What is ‘off the Plan’? Off the plan is when a builder/developer is developing a set of units/apartments and will look to pre-sell some or all of the apartments before construction has even began. This type of purchase is call buying off plan as the purchaser is basing the decision to buy based on the plans and drawings.
The conventional transaction is actually a deposit of 5-10% will likely be paid during the time of signing the contract. Not one other payments are essential whatsoever until construction is complete upon in which the balance in the funds have to complete the acquisition. The length of time from signing from the contract to completion can be any amount of time really but generally no longer than 2 years.
What are the positives to buying Ki Residences Off the plan? Off the plan properties are marketed heavily to Singaporean expats and interstate buyers. The key reason why many expats will purchase Off the plan is that it takes many of the stress away from finding a property back in Singapore to invest in. Since the apartment is completely new there is not any have to physically inspect the website and usually the location will certainly be a good location close to any or all amenities. Other benefits of purchasing Off the plan include;
1) Leaseback: Some developers will offer you a rental guarantee for a couple of years post completion to supply the purchaser with comfort around prices,
2) In a rising property market it is not uncommon for the value of the apartment to improve resulting in a great return on your investment. If the deposit the customer put down was 10% and also the apartment increased by 10% on the 2 year construction period – the customer has seen a 100% return on the money as there are no other costs involved like interest payments etc in the 2 year construction phase. It is not uncommon to get a buyer to on-sell the apartment before completion turning a simple profit,
3) Taxation benefits which go with purchasing Ki Residences Floor Plan. These are some terrific benefits and in a rising market purchasing Off the plan can be a smart investment.
Do you know the negatives to purchasing a house Off the plan? The key risk in purchasing Off the plan is obtaining finance for this particular purchase. No lender will issue an unconditional finance approval for an indefinite time frame. Yes, some lenders will approve finance for Off the plan purchases but they will always be subjected to final valuation and verification from the applicants finances.
The highest period of time a lender will hold open finance approval is half a year. This means that it is far from easy to arrange finance before signing an agreement with an Off the plan purchase just like any approval might have long expired when settlement arrives. The chance here would be that the bank may decline the finance when settlement is due for one of the following reasons:
1) Valuations have fallen and so the property may be worth under the initial purchase price,
2) Credit policy has evolved leading to the home or purchaser will no longer meeting bank lending criteria,
3) Interest rates or the Singaporean dollar has risen leading to the borrower no longer having the capacity to pay the repayments.
The inability to finance the balance of the purchase price on settlement can resulted in borrower forfeiting their deposit AND potentially being sued for damages in case the developer sell the home cheaper than the agreed purchase price.
Examples of the above risks materialising during 2010 during the GFC: Through the global financial disaster banks around Australia tightened their credit lending policy. There was many examples where applicants had purchased Off the plan with settlement imminent but no lender prepared to finance the balance from the purchase price. Listed below are two examples:
1) Singaporean citizen living in Indonesia purchased an Off the plan property in Singapore in 2008. Completion was due in September 2009. The apartment had been a studio apartment with the internal space of 30sqm. Lending policy in 2008 ahead of the GFC permitted lending on this kind of unit to 80% LVR so only a 20% deposit plus costs was required. However, following the GFC the banks began to tighten up their lending policy on these small units with a lot of lenders refusing to lend in any way and some wanted a 50% deposit. This purchaser did not have enough savings to pay a 50% deposit so needed to forfeit his deposit.
2) Foreign citizen living in Australia had purchase Jadescape Off the plan in 2009. Settlement due April 2011. Purchase price was $408,000. Bank conducted a valuation and also the valuation came in at $355,000, some $53,000 underneath the purchase price. Lender would only lend 80% of the valuation being 80% of $355,000 requiring the purchaser to set in a bigger deposit than he had otherwise budgeted for.
Should I buy an Off the Plan Property? The author recommends that Singaporean citizens living overseas considering purchasing an Off the plan apartment should only do so if they are in a strong financial position. Ideally they could have at least a 20% deposit plus costs. Before agreeing to get an Off the plan unit one should contact whmrna specialised mortgage broker to ensure which they currently meet mortgage loan lending policy and really should also consult their solicitor/conveyancer before fully committing.
Off the plan purchasers can be great investments with a lot of many investors doing very well from the buying of these properties. There are however downsides and risks to purchasing Off the plan which need to be considered before investing in the acquisition.