What is "Off-Plan" property in Phuket Thailand?

Category : Buying Real Estate | Posted On 2012-08-26 00:00:00

What is Off-Plan property in Phuket Thailand?

The term Off-Plan refers to property that is available for purchase prior to construction. Pre-construction sales and selling off-plan are used by developers throughout the world when a new development is launched and marketed. It is the beginning or start of the sales process and gives the developer more leverage to secure better financing terms from banks and lenders.

Buying Off-Plan or purchasing pre-construction is a common way for investors to get in early and secure the best unit or plot in a project when buying property in Phuket Thailand. Off-plan buyers enjoy the benefits of discounts and promotions on their property purchases along with being extended a payment plan. It is typical for an Off-Plan property to be worth as much as 30% more when it's completed.

Off-plan property is basically buying the rights to a unit or property that has yet to be built, as opposed to buying a finished unit or property in Phuket on the secondary market.

Off-Plan is Pre-Construction

Typically off-plan means buying property from a developer at the pre-construction stage. It is also common for a property developer to commence construction of a project and continue to sell units of property throughout construction while still referring to properties as off-plan.

When purchasing an off-plan property, it is conceptually important to understand that the developer is assuming responsibility for purchasing land, subdivision, utility access, and basically full accountability for construction and project management. You are essentially consenting to pass responsibility to the property developer for all of these matters regarding your property in Phuket Thailand.

Off-Plan Property Delays

In Phuket Thailand, it is common for off-plan developments to run past the expected delivery date. Unfortunately, this happens more often than not and can be blamed on slow contractors and their crews. Weather delays play a part as Phuket gets a fair amount of rain between May and October. It should be stipulated in the sale and purchase contract the exact delivery date and a subsequent grace period. Should the developer go beyond this grace period the buyer will be paid for late penalties and fees. Developers are liable for late penalty fees plus interest and the buyer can deduct this from the last payment.

Off-Plan Property Benefits

One benefit to buying off-plan property in Phuket Thailand is that once you have purchased off-the-plan from the developer, the price is fixed. Buyers are given a payment plan and payments are staged according to the construction progress. Buying off-plan can typically save the new owner between 10% - 30% off market prices. Purchasing this way gives you the opportunity to choose the best unit or location in the estate or building. Purchasing off-plan also means that the buyer gets warranties on appliances and the structure.

There are many advantages to buying off-plan property all of which contribute to the overall aim of capital growth and locking down the best unit on the top floor or the corner plot. With a rapidly growing housing market in Phuket, many investors are taking advantage of purchasing property pre-construction to secure a lower price before completion.

Buyers are sometimes able, but not always, to make changes to the unit or property as desired. Property in Phuket differs from one developer to another in what they are able to change pre-construction.

Selling before Completion

When it comes to speculating on an off-plan property, as with any investment, there can be benefits but you should always have an exit strategy. Some investors buy early with a plan to sell before it completes but this can be risky. That said, if your circumstances change, you may find yourself in a position where selling is necessary.

Selling your off-plan property before the completion is dependent on your contract. Some developers discourage investors from speculating on off-plan property. As they start to raise their prices they do not want the added competition. Make sure your contract allows you to sell before completion, and don't forget to consider any tax, selling commissions, and legal fees that come with the transaction.

One option might be to keep the property and rent it out achieving higher yields and creating better capital gains growth over many years. Rental yields in Phuket are strong but vary depending on location, purchase price, and demand within the area.

Risks of Buying Off-Plan

As with any investment, there are elements of risk when buying off-pan property more so than buying completed property. It is extremely important to go with property developers that you trust. Firstly, know the developer working on the project and research their background. Ask questions such as how many projects have they completed in the past. Do they have a strong financial background? Are they stable? Avoid the worst-case scenario of losing your reservation payment or deposit if the developer goes bust.

The risks of buying off-plan can be greatly reduced by working with a reputable developer with a good track record and strong financial backing. Other risks are that the property might differ from expectations. Another is that exchange rates might weaken during the payment plan and construction.

All things considered, property in Phuket purchased this way (Off-plan) is almost always going to save you money if done correctly.

For more information about investing in property in Phuket or about the safest off-plan properties in Phuket Thailand call us today at +66 93 606 0906. We would be happy to schedule a free consultation. Our commission fee is paid by the seller so we can offer buyers our services at no charge.

David Henry
David Henry is known for his integrity, high energy and hard work which goes into every detail of your real estate transaction at Phuket Realtor. David grew up in the Boston area and started as a realtor in his 20's. With over 30 years of experience in real estate, he has now started one of the best independent real estate agencies in Thailand, Phuket Realtor.