If you are in the market for a house or condo it’s highly likely you will eventually see offers to buy “off-plan”. These offers are typically accompanied by some kind of discount or incentive, which sometimes seem too good to be true.
What Does It Mean To Buy Off-Plan?
Simply put, buying off-plan means purchasing a house or condo before construction has been completed. In many cases the best prices can be had before construction has even begun. The term refers to making a decision to buy based on the architectural plans alone, however, nowadays developers use 3D rendering software to create accurate, lifelike models of exactly what the property will look like once complete.
So why do developers offer off-plan sales and why would a buyer consider these offers? Unsurprisingly, it is about money. When a project is in the early planning phase a developer may decide to sell a certain percentage of a housing or condominium project off-plan. The major benefit for them is to generate some cash flow for the project early on instead of having to wait for the entire project to be complete. They can also use this as an incentive to try and capture more interest in the project by being able to advertise that a certain percentage of units have been sold already. This tactic is also used to leverage trust in the company by saying, “look, all of these people trust us enough to buy, so you can too.”
Construction | Credit: Zenithy Villas
What Are the Pros of Buying Off-plan?
Those are a couple of pros for the developers, so what about for buyers? There’s one major benefit for purchasing off-plan in Phuket for buyers and it is the price. Off-plan units will be offered below market price, sometimes at a 25-30% discount. There are savvy investors out there who focus predominantly on buying off-plan and then selling at market value when the project is complete. Some development companies offer a guaranteed return on rental income on off-plan units for those without the intention of actually living in it.
Not all projects offer off-plan purchasing on their projects. If it’s a financially strong company and they are building in a well-established area with proven steadily increasing property values and high demand, they won’t sell off-plan, or if they do it won’t be at much of a discount.
Another benefit for off-plan buyers is, if they get in early enough, they can get first choice of units. Do you want one of those lovely sea view units on the front of the building? Well, if you don’t buy off-plan early on they may not be available, or if they are it will be at a premium. In some cases, developers will offer further incentives for the first few buyers to sweeten the deal which may come in the form of upgrades, furniture packages, or other gifts.
Off-plan | Credit: Zenithy Villas
What Are the Cons of Buying Off-plan?
As is the case with any deal, there’s always a downside. In this case, the most glaring one being risk. There’s a risk that the developer mismanages the project, runs out of money and declares bankruptcy leaving you in an unenviable position of having to take legal action. There’s the risk that the project timeline gets drawn out, leaving your investment locked away. Perhaps the project is finished on time, but the quality of the construction is poor. Maybe the returns on your rental unit don’t match what was promised or management and maintenance of the building and grounds are subpar.
Buying off-plan in Phuket can be a great option for the right person under the right circumstances. Doing the appropriate research and/or hiring competent consultants is key to ensuring your investment is safe and sound.