the market yet but, like any other marketplace in reality, 3-5 years required and a sensible approach by the government and builders in predicting saturation point.
Here in Spain at the moment, built properties are generally available cheaper than off plan as either a private seller or developer who wasnt able to sell it off plan would like to get rid of it to free up cash. (not that there are that many new off plan projects by comparison).
Anyway, just a few thoughts. Doubtless they will open to doors to discussion as by no means covered all pros/cons and driving forces behind the off plan market in this post.
Cheers
Rick
