Property Developments - Buying Property Off-Plan in South Africa

Buying off-plan property has become a popular choice in South Africa. Property developers are keen to maximize on off-plan sales as an aid to financing a project. Buyers choose their properties from plans, elevations and computer graphics, and need to exercise their imaginations to envisage the end product.


There is however, also a small element of risk attached to buying off-plan, therefore developers offer the property at low prices. As construction nears completion, the risk diminishes and the price starts to rise. In addition, buyers can more easily see what the finished product will look like and are eager to snap up properties. Property investors should act with extreme caution however, and take steps to ensure that an off-plan option is the right one for their purposes. Amongst other factors, it needs to be in a good location and the developer must have a good track record.


Off-Plan investment property in South Africa in some areas such the Western Cape, Cape Town, Eastern Cape Towns on the Garden Route and in the areas around Durban in Kwa-Zulu Natal have brought excellent profits for investors in recent times.


When buying a property in South Africa off plan you need to do your homework and you need to be aware of potential pitfalls. There are many stories of buyers who bought property off plan only to discover a variety of defects on the property once they had taken occupancy of the property.


Because most property you buy off plan in South Africa will have appreciated in value by the time you take transfer, buying off plan remains an attractive option. Buying property off plan also saves the buyer on transfer duty and buyers are also given the freedom to choose their own fittings.


You can reduce your risk through buying the property from an established developer with a good reputation. Ask your estate agent about other developments completed by the same property developer and take the time to check them out. Do some online searches to see if the developers name is connected with projects that have gone sour in the past. Despite these precautionary steps you may still have some problems with the property but a reliable developer will be more likely to fix any problems the property may have.


In most cases when you buy a property off plan you will be shown an “artist’s impression” of what the property may look like. Always take into consideration that this is not a guarantee of what the property will look like, but is a visual possibility drawn up in the initial stages of conceptualization and the reality may well be different. If one of the major reasons for your interest in the property is the view, be aware of any buildings no included in the “artist’s impression” that may obstruct the view of the property.


A reliable property developer will ask the buyer to draw up a list of defects on the property to be submitted within a certain time frame so that these may be attended to by the developer before occupation.


Some things to look for when drawing up a list of defects include:


·         Straightness of the walls

·         Taps, shower, bath and plumbing are in working order;

·         Cupboards correctly installed;

·         Hairline cracks in tiles and tiles neatly laid;

·         Stove in working order;

·         Silicon sealing in bathrooms and kitchen;

·         Plugs in working order;

·         Scratches, cracks or marks.


Benefits of buying off-plan in South Africa


The first buyer of a ‘new’ property is exempt from paying Transfer Duty which can offer savings on a property. Profits from off-plan properties can be free of capital gains tax if the property is sold before completion. Often the developer will pay the legal costs generated by a property purchase, such as the fees incurred through the registration of the title deed and the costs involved in raising a bond or mortgage. Only a relatively small amount of money is needed up-front, usually about 10% of the purchase price.


How can property be cheaper if bought off-plan – How does it work?


Besides the extremely attractive off-plan price, some great advantageous finance arrangements are in place. Initially there is only a 10% deposit and the rest of the payment is only due on completion. Furthermore it is possible to finance this through a mortgage.


Maximizing profit from off-plan investment in South Africa


Purchasing early


In order to maximize on profits through off-plan purchase it is essential to purchase early. The South African property market, as in many others, is experiencing a steady growth and prices never stay at the initial offer level for long.


Purchasing the best units


The first investors in a development have the opportunity to select the best properties and choice units. They will receive the highest capital appreciation in the shortest time. In addition, the best units command a higher rental income.


Price increases as development matures


Once there is physical evidence of construction on the site, the price of the units begin to increase. Often developers will complete a show home at this point, which potential purchasers can view, therefore minimizing their risk. The price of units then increases as buyers are no longer purchasing solely from plans.


Buying your dream home off plan – make sure you get what you are paying for


Buying “off-plan” means you are purchasing your new home in a sectional title complex or cluster home scheme before it is built and will be depending on the developer and builder to complete your home properly and timeously.


Your protection under new housing laws


A few years ago the Housing Consumers Protection Measures Act was introduced. Under this law the National Home Builders Registration Council was established to protect your interests. The NHBRC has wide powers over all builders who now have to be registered with the Council before they can commence any building operations.


A Certificate of Enrolment has to be obtained prior to foundations being laid and to obtain this each builder has to furnish approved plans of the new building as well as a specification schedule of the actual work to be done and the materials the contractor intends using. A copy of this certificate has to be supplied to you before work begins. Your builder also has to give you a copy of his building contract which has to comply with the provisions of the Act together with a copy of the approved plans.


If the work is not completed in good time or is defective, you have recourse against the builder but have to take action within three months of taking occupation of the premises. Only in cases of serious structural defects will you be entitled to claim within a period of five years. If your builder defaults completely you can report him to the Council which may act to remove his certificate if the problem is serious and he has made no attempt to rectify it.


If you are prejudiced in any way by a defaulting builder, contact the NHBRC immediately. The Council can also give you a list of all registered builders in your area.






Courtesy: Agent – The Official Publication of the Estate Agency Affairs Board


“Redressing the Past, Building the Future and Guiding the Real Estate Business towards Professionalism”


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