Investing in an architect's vision

Buying a property unseen can be profitable and time-saving, but you could be faced with a bill for unexpected extras
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The Independent Online

While most of us wouldn't dream of buying clothes or furniture unseen, we are apparently willing to buy our biggest asset, property, when it is little more than a twinkle in a developer's eye. Buying off plan is growing in popularity as both investors, who have traditionally bought this way, and more recently, owner-occupiers anticipate future gains when their properties are complete.

While most of us wouldn't dream of buying clothes or furniture unseen, we are apparently willing to buy our biggest asset, property, when it is little more than a twinkle in a developer's eye. Buying off plan is growing in popularity as both investors, who have traditionally bought this way, and more recently, owner-occupiers anticipate future gains when their properties are complete.

Tony Riddle was 'first on site' to buy at St James' Kew Riverside and placed a 5 per cent deposit on a four bedroomed detached house with a £1.2m price tag three weeks after seeing plans. "There wasn't much to see but I knew that being first would stand me well and I could get the pick of the bunch," he says.

Mr Riddle admits to not knowing what his future home would eventually look like but wasn't unduly concerned. "Location was the most important thing to me. I'd seen other St James developments and knew that the quality would be good." He found both his developer's 'blue-chip reputation' and the state of the market reassuring, although he cautions that buying off plan holds an inherent element of risk. "I'm a bit of a risk-taker but I think that interest rates have topped this year and the market still looks healthy. I don't know anyone who has lost money."

Mr Riddle placed his deposit in August with a completion date set for early summer, a timescale that has allowed him greater influence over finishing and design - he asked them to change the kitchen.

Fellow off plan buyer Paul Spurr has also enjoyed stamping his mark upon his intended home at Repton Park, a converted Victorian asylum in Chigwell, Essex, being developed by Crest Homes. He has been able to specify full data cabling and access to media throughout his two-bedroomed apartment and has chosen Corian work surfaces and a shower rather than a bath for one of the bathrooms: "You must be pragmatic. It's difficult for developers to bespoke 750 dwellings so there are limits as to how far you can go."

Mr Spurr admits his 'more exotic ideas' such as a glass or perspex spiral staircase up to the loft space were deemed impractical but Crest are now offering some of the products found through his research as upgrades. "Searching the internet for different products is a hobby and it is where I found the natural bamboo flooring for the bedrooms." Buying off plan also allowed him to choose the only apartment featuring a room in the Gothic building's eaves.

Selling off plan inevitably benefits developers too. Mark Breen, chairman of Artesian Property Partnership, says: "The decision to sell off plan is generally a question of timing in the market as well as the desire to achieve an element of certainty."

Artesian recently launched Harlequin Court, a development of 42 units starting at £350,000 for one-bedroom apartments and £440,000 for two bedrooms in Tavistock Street, Covent Garden: "We have a product for which there is good demand, limited competition and a relatively strong market. However given the size of the development, with sales in excess of £22m, it made sense for us to launch the scheme off plan providing us with an element of certainty that a number of units would sell before practical completion while the market is buoyant."

The key to buying off plan may lie both in the strength of the market and your strength of nerve. An architect recently told me of a development on which he was working where a particularly sanguine speculator reserved all flats on site with a deposit of just a few hundred pounds. On completion he sold them instantly, making a tidy profit with little outlay. Mr Breen admits that off plan buying favours investors, as individuals may find it difficult to tie up 10 per cent of their flat's value while completion may be 12 months away, although capital appreciation can compensate. "There is an opportunity to buy at a lower rate than on completion of the development," he adds.

Warren Black of agent Felicity J Lord sees a similar picture: "At least 70 per cent of purchasers buying off plan through our City and Docklands offices are investors," he says. "They have anything from £150,000 to £400,000 to spend on a property and generally look to turn it within 12 months of buying. In a growing market they tend to make a nice tidy profit on the 10 per cent deposit they put down. In the worst case scenario, if they can't turn the contract they rent out the property to cover mortgage costs."

Lane Fox's James Wilson agrees. "In London buying off plan for investment is particularly attractive in a strong rental market, like now, where demand is strong and rental growth is occurring; this underpins the risk," he says. The pattern is also changing: "Overseas investors have bought heavily off plan, initially in central London, but as sites become scarce, far further afield. UK buyers are now prepared to follow suit."

Some UK buyers are more reticent. Alan Pocock almost missed out on a Taylor Woodrow development after viewing it as a shell: "The windows were covered and you couldn't see the view. The sales people said if you want one get out your cheque book, but before I could decide they were all sold." Luckily, a show flat came up for sale and he is now the proud owner of a property on the development.

But this method does not suit everyone. Michael Rogers, who is buying a Redrow house, believes it is best left to investors. "I put down a £250 deposit in May when the property seemed competitively priced but now realise it's going to cost me around £5,000 more than I anticipated," he says.

Mr Rogers' bugbear is the cost he faces for 'extras' such as additional sockets and he believes the cost of items such as the fireplace and fridge freezer are unreasonable. For him the process has brought unpleasant surprises. "Perhaps it's my own naivety, this is a new thing for me, but I was not allowed to see the price list for fixtures and fittings until after I'd agreed to buy," he says..

Mr Rogers chose his new home after seeing plans and admits that watching it being built has been a good experience, particularly as it is his first marital home.

But buying off plan has left him in the dark about some crucial details. "Finding out exactly how big the garden is has been very difficult and took over a month and five follow-up calls," he says.

He was also unprepared for what he regards as 'inflexibility' over the buying process. "After I put down my deposit I had only four weeks to exchange and had to agree a completion date but the developer didn't. If I hadn't been able to exchange then they could have pulled out and I would have lost my deposit."

Mr Rogers is looking forward to moving into his new home in January but believes the off plan experience is not for ordinary buyers.

"I wouldn't knock Redrow's quality and workmanship and you do get your dream home but the price you initially pay isn't the price you end up paying," he adds.

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