What is ‘off the Plan’? Off the plan is when a builder/developer is developing a set of units/apartments and will look to pre-sell some or all of the apartments before construction has even began. This kind of Purchase is call purchasing off plan as the customer is basing the choice to purchase based on the plans and drawings.
The typical transaction is really a Deposit of 5-10% will be paid at the time of signing the agreement. Hardly any other payments are needed whatsoever until construction is finished upon in which the balance from the funds must complete the acquisition. The length of time from signing of the contract to completion can be any amount of time really but generally no more than two years.
What are the positives to purchasing Ki Residences Off the plan? Off the plan properties are marketed heavily to Singaporean expats and interstate buyers. The reason why many expats will purchase Off the plan is that it takes most of the stress out of choosing a property back in Singapore to purchase. Since the apartment is brand new there is absolutely no have to physically inspect the site and customarily the area is a good location close for all amenities. Other advantages of purchasing Off the plan include;
1) Leaseback: Some developers will offer you a rental guarantee for a couple of years post completion to supply the buyer with comfort around prices,
2) In a rising property market it is not uncommon for the price of the apartment to improve resulting in an outstanding return on your investment. In the event the deposit the customer put down was 10% as well as the apartment increased by 10% on the 2 year construction period – the customer has seen a 100% return on their money as there are not one other costs involved like interest payments etc inside the 2 year construction phase. It is far from uncommon for any buyer to on-sell the apartment prior to completion turning a quick profit,
3) Taxation benefits that go with purchasing Ki Residences Floor Plan. These are some good benefits and in a rising market purchasing Off the plan can be a great investment.
Exactly what are the negatives to purchasing a property Off the plan? The primary risk in purchasing Off the plan is obtaining finance for this purchase. No lender will issue an unconditional finance approval for the indefinite period of time. Yes, some lenders will approve finance for Off the plan purchases however they are usually subject to final valuation and verification from the applicants financial situation.
The maximum period of time a lender will hold open finance approval is half a year. Which means that it is far from possible to arrange finance prior to signing a legal contract with an Off the plan purchase as any approval could have long expired when settlement arrives. The chance here would be that the bank may decline the finance when settlement arrives for one of many following reasons:
1) Valuations have fallen so the property will be worth under the first purchase price,
2) Credit policy has changed causing the house or purchaser will no longer meeting bank lending criteria,
3) Interest rates or the Singaporean dollar has risen causing the borrower will no longer being able to pay for the repayments.
Not being able to finance the balance of the purchase price on settlement can resulted in borrower forfeiting their deposit AND potentially being sued for damages in case the developer sell the house for under the agreed purchase price.
Examples of the above risks materialising during 2010 throughout the GFC: Through the global financial crisis banks around Australia tightened their credit Lending Policy. There were many examples where applicants had purchased Off the plan with settlement imminent but no lender willing to finance the balance in the purchase price. Listed below are two examples:
1) Singaporean citizen residing in Indonesia purchased an Off the plan property in Singapore in 2008. Completion was due in September 2009. The apartment had been a studio apartment with the internal space of 30sqm. Lending policy in 2008 ahead of the GFC permitted lending on this type of unit to 80% LVR so only a 20% deposit plus costs was required. However, right after the GFC banking institutions started to tighten up their lending policy on these small units with lots of lenders refusing to lend whatsoever while others wanted a 50% deposit. This purchaser was without enough savings to pay for a 50% deposit so needed to forfeit his deposit.
2) Foreign citizen living in Australia had purchase Jadescape Off the plan in 2009. Settlement due April 2011. Purchase price was $408,000. Bank conducted a valuation as well as the valuation started in at $355,000, some $53,000 below the purchase price. Lender would only lend 80% of the valuation being 80% of $355,000 requiring the purchaser to place in a bigger deposit than he had otherwise budgeted for.
Do I Need To buy an Off the Plan Property? The author recommends that Singaporean citizens living overseas considering purchasing an Off the plan apartment should only do so when they are in a strong financial position. Ideally they would have a minimum of a 20% deposit plus costs. Before agreeing to buy an Off the plan unit you ought to contact whmrna specialised mortgage broker to confirm that they currently meet mortgage loan lending policy and should also consult their solicitor/conveyancer before fully committing.
Off the plan purchasers can be great investments with a lot of many investors doing very well out from the purchase of these properties. You can find however downsides and risks to buying Off the plan which have to be considered before committing to the acquisition.
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