Is Purchasing Property Off-Plan Still A Wise Decision?
According to Gareth Bailey, area principal for Durban Coastal at Pam Golding Properties, to say that there appears to be a lot occurring in the globe lately would be a great understatement, and analyzing the ramifications for investment economics poses a fascinating challenge. “Despite heightened global volatility, the Rand has defied forecasts and held, and South African assets remain a desirable alternative throughout the world.” Surprisingly, the residential market within the property asset class has remained solid during the Covid era, driven by the emerging work-from-home trend’s effect on housing demand and the banks’ insatiable thirst for quality loans. According to the March Property Barometer Report from FNB, national home price growth has slowed significantly over the last two years, but it has remained consistent around the 4% level, with certain regions, such as the North Coast of KwaZulu-Natal and the Western Cape, surpassing this national average.
In the last five years, billions of Rands have been spent on residential off-plan sales in our North Durban suburbs, causing a rush of building activity. Several people wonder, “Is it still a smart idea to purchase off-plan instead of an existing home?” There are benefits and drawbacks to purchasing a property before it is completed, but if you take certain precautions, you should be able to enjoy your new home and reap the financial rewards of your investment for many years to come.
According to Bailey, “one of the most essential considerations when purchasing off-plan is the pedigree and track-record of the developer and the professional team, since this speaks to the possibility that the development will be completed on time and to specification.”
Most of the time, friends who have had bad development experiences have something to say about delays or the quality of the final product.
Since off-plan houses are more expensive than existing ones, buyers should keep in mind that they are fresh new and have the ability to notify the developer of any issues at handover so that they may be fixed. Buyers may rest easy knowing they won’t have to spend a tonne of money on repairs for at least a few years, thanks to this and the building’s warranties. The Voetstoots clause, which translates to “acquired in the existing state at the purchaser’s risk,” remains in effect to the degree that any latent (hidden) faults develop despite the new Property Practitioners Act requiring agents to get a written declaration of deficiencies upfront from sellers. Properties purchased before construction has begun often contain VAT, and there is no additional transfer duty to pay. Transfer tax is still a consideration for buyers of preexisting homes. Rates start at roughly R90 000 for homes valued at R2.5 million and rise to around R250 000 for those priced at R4 million. When determining their bond offers, banks are ready to use the full asking price, including VAT, although they often ignore transfer duty when dealing with preexisting properties.
“Off-plan homes may frequently come with the introduction of completely new regions with distinctive vistas, such as those of the sea, or provide forms, such as flats or gated-estates, that have not been seen in the current surrounding property market.”
According to Bailey, people are increasingly choosing to set up shop in gated communities like estates and sectional titles because of the safety and convenience these provide. “Although Covid has reversed this tendency by increasing demand for detached houses that give greater room for home offices and the flexibility to maximize lifestyle at home, I expect that the long-term trend will restart at some moment, and this will prop up price rise in these sorts of properties.” If you’re an investor, purchasing off-plan allows you to lock in a brand-new home that’s been tailored to your tastes at today’s price, all while reaping the benefits of appreciation from the time of signing until handover, which is typically 12 to 18 months later. Both of the complex apartment projects that we’ve introduced to the market in the last couple of years during Covid have been huge hits with renters. In little over a year, the La Lucia, South Africa, development Kent on the former site of the La Lucia Mall sold out entirely, while in just over 18 months, the uMhlanga, South Africa, development of The Onyx, located diagonally across from Busamed Gateway Private Hospital, almost reached its sales target. York at Sanctuary Private Estate, located on a greenbelt just outside of Umhlanga’s exclusive Umhlanga Ridge and across from the branches of First National Bank, was only recently introduced to the market in April 2022. Apartments at this FWJK complex range in size from one to three bedrooms, and they’re all thoughtfully designed to make use of the natural scenery and sea vistas to which they look out. Prices start at R1.695 million (all figures are gross). The convenience of having parking on the same floor as one’s apartment is a major selling factor for most of the units. A further point of differentiation is that residents of Sanctuary Private Estate have immediate access to the nearby greenbelt, where they may go hiking, horseback riding, or mountain biking or engage in other outdoor pursuits like trail jogging and fishing. We expect this new home development to be well embraced by the marketplace because of the attractive price and convenient position in the heart of uMhlanga on uMhlanga Ridgeside.
Bailey concludes, “There are pros and cons to buying off-plan versus existing properties. However, if the opportunity of an off-plan product or position piques your interest, just make sure that you choose a quality development team, and this will most likely yield long-term rewards, both in terms of lifestyle and capital appreciation.”
