Is buying off-the-plans right for you?
With a boom in construction and ‘intensification’ of new housing, more and more Kiwis are grappling with the idea of investing in properties which are yet to be built.
The move towards multi-unit apartment and townhouse communities has become an undeniable trend that is re-shaping the residential landscape in New Zealand’s cities.
The evidence of new development is clear on our skylines. The latest Rider Levett Bucknall Crane Index (which tracks the number of tower cranes), points to a 6.8 percent lift in new residential building work for the year to September 2018.
The 56 long-term cranes working on residential construction projects make up nearly 40 percent of an all-time record national tally, far outnumbering those working in any sector of non-residential (commercial) property.
“Since 2014 we have seen a huge surge in the number of residential developments going to market across New Zealand,” says Trent Quinton, a leading off-plan salesperson with Bayleys.
“New Zealanders are more attracted to the apartment lifestyle. And, whether it’s for the price or the ease of living, we’ve seen that Kiwis across all demographics have become more comfortable investing in an ‘idea’, rather than an existing home.”
In April alone, 745 new townhouse, apartment and attached units were awarded building consent, according to Statistics New Zealand – a significant number which demonstrates the national appetite for these types of homes.
“New Zealand is still critically undersupplied in terms of residential housing,” says Quinton. “New projects offer options – those who can’t purchase a standalone home in their favoured neighbourhood now look to new apartments for a foot in the door.”
Baby boomers are very active buyers, he says. “Downsizing, they want style and ease, but still a home, not a shoe-box. Developers have had to evolve, creating bigger floorplans in boutique complexes with high-end features.
“Buyers look to new developments for the latest building standards, new appliances – green initiatives too. For the cost of upgrading an existing home, they can purchase new, ensuring every feature on their wish-list is already included.”
Despite seeing the rise of multi-dwelling projects as an efficient solution to New Zealand’s call for residential housing, Quinton says some Kiwis still find the process of purchasing sight-unseen intimidating – with concerns concentrated around potential development delays.
“In residential developments, there are lots of moving parts. With the upswing in construction across the country, there has been a strain on the labour available, but also the credit accessible to fund these projects.”
Because of these pressures, it’s vital that buyers thoroughly research the developer, paying special attention to previous projects and their reputation within the industry, says Quinton.
“Adequate research is imperative when it comes to buying with confidence, and solicitors need to review contracts. There are a number of items in a development contract that you will not find in a standard sale-and-purchase agreement.
“These might include clauses relating to additional costs, liabilities and provisions. Your legal representative may look to insert penalty clauses to provide some security in the event of a delay.
“Other key areas that buyers should concentrate on are the specifications and floorplans. Buying a concept means that you have the flexibility to change certain aspects. Is there enough storage? Are the finishes what you imagined? Don’t be afraid to discuss moving a power outlet, or light fittings if necessary.”
As an investor himself, Quinton explains that the mark of a great project is the calibre of its buyers.
“I have purchased in several developments marketed by Bayleys, and I begin by researching the neighbourhood. School zones, transport links, and local infrastructure are key fundamentals for any buyer to investigate.”
While thorough research remains Quinton’s number one rule for buyers of off-plan properties, he stresses the equal importance of choosing a project that suits your lifestyle.
“It can take two, three or four years for a development to move from concept to completion,” he says.
“Some appreciate this as additional time to gather funds (usually a 10 percent deposit is required upfront, with the balance payable upon completion). Whatever the motivation, it is critical that the development period works with your wants and needs.”