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Off-plan developments are in strong demand from investors around the world, despite some seeing it as a risk to purchase months or often years before completion.
The major advantage of investing off plan is to secure the purchase at a discounted price ahead of capital appreciation over the build period, giving investors instant equity in the property at the point of completion.
Here are 5 reasons why every investor should consider investing in off-plan developments:
Although capital growth is never guaranteed, cities with strong tenant demand and growth potential such as Manchester have been performing exceptionally well, with approximately 7% growth in the city per year. Birmingham is another strong investment city, which is forecast to see the strongest house price and rental value growth in the UK over the next 5 years, making it an attractive investment location for global investors.
As Boris Johnson announced the government’s four-stage roadmap out of COVID-19 restrictions, housing experts are predicting that this also signalled the start of a new era for the UK property market, with a ‘post-pandemic boom’ emerging. The latest House Price Index from Halifax shows that property prices increased by 1.1% between February and March 2021, making them 6.5% higher than in March 2020.
As the government is expected to fall below their target of building 300,000 new homes each year in order to meet the increasing demand, investing now in high spec off-plan property will deliver strong rental yields for buy-to-let investors.
JLL’s 2020 forecast report Home is… for everything explores how our lives revolve around our homes more than any other time over the past 250 years – a trend accelerated by COVID-19. Purpose-built rental homes have become the modern city-centre home of choice for millions of tenants across the UK in recent years, driving a change in tenant demand and priorities. Tenant requirements typically include communal outdoor green space, larger living areas, fast and reliable Wi-Fi, on-site facilities including a gym and fitness studios, and pet-friendly homes.
The JLL report also detailed that in 1800, less than 10% of the world’s population lived in urban areas, compared with more than 55% today and more than 80% in the UK.’ With this increased appetite for city living, up-and-coming city-centre neighbourhoods have become a lucrative off-plan investment opportunity. Prime investment cities include Manchester, Birmingham and Leeds, with recent figures showing that population growth in Manchester is increasing at twice the national rate, making the city a prime beneficiary with a large buy-in from investors.
In summary, whilst there are no guarantees, investing in areas with strong demand and consistent growth is likely to deliver strong returns for investors. If you’re considering investing off plan, conduct thorough research into the developer, location and property plans before you purchase, making sure developers have a portfolio of successful properties.
At Select Property Group, we specialise in off-plan high spec developments in the UK’s strongest investment locations. Find out more about our latest investment opportunities.
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