Securing a luxury property in a prime location is considered the ultimate goal for every investor seeking a successful property investment. The prospects of strong rental yields partnered with consistent occupation can ensure a good return on investment.
But even within this win-win situation, there’s still even more lucrative opportunities to be found, most notably – securing the same asset at below market value.
So how is this possible? To secure an investment of this type, an increasingly growing number of domestic and foreign investors are looking to off-plan developments.
Off-plan refers to investing in a property either before or during the construction process, so essentially, before the development has been built.
In this article, we will address the key benefits of investing in off-plan developments and highlight why it has become such a popular asset class within the industry.
There are several reasons why more investors are gravitating towards off-plan developments, but the most significant driving force rests on the ability of securing properties at below mark value, usually at a 15-20% discount. Essentially, the earlier you buy, the cheaper it will be.
Investors can additionally expect to pay smaller deposits in some cases just 10% on average. This allows prospective buyers with smaller budgets to get their foot in the investment door at a more affordable price.
In addition to securing a unit at a discounted price, investing in a property which is still in the process of being built has potential to see strong capital growth over the construction time frame. Once the property is complete, there is typically a substantial uplift in its value, which effectively gives investors instant equity from their investment.
Let’s say you secured an off-plan property for £140,000, which before discount was valued at £160,000, and then over the course of completion the property uplifted to £190,000, you would make £50,000 in capital growth. This example demonstrates how this type of property investment can seriously improve an investor’s financial wealth and exemplifies why so many are increasingly turning to off-plan developments.
The chronic undersupply of new build homes in the UK is driving a surge in demand for luxury off-plan developments, especially in the North of England. Recent research indicates there have been more off-plan apartments sold in the North West and North East than any other region in the UK in the last year. As the government intends to meet the ever-increasing demand, it enables investors to cash in on the lucrative opportunities in the undersupplied market. Cities including Manchester, Liverpool, Sheffield, and Birmingham are swimming in university students and graduate talent – a demographic pool which is dominating the rental landscape.
It’s no surprise demand is soaring for new builds, as the appeal for modern and high- spec apartments compared to old, tired developments is especially desired among the young professional and student community. A notable benefit of new builds refers to their sustainable design, installed with the latest environmental standards, so issues such as dampness and unreliable boilers are not a concern, providing a low-maintenance property for both tenants and landlords.
Any asset class with growing demand presents lucrative opportunities for investors. For example, recent research shows 60% of letting agents saw landlords increase rent in response to the growing demand in the private rented sector. The uplift in rental prices provides confidence in the buy-to-let market and highlights the importance of the new build sector in fuelling the current property market boom.
As off-plan developments are not yet built, they offer the opportunity of personalisation, allowing investors the freedom to choose a specific unit depending on size, features, and location within the development.
Developers can also provide landlords with a furniture pack, whereby the property comes already furnished ready for tenants to move into, and in most cases, to a high-spec luxury finish. This is highly appealing among domestic and overseas investors looking for a hands-off way to manage their property. Alesco Investment Properties has partnered with David Phillips, the UK’s largest and most resourceful design-led furniture provider, fitting stylish apartments to the highest of standards – and what’s more, Alesco clients receive an exclusive 10% discount!
Off-plan developments are generally located in areas of low supply and high demand, giving investors access to the most desirable properties in areas experiencing exponential growth.
In Zoopla’s latest House Price Index, Manchester and Liverpool retained their spots at the top of the price chart at annual growth rates of 6.5% and 6.3%, closely followed by cities including Leeds and Nottingham. These areas are all part of the Northern Powerhouse initiative, a scheme to balance the historic domination of the Capital in fuelling the UK’s economy. As a result, there has been a significant amount of investment and regeneration in these areas, driving instrumental growth to local economies, business innovation, population, and employment levels, which in turn has seen unprecedented demand for high-quality housing across the rental market. Based on these factors, Alesco’s portfolio of developments are exclusively situated in the UK’s Northern Powerhouse.
Overall, investing in off-plan developments offers a number of benefits, and is especially attractive to investors looking to achieve the greatest returns from their property investment.
At Alesco, the bedrock of how we build our client’s portfolio is through off-plan developments based on the potential for gaining substantial equity from each investment. With over 20 years of experience in the property investment landscape, and a wide-ranging portfolio of developments in the most lucrative, and high growth areas, we offer our clients the best properties on the market. If you’d like to have a chat about our opportunities over a coffee, we’d love to welcome you to our London office. Contact us today on +44 (0)203 819 7366 to set up a meeting.
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