Off-plan property represents one of the largest segments of the Turkish property market. Many people associate buying off-plan with the purchase of an apartment however it is also villas and townhouses that are sold in this way. It represents a great way for developers to raise income to build and for the purchaser it provides the opportunity to buy in at a lower cost than were the property to be sold on completion. There are many pros and some cons to buying off-plan, we take a look at how it really works and what the benefits really are...
How off-plan works
For developers, selling real estate off-plan limits their financial risk, minimise borrowing and enables them to receive a steady flow of revenue, which they use to complete their build project. Developers offer off-plan property before the build project is completed and as the name suggests, you are buying your property from a set of architect’s plans and not by seeing a completed dwelling. As an incentive, developers offer stage payment schemes and lower prices, which will increase once the project is finished. To encourage more sales, many developers offer further incentives like furniture packages, guaranteed rental income and help getting a mortgage. Off-plan payment schemes generally require an initial down-payment of around 10% of the property value, although this may be more if the development is already partially built. This down payment is followed by stage payments at regular intervals usually coinciding with a particular stage in the building’s development. Around 10 to 15% of the total cost is held back until the purchaser is happy that the property meets the requirements laid out in the original contract. Once this is paid the title deeds are handed over to the buyer.
Off-plan: the benefits
There are numerous benefits to buying off-plan property; the stage payment scheme alone means that you can save up for each stage without the pressure of having to raise a lump sum. Those buyers who can afford to pay cash up front should receive a discount for doing so. Another advantage of an off-plan dwelling is the fact that you will be its first owner; additionally you will be able to choose the colour and style of the interior from the list of builder’s samples, thus having more control over the overall look of your new Turkish dream home and if your deal includes a furniture package there will be a good degree of choice here too as well as saving you time and hassle searching for furniture and household appliances when your home is complete. More and more developers are tapping into Turkey’s growing rental and self catering market and many now offer generous rental schemes, whereby the developer sets a contract with a tour operator and guarantees to rent out your apartment for certain periods of the year. For those interested in a second income, these types of rental deals will save time and effort in the long run because you will not have to do the donkey work of finding a reliable rental agent or deal with amendments to tenancy agreements.
Off-plan also represents excellent choice because today’s off-plan properties are constructed to far higher specifications and additional luxurious facilities and amenities like gyms and saunas, as well as children’s play areas and pools. Another comforting factor when buying a good off-plan development is that you will have a contract with the construction company developing the property and a guarantee to complete the building within a specific timeframe to the original specifications. Once your home is complete you will have the opportunity to make a snagging list of faults and these will be ironed out by the developer before you move in. From an investment point of view, being the ‘early bird’ in a new development often means that the resale values on completion of the project have risen since your initial purchase was made leaving you with a little profit should you decide to sell.
Off- plan: the disadvantages
Buying off-plan property does come with a degree of risk, the greatest of which is whether the developer will complete the build. To protect your investment from issues of this nature you must ensure that the developer has relevant insurance, which will compensate you should he go bankrupt or fail to complete the development. You also need to ensure that the contract specifies a time frame for completion and pays out penalty payments should this not be accomplished. Many off-plan developments fail to complete within the specified timeframe. Check out the reputation of your developer and look around other properties that he has constructed and don’t forget to ask about the timeframes for completion. If a rental contract is part of the deal make sure you get to read the developer’s contract with the company responsible for filling your property! In more cases than not, everything goes smoothly, but beware that is you are buying in to a large scale development you may find yourself living on a building site whilst the developer completes other aspects of the complex or begins work on a “phase 2” adjoining project.
Off-plan investment strategies
If you are buying off-plan solely for investment, choose your location and development very carefully. The boom years for Turkish property have been swallowed up by the global recession and in areas where new development is high you may find that once your property is complete new off-plan projects are available with better facilities, deals and prices. If you find that you are unable to sell your off-plan property upon completion of the build, you may be able to approach the developer to buy it back from you, or you can choose to rent it out particularly if your developer has a good rental deal with a tour operator. Whatever your reasons for choosing off-plan property, it is a straightforward move onto the Turkish property ladder and providing you use a good lawyer to deal with the contract between you, and you are 100% sure that your builder has the right insurance in place should things go wrong, you should find that buying off-plan brings you many benefits.
