Property Buying Off-Plan: The homes aren't built but first-timers can live the dream

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The Independent Online

So would you buy a new home on the strength of the architect's drawings, before the property is even built? It might sound risky but "off-plan" purchases have become a serious option for struggling first-time buyers.

"Buying any property is a bit of a gamble, but it's worth looking at off-plan as part of the mix of places you view," says David Hollingworth from broker London & Country.

Many people who might normally seek to make their move more affordable by going after houses "in need of modernisation" are now considering new-build homes instead. Not only will they get a brand-new property that needs minimal work and maintenance - saving money at the outset - but they will eliminate the risk of being gazumped.

Buying off-plan can also bring with it some hefty discounts. "Builders can be very generous if you commit, say, two years before the development is due to be completed," says Nick Gardner from broker Chase de Vere Mortgage Management.

The good news for first-time buyers is that developers are now offering a range of incentives, such as paying part of the deposit, or adding extras like carpets and kitchen appliances.

Rob Clifford, from broker Mortgageforce, says: "As soon as you say you want a property, you usually have to pay a reservation fee of £500 to £1,000. But you may be able to get fittings exactly where you want, and negotiate extras such as tiled floors."

While it may sound appealing, buying off-plan is not all plain sailing. For a start, warns Mr Gardner, a brand-new home comes with a premium - of around 15 per cent compared with the rest of the market - and this drops away quickly. "As soon as someone lives in a new-build, that premium disappears. It's just like buying a new car."

Another potential drawback is that there may be no fixed date for completion. "A six-month build schedule can become 18 months - with no late-delivery compensation," warns Mr Clifford. "This can cause problems, as most mortgage deals have a shelf life of just six months."

If the home loan you have arranged does expire before you can complete, go back to your lender. "Most are understanding and may be able to extend the offer," says Mr Hollingworth. "Alternatively, you may be offered a new deal, though you might not get such a good rate."

Exchange of contracts - at which point you usually pay a deposit of 10 per cent - happens very early in the off-plan process. It's important to note that this is binding, even though you could find yourself waiting two years for the building to be finished. On the plus side, however, you may find that the property has increased in value by the time you come to complete.

If you do opt for an off-plan purchase, buy from a builder with a National House-Building Council (NHBC) or similar guarantee - offering peace of mind for 10 years.

David Arbery, 26, is just weeks away from moving into his first home: a two-bed flat in Bristol, bought off-plan. "I'd looked around a few properties but didn't find anything suitable," he says. "I then looked at the plan for a new-build flat and decided this was far more convenient."

He secured the flat with a deposit in January, and received a mortgage offer in February via London & Country. "I was able to specify certain aspects, such as the kitchen, and got a 4 per cent discount on the asking price. There is also a 10-year guarantee."

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