The concept of buying off plan is to buy property before it is built, which is nothing new - many investors have done it and do it frequently. However, this trend is on the increase as more clients are beginning to realise the benefits of buying overseas property off plan.
Buying off plan means reserving a plot or a specific property abroad at the initial stage when the plans are approved and it does not mean buying a re-sale or just newly built property. At each stage of the process significant investments are required from the developer. A small percentage of the off plan properties for sale is offered at a discounted price to the investors in order to secure the bank guarantees or gain the market confidence in the project. Investing in property abroad, especially in up and coming areas such as Cape Verde, is becoming increasingly popular as they offer larger financial rewards.
Overseas property off plan investment
Smart investors are getting to know about the new developments launched at the very early stage and pick and choose the best possible prices and properties. As a general rule the prices are going up during the period of construction by at least 10% when the construction commences, foundations are laid, when the rough works are finished and when the complex is completed.
As many off-plan developments last for a period of 12-24 months, the investor with a little financial outlay secures the price and in most cases enjoys a healthy capital growth if he/she chooses the right development.
Required capital to buy off-plan property abroad
A reservation fee is normally required when you buy a property off-plan; it varies from country to country and could be in the region of €1,000 to €6,000 (£700-£4,000). It is deducted from the next instalment to the developer or even, in some cases, fully refundable up to fourteen days after the developer receives the buyer reservation and is offset against the first stage payment, which is normally in 3-4 weeks after the reservation and in the region of 10-30%. Here is an overview of the typical payment stages (in Cape Verde): Once the buyer reserves a property and plot number, the developer will send out the promissory contract which will detail the buying process and the five stage payments.
:: Payment one – 30% on signing the promissory contract – 28 days from receiving the reservation fee.
:: Payment two – 20% on completion of infrastructure.
:: Payment three – 20% on completion of foundations.
:: Payment four – 20% on completion of walls and roof.
:: Payment five – 10% on completion.
In some instances the final payments are not required, if the investor decides to sell the property before completion. Some developers even offer to organise several kitchen and furniture packages during the buying process.
Overseas property investment - what to look for
Buying a property abroad off-plan does not necessary guarantee a good capital growth, as a lot of overseas property buyers/investors found out the hard way, for example, in Costa del Sol. Things to bear in mind are: a) the maturity of the market in the specific area you are looking to invest, b) the prices (how does the development compares with the local market prices) and c) the quality of the development and of course the location and size of a specific project.
Buying off-plan takes courage, but is financially rewarding. Prospective purchasers should bear in mind that property with a good investment potential sells extremely quickly (like in the emerging market of Cape Verde) Reserving the plot before you travel could be the best way to buy homes abroad. We as your International overseas property agents will point you in the right direction and assist you to choose an investment project that would provide the best returns. We work hard to only handpick the developments offering high returns and best possible security.
