Buying off plan property: Here’s everything you need to know

Article summary

• Buying off plan means buying a property that is still in development.
• The benefit is you will get a property that’s never been occupied before; the risk is you don’t get to see what the end product will look like.
• You need to do your homework and make sure the developer has a good reputation.

Imagine moving into a brand new property that no one’s ever inhabited before, built to all the modern standards and already bought and paid for. This is what it means to purchase a property off-plan.

Note: If you’re planning to buy a property, you can use our Bond Calculator to determine what home loan you would qualify for.

Buying off plan in South Africa

Here we discuss:

1. What is off-plan property?
2. The benefits of buying off-plan property.
3. The risks of buying off-plan property.
4. What you should do before buying off-plan property.

1. What is off-plan property?

It means to purchase a property that is still in development.

You won’t know what the final product will look like; other than what you can glean from the building plans and blueprints.

Buying something without seeing it may seem counter-intuitive, but when it comes to property, it can actually provide a number of benefits.

2. The benefits of buying off-plan property

• You get a property that has never been occupied.
• A brand new property is appealing to potential tenants if you want to rent it out.
• You don’t pay transfer duty on newly built properties.
• You are covered by the Consumer Protection Act, which will provide legal options if the building does not go according to plan.
• You pay for the property in the early stages of development when the price is lower.
• The property will then increase in value as construction progresses.
• If you purchase an off plan property in a sectional title estate, you only start paying once the entire section is complete.

3. The risks of buying off-plan property

• You can’t see the finished product and depend on the developer to deliver according to plan.
• You’ll have to wait a few years for development to complete, making it a few years before a buy-to-let property can begin generating income to cover the price you paid for it.
• The developer might go bust during the construction, in which case you’ll have to hope that the liquidator can pass the contract over to another developer.

4. What you should do before buying off-plan property

1. Do your homework on the property developer by:

• Checking their track record and how long they’ve been in business.
• Comparing marketing brochures for their properties to the finished product.
• Looking at online reviews.
• Get pre-approved to ensure that you can afford to buy into the new development. If a bank has approved the development then it will be possible to acquire funding for your purchase. A prequalification certificate will prove you have the necessary funds and boost your chance of home loan approval.

You can get pre-approved by contacting ooba Home Loans by using our free, online prequalification tool, the Bond Indicator.