Home, sweet (brand-new) home!

Buying property off-plan is a great way for first-time homebuyers to get a foot on the property ladder. It comes without transfer duty as there is no prior owner, and the VAT is included in the purchase price. For these same reasons, it is also an appealing option for someone looking to purchase an investment property that can be rented out to generate income.

Early purchasers have an added advantage of getting great deals as the early phases of a development are often very competitively priced, and prices will increase as new phases are launched.

BetterBond National Development Manager, Jenny Rushin, says the traditional concern about buying off-plan, namely not being able to view a property in person, is of increasingly less concern, thanks to modern technology. "Yes, buying off-plan means purchasing a property you cannot view - except perhaps walk through a show unit that has been erected on-site. But modern technology makes it possible to get a very good idea of what a place will look like once it's finished. Nowadays, you've got 3D renders, virtual tours, augmented reality experiences and everything in-between! So, prospective buyers can get a very good idea of what a new development will offer."

Interest-rate savings

Another compelling argument for buying off-plan right now, is the fact that the interest rate is at its lowest for almost 50 years. There has been two 100-basis-point rate cuts in the space of a month and this is making many people who are currently renting, consider buying.

Rushin says, "Long-term affordability has to be the main consideration, however, along with the fact that the monthly bond repayments are not the only costs associated with owning property. There will most likely also be levies, rates and taxes, utilities and more. It is essential to include these in all calculations."

To give you an idea of the difference that the two drops in interest rate have made, see the table below, based on a typical 20-year bond term.

	Monthly bond instalment
Bond amount	9,75%	8,75%	7,75%	Monthly saving (9,75% - 7,75%)	Interest saving over 20 years
R250 000	R2 371	R2 209	R2 052	R319	R76 541
R500 000	R4 743	R4 419	R4 105	R638	R153 082
R750 000	R7 114	R6 628	R6 157	R957	R229 623
R1 million	R9 485	R8 837	R8 209	R1 276	R306 163
R1.25 million	R11 856	R11 046	R10 262	R1 594	R382 705
R1.5 million	R14 228	R13 256	R12 314	R1 914	R459 246
R2 million	R18 970	R17 674	R16 419	R2 551	R612 328
R3 million	R28 456	R26 511	R24 628	R3 828	R918 491
R4 million	R37 941	R35 348	R32 838	R5 103	R1 224 656
R5 million	R47 426	R44 186	R41 047	R6 379	R1 530 819
R6 million	R56 911	R53 023	R49 257	R7 654	R1 836 984

Capital growth

In terms of the value of your property, time is one of your greatest allies when purchasing off-plan. Because the construction period (typically around 12 to 18 months from launch) between time of purchase and date of occupation could conceivably see your investment increase significantly in value. Some estimates say 5%-10%, although there are several factors that play a role, including area, type and size of the development, and levels of supply and demand in the market. All things being equal, however, your property could be worth a tidy sum more by the time it is built, compared with when you bought it.

Easier to finance

All new developments are pre‑approved by the major financial institutions. This could make obtaining finance to buy into such a development easier for prospective buyers. Rushin adds, "If you've taken the time to get pre‑approved for a home loan, you would be in an even stronger position to get your bond approved, as soon as you decide to buy. This makes the property purchase process quicker and easier all-round."

Developer track record

One of the best protections against the insecurity of not being able to view the property upfront, is to do a thorough check of the developer's track record. This will give you a fair look at other developments they undertook, look at purchase prices over time and consultant an area specialist

While the development that you're buying into is under construction, it is a good idea to take an active interest in the project as it progresses. Stay in touch with the developer and view the property at regular intervals if you can. Raise concerns as they arise and insist that they are addressed.

Fine print

Before signing on the dotted line, take care to familiarise yourself with your rights as purchaser of an off-plan property. Pay careful attention to stipulations around the completion and transfer dates because, if they don't coincide (and they often don't!), you could be liable for occupational rent. Also known as occupational interest, this is the monies payable when you occupy a property that you do not yet own, for example if you moved in before registration and transfer of the property.

Before the transfer of the property into your name, inspect the place together with a representative of the developer. This is your opportunity to ensure everything was done according to plan.

The consumer is covered by the Consumer Protection Act, which offers some protection around non-compliance. For properties approved by the National Home Builders Registration Council (NHBRC) - and most major developments are - a five-year structural guarantee applies, and for smaller snags you would typically have three months in which to report and have them sorted.

Bottom line

"Buying off-plan provides a tremendous opportunity at making your dream of homeownership come true. And, provided you make your calculations carefully, could prove a good investment over time. Always remember, however, that property is not a short-term commitment and as the biggest asset you'll ever buy, it's vital to take all the important factors outlined here, into consideration," concludes Rushin.