With housing shortages across many urban areas, new homes and neighbourhoods have begun to shoot up around the country. So if you’re thinking about buying a home, you might very well be tempted by buying pre-construction.
While there are ups to this practice, there are some downsides as well. It’s well worth knowing both sides of the story before making a firm decision. A little knowledge goes a long way and can really help you to avoid a potential disaster.
Know What You’re Getting Into
When considering buying pre-construction, you need to think in slightly different terms to buying a resale home. Essentially, you’ll be investing in a property that hasn’t been built yet, in a neighbourhood that also isn’t completed. Depending which stage the project is at, it could be several years before you can move in.
While this does have its advantages, it also requires potential pre-construction buyers to think of such a purchase more as an investment than a typical resale purchase.
Is the Future Bright?
Most new builds are within entirely new neighbourhoods, so unlike resale homes, you’ll need to consider how the neighbourhood is going to change, rather than focus on the here and now. It’s well worth contacting the city hall to discuss future plans for the neighbourhood.
- What local amenities and facilities currently exist, and what’s planned for the future?
- How are the roads, and in what way will they develop? If the neighbourhood is due to expand, but the roads remain the same, there could be bad congestion and long travel times.
- Plans for public transport? Many new neighbourhoods are some distance away from the city centre and if you don’t have a car, you need to know what public transport options exist.
What About the Property?
You also need to focus on the property itself. It’s essential to find out exactly what is to be included to ensure it meets your needs.
- What size will the finished property be?
- What’s the price per square metre?
- What parking options are there?
- Can the floor plans be adjusted at this point?
- Are you able to see existing examples of the developers’ work, such as previous projects?
- What’s the time frame and payment schedule?
Now you know what you’re getting into, let’s take a look at why buying pre-construction is a worthwhile endeavour. Sure, there are extra things to think about, but this effort can pay off in many ways.
You’re in Control
The best thing about buying a property that hasn’t been built yet, is that you can have a large say in the design. With a keen eye for design, you can implement features that will add long term resale value to your property, such as hardwood floors.
Good Value for Money
It’s often cheaper to buy a pre-construction property, considering per square foot pricing. The same finished unit will typically cost much more, making resale or renting out a realistic option. Additionally, the earlier you get in on the project, the more attractive the discounts will be. You will also have more time to save up for your new home, as most developers will accept a series of smaller deposits over the course of a couple of years or so.
Modern and Fresh
Your new build will often feature the latest smart technology, energy efficient appliances and cutting edge style. Structural elements will typically be under warranty, so if there are problems with damp for example, you’ll be covered. As long as it’s been well constructed, your new home shouldn’t need any maintenance or redecorating for years to come.
Nothing is ever perfect and each coin has two sides. On the flip side of this particular one, there are a number of downsides to buying pre-construction. It’s well worth being aware of these before rushing in and laying your money down!
What You See Isn’t Always What You Get
While negotiating, you’ll be shown plans and digital mock-ups of what your new home will look like when it’s finally finished. What these typically neglect to show is the true nature of your surroundings. New neighbourhoods will often be construction sites for some years to come. That beautiful view you signed up for might one day be obscured by a new block. Additionally, the property itself might also not be finished exactly as it was designed.
Your Cash is Tied Up
Once you’ve bought a pre-construction property, your capital can be locked up for several years, until the units are built and sold. This non-liquid investment will freeze your capital — typically a larger down payment than a resale. A lot can happen over the course of two to four years, but no matter how much you need it, your cash is out of reach.
Bad weather, lack of trades people or a developer gone bust can throw a spanner in the works and severely delay the construction of your property. There are no guarantees, only estimates. In the case of a condo, if a developer cannot sell enough units, the entire project may be abandoned. This leaves you at the mercy of the elements and the developer, making it difficult to plan ahead.
The Ugly Truth…
Ugly might be a bit of a strong word, but there’s a theme going! The truth of the matter is, however, that several people have lost a lot of time and money due to not thoroughly researching the developer they choose to work with. A developer with financial issues should be avoided, because if they go bust halfway through building your home, there’s small chance it will ever get finished, and you might even lose your deposit.
Always take your time to research any developer you’re considering. Check for previous experience; look at the quality of prior work and model homes and get real life feedback from previous customers, and always ensure their finances are in order! Also, be sure to check out the neighbourhood; speak with the city planners and get a firm idea of where it will be in ten years. With planning and research, buying pre-construction can be a superb option!