5 Things to Know About Buying Off-Plan Property
5 Things to Know About Buying Off-Plan Property
Imagine owning a brand new property with all the warranties. And it's located in a tropical paradise known for generating strong annual rental returns. And it increases in value over time. These are some of the advantages of buying off-plan property in Phuket Thailand.
If you are considering property in Thailand for early retirement, or for a holiday home, buying off-plan property is a common practice in Thailand.
Most developers offer units for sale at an early stage of project development sometimes even before they break ground. It's also common for a property developer to start construction of the project while still referring to it as off-plan.
Some clients might not be familiar with this term but generally speaking, buying off-plan means committing to an idea before seeing the final result. In Phuket, purchasing this way is a sure way to secure a home in a market where demand surpasses supply.
But it's important to understand that the developer is assuming full responsibility for the construction of the project. Therefore, it's essential to conduct a full due diligence.
There can be great benefits to buying off the plan, but inherent in such purchases are also risks.
When buying off-plan property it is essential to purchase from a reputable developer with a solid track record. This is step one to minimizing your risks.
Off-plan property is basically buying the rights to a “property” that has yet to be built. A good realtor can help shorten the process of finding these reputable developers. You will want to know about prior projects and the financial health of the developer.
Most developers secure funding before they start the project, but you will want to make sure to know that if the units are not 100% sold, they will still complete the project.
Working with a good developer from the start can save you a lot of time. Your lawyer will conduct a due diligence on the property, development, and developer. If the report comes back with problems, your booking fee will be refunded and you start all over.
Point #2 is for condominium buyers.
When buying a condominium off-plan, choose to work with only “condominium registered” developments.
For registered condominiums, the developer will have to obtain a condominium license which is quite cumbersome. This also means that they will be governed by legislation contained in the Thai Condominium Act which provides a greater degree of consumer protection for buyers.
This means that contracts will be standardized and are in the form established by the Ministry of the Interior protecting buyers from any unfair contractual terms.
It is worth noting that while condominium ownership is more certain and regulated, this does not obviate the need to engage a lawyer to act on your behalf.
Not all developers go for the license so make sure your property is condominium registered.
When purchasing off-plan property, it’s important to understand that the developer is assuming full responsibility.
The developer is responsible for purchasing land, subdivision, and all issues relating to access and utilities and full accountability for construction and project management.
Indeed, for those who have no intention or inclination to get involved in the property construction process, this is one of the principal benefits. However, by passing responsibility to a property developer for these tasks, you are largely or wholly giving up control over their implementation.
Make sure that the developer is qualified.
Off-plan property does, however, come with its benefits.
Buying off-plan property is a great way to save money. On average, you can save anywhere between 10% to 30% off market prices. Some developers refer to this as early bird marketing but most developers call it off-plan pricing.
You can watch as your unit increases in value as each phase is released. Properties sold at the off-plan stage are sold at a discount to market value, which allows purchasers to lock in future capital gains.
Buying off-plan typically gives you more choices. You can choose a high floor in a condominium development or a corner unit. You can choose the best plot in a villa development. Many developers will offer choices of tiles and layouts. These preferences are personal choices that are made easier by buying off-plan.
Another principal benefit is that you are getting a new property with full warranties.
Buying an off-plan property from the developer also has the advantage that, once you have signed the contract, the price is fixed.
Buying a home off-plan allows for flexible payment plans. All that is needed at the time of purchase is a reservation payment (booking fee) which is usually 1% of the purchase price. Typically, a contract is signed and a 20% deposit is paid 30 days later. This gives you the time you need for due diligence.
Mortgages and financing for foreigners in Thailand can be extremely limited. Typically Thai Banks will only lend to foreigners who live and work here and qualify. We are starting to see more international banks lend money like UOB and ICBC but there are many restrictions.
Purchasing off-plan provides buyers a payment plan that corresponds to the construction progress. In most cases, the purchase can be spread over 2-3 years. Some developers in Phuket are now offering extended terms of 3 to 5 years after completion. These payment plans are interest-free.
We would be happy to discuss the reputable developers now building in Phuket, Thailand. Give us a call +66 93 606 0906 (WhatsApp) or contact us at [email protected] for more information.