Off-plan homes: The pros and cons

Buying a home “off plan” or directly from the developer has many benefits for first-time buyers and others without large sums of cash for transfer duties and various other transaction costs, but there are some challenges involved too.

Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s largest mortgage originator, says that one of the most appealing aspects of buying an off-plan or newly-built home is that tax is built into the sales price, in the form of VAT.

“For anyone buying a property priced at more than R750 000, this means a considerable saving when it comes to up-front expenses, because there is no transfer duty payable. And there may be savings even for those buying lower-priced homes, because developers will often cover bond registration costs and transfer legal fees as a purchase incentive.”

In short, he says, in new developments it is often the case that “the price you see is the price you pay”. 

Further benefits include moving into a brand new home and a planned community that most likely offers excellent security measures and communal amenities. “On top of that, off-plan buyers are often able to customise the layout and finishes of their new homes to suit their personal preferences.”

However, buying off plan does present some hurdles, including the fact that in most cases buyers have to base their decisions on two-dimensional visual materials such as building plans and architects’ drawings, as opposed to actually seeing the physical home that is on offer.”

In addition, says Rademeyer, off-plan buyers in any freehold development such as a cluster village or an estate must make sure that they sign two sales agreements – one for the purchase of the land, and a second for the purchase of the home that is to be built on that land, so that payments to the builder or developer can be linked to building progress and completion.

“Indeed, the building contract in any off-plan purchase should contain details of every item and specification agreed to with the builder or developer – including price, floor plan, wiring, plumbing, fixtures, fittings and even paint specifications, as well as a completion date.

“This is very important in order to avoid possible future disputes, and buyers should of course only purchase off-plan from a known developer with a track record of successful projects. Such developers usually have the backing of a large financial institution and are usually also associated with reputable bond originators such as BetterLife Home Loans.”

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