What is ‘off the Plan’? Off the plan is when a builder/developer is developing a set of units/apartments and will look to pre-sell some or all of the apartments before construction has even began. This kind of purchase is call purchasing off plan as the customer is basing the choice to purchase based on the plans and drawings.
The standard transaction is actually a deposit of 5-10% will likely be paid at the time of signing the contract. Hardly any other payments are essential whatsoever until construction is done upon that the balance from the funds have to complete the investment. How long from signing from the contract to completion can be any amount of time really but generally no more than two years.
What are the positives to purchasing Ki Residences Off the plan? Off the plan properties are marketed heavily to Singaporean expats and interstate buyers. The reason why many expats will purchase Off the plan is it takes most of the stress from finding a property back in Singapore to buy. Because the apartment is new there is no have to physically inspect the website and usually the area will be a good location close to any or all amenities. Other features of purchasing Off the plan include;
1) Leaseback: Some developers will offer you a rental guarantee to get a year or so post completion to provide the buyer with comfort around prices,
2) In a rising property market it is really not uncommon for the price of the apartment to increase leading to a great return. In the event the deposit the buyer put down was 10% and the apartment increased by 10% on the 2 year construction period – the buyer has seen a 100% return on the money because there are not one other costs involved like interest payments etc in the 2 year construction phase. It is not uncommon for a buyer to on-sell the apartment just before completion turning a fast profit,
3) Taxation benefits who go with purchasing Ki Residences Floor Plan. These are some good benefits and in a rising market purchasing Off the plan can be a smart investment.
Do you know the negatives to buying a home Off the plan? The key risk in purchasing Off the plan is obtaining finance for this purchase. No lender will issue an unconditional finance approval to have an indefinite period of time. Yes, some lenders will approve finance for Off the plan purchases nonetheless they are usually subject to final valuation and verification from the applicants financial situation.
The highest time period a lender will hold open finance approval is six months. Which means that it is really not easy to arrange finance before signing a contract on an Off the plan purchase just like any approval might have long expired when settlement arrives. The danger here is the fact that bank may decline the finance when settlement arrives for one of many following reasons:
1) Valuations have fallen therefore the property may be worth less than the first purchase price,
2) Credit policy has changed resulting in the house or purchaser no more meeting bank lending criteria,
3) Interest rates or the Singaporean dollar has risen resulting in the borrower no more being able to pay the repayments.
Being unable to finance the balance in the purchase price on settlement can result in the borrower forfeiting their deposit AND potentially being sued for damages in case the developer sell the home for under the agreed purchase price.
Examples of the above risks materialising in 2010 through the GFC: Through the global financial crisis banks around Australia tightened their credit lending policy. There have been many examples where applicants had purchased Off the plan with settlement imminent but no lender willing to finance the balance of the purchase price. Listed below are two examples:
1) Singaporean citizen located in Indonesia purchased an Off the plan property in Singapore in 2008. Completion was due in September 2009. The apartment was a studio apartment having an internal space of 30sqm. Lending policy in 2008 before the GFC permitted lending on this type of unit to 80% LVR so merely a 20% deposit plus costs was required. However, after the GFC financial institutions begun to tighten up their lending policy on these small units with many lenders refusing to lend at all while others wanted a 50% deposit. This purchaser did not have enough savings to pay for a 50% deposit so needed to forfeit his deposit.
2) Foreign citizen living in Australia had purchase Jadescape Off the plan in 2009. Settlement due April 2011. Purchase price was $408,000. Bank conducted a valuation and the valuation came in at $355,000, some $53,000 underneath the purchase price. Lender would only lend 80% in the valuation being 80% of $355,000 requiring the purchaser to set in a bigger deposit than he had otherwise budgeted for.
Should I buy an Off the Plan Property? The writer recommends that Singaporean citizens living overseas considering purchasing an Off the plan apartment should only do this should they be in a strong financial position. Ideally they might have a minimum of a 20% deposit plus costs. Before agreeing to purchase an Off the plan unit you need to contact whmrna specialised mortgage broker to ensure which they currently meet mortgage loan lending policy and really should also consult their solicitor/conveyancer before fully committing.
Off the plan purchasers can be great investments with lots of many investors doing very well out of the acquisition of these properties. You will find however downsides and risks to purchasing Off the plan which need to be considered before investing in the purchase.