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Buying off plan investment property has been one of the basic acquisition methods for property investors in recent years, but in current market conditions is it still a viable risk?

Off plan investing has worked well in a rising market, where discounted pricing strategies from developers and property clubs (read gifted equity) carried an assurance of realistic growth within a reasonable time frame. However, in a declining market the time required for prices to reach previously promised levels has stretched considerably, and some of the stated price performances may not be achieved at all where supply has outstripped all reasonable demand in city centre locations.

With an over supply of rental properties in some city locations, where there can be a damaging shortage of owner / occupiers to create community values, there is yet more stress for the investor who has bought off plan in good faith – only to find that dozens of similar units have come onto the rental market at the same time, depressing monthly incomes and cash flow.

So what advice can be offered for those still willing to take the buying off plan route into property investing?

• Stay local – only buy in areas that you know well, and where you understand that the key rental drivers are likely to be in place (availability of employment, good transport links, a range of amenities etc).

• Be sure that any offered discount is verified by independent valuation (ideally from a RICS Surveyor).

• Only buy off plan in smaller developments – we have tended to chose developments of small apartment blocks (ideally less than 14 units per build) and small terraces / semi detached housing stock. This avoids the mass competition for tenants on completion, and therefore depressed rental values.

• Chose areas where there are multiple demands for rented accommodation (close to a University campus, teaching hospitals, migrant workforces, as well as normal local demand).

With the right due diligence, and in the right location, buying off plan investment property can still be a winner – even for the inexperienced investor. But it should still be balanced in a portfolio with other property types including pre-owned units to mitigate the inherent risks.

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