Off Plan Contract Assignments – The new way invest?

For many the thought of buying a new home or investment ‘off plan’ from a brochure is still a very much taboo and complex idea. For many there are too many rumoured risks surrounding new builds. Will the apartment be anything like the plans? Is my investment safe, what if the developer goes bust? Will the maintenance charges be subject to huge hikes in price in years to come? Are there extra charges to pay? And finally is it even profitable?

Ernest Brooks International’s New Homes department wants to provide an insiders insight and bust some of the myths surrounding this interesting market which many individuals and organisations around the globe are finding hugely profitable.

In a nutshell…

Off Plan – Newly built property, often bought direct from a developer or through a named selling agent at the launch site, months if not years before the completion date, for a limited time until the site completely sells out of residences. A percentage of the purchase price is paid as deposit, occasionally with a nominal instalment due after some months, then the balance due at completion. A contract is formed with the developer that once built, and paid for, the specific apartment will be completed and then legally owned by you as the buyer. No mortgage in principal is necessary at this point unless completion is within a 6 month wait time and no stamp duty is paid until the completion of the apartment. The initial deposit amount is insured in case of any problems during the build process. This is an excellent time to invest very early into a development; however there is a finite number of units and they can sell quickly, in some instances selling in the first week of a launch!

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Contract Assignments – An off-plan property, which has been already bought from the developer and now is being resold. These become available sometime after launch, and can be available right up to the completion date of a new development. To buy at this point the deposit placed by the initial seller is paid, plus any uplift/difference in the price since purchase and the Original Purchase Price (OPP) was paid. The contract initially made with the seller is then reassigned into the buyers name, and the agreement between the developer and the new buyer is in place.

Once again at the time of purchase, a Mortgage AIP is not necessary (but advised when within 6 months of completion of the apartment), and no stamp duty is paid. As developments begin to complete we often see an organic growth in prices, as only at this point stamp duty is paid and mortgage applications are made; and these costs are passed onto the prices. Buying a contract assignment allows the opportunity to buy just before this point.

Click here for a full availability of Ernest Brooks contract reassignments here.

So what are the benefits of buying off-Plan?

Firstly, you are of course buying a brand new home finished to modern build standards , fully energy efficient, and complete with fully fitted new kitchen/bathroom appliances all under manufacturer’s warranty, the apartment itself is further insured under building warranties and insurances.

Secondly, many find the spread payment plans of a new home are advantageous as a buyer can stage their payments and spread their investment, paying a percentage of the price but benefitting from capital growth of the overall amount!

Thirdly, for the buy-to-let investors amongst the fact that renters will flock to demand the latest developments is hugely beneficial. Over the past 12months the Ernest Brooks lettings team have let 95% of our off plan apartments prior to their completion and before any viewings have even been possible!

Fourth, further to the build quality and energy efficiency which cuts down on any costs for buy-to-let investors; incentives are often offered parallel to a purchase. These can include: discounts, furniture packs and reduced lettings managements fees. To further assist investors and buyers with furniture for their investment Ernest Brooks is soon to be launching their new offering: Ernest Brooks Interiors where a selection can be found.

What about the market uncertainty?

2016/17 did see the economy and house market grow slow; and we do have this question asked of us frequently. However, in and around the areas of regeneration In London and other cities across the UK where the majority of new builds are being developed has seen positive property growth. For example Stratford has seen the average property sale price grow by between 5-6%. Furthermore new homes in the borough of Barking & Dagenham has grown by 14.64%. In the last budget report Phillip Hammond announced billions of pounds of investment to support the housing market in the coming years, so we will surely continue to see new areas of regeneration pop up; and new opportunities for positive investment and profits.

This type of investment is not just limited to London either, with further investment by the government in the UK’s infrastructure across the country most notably the HS2 linking northern cities with London. Cities such as Birmingham, Manchester and Luton have seen a huge rise in new development as demand for the areas begins to soar!

Where do I invest?

Ernest Brooks International have a wide selection and can advise on some of the best new investments across the major UK cities. Call and discuss with one of the members of the New Homes & Investment team to discuss what investment and development is best suited to you, and how profitable this market really can be: 0203 621 8881.

If you already have an off plan property and would like a valuation on what it is now worth for resale click here.


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