Investing in property developments for the first time? Don't fret; here's everything you need to know about purchasing your first-ever property development and making it a success.
What are property developments?
The process in which land or any kind of building is developed to raise the market value of that project is known as property development or real estate development. This process consists of building a property from ground zero, renovating a property, or even using a property and changing it into the developer's desired outcome, such as a house, mall, or even a hospital.
What are the different real-estate property development types?
- Apartment buildings
- Townhouses
- Single-family residences
What do you need to know when buying a development for the first time
- Buying a property off-plan means that you don’t have to pay a transfer duty. This is because a Transfer Duty only applies when a property changes ownership, which is not the case when buying a newly developed home. In SA, any existing property require a Transfer Duty to be paid. Therefore, if you buy a new property development, you save significantly, as there is not Transfer Duty, especially if it is a multi-million-rand property.
- If you want to make any structural changes to your property, they can only be done with approval from the developers and will likely result in additional admin costs, since the property plans will have to be redrawn to include your changes.
- Generally, you will have a choice between a handful of design and fixture options for your property. However, sometimes the 1 option might come as a standard and the other options will come at an additional cost. If you don’t like any of the features on offer by the developers, you may usually propose an option you are comfortable with, but this will come at your own cost if it gets approved.
- When buying a property off-plan, the developer will provide you with draft plans of what the property will possibly look like. As the draft plans are not final, there may be a need for the builders & developers to deviate from the draft plans, but they will always need to seek the purchaser’s approval should the deviations have an impact on them.
- Before just making changes to your development property, you need to understand that these off-plan properties are most often built in estates managed by homeowners’ associations with strict by-laws controlling the appearance of all the homes within the estate/community.
- The deposit payable depends completely on the developer but it is usually between 5 - 20% of the purchase price of the property.
- You should gather all the information on how long the development will take to be completed and how everything will be managed by the developer.
- You must ensure that you sign off on the floor plan and finishes schedule and that your future levies have been communicated with you.
The Pros and Cons of buying a Development Property
Pros
- Low maintenance
- Structural warranty
- Cost savings
- Customisation opportunities
- New, modern living space
Cons
- Time can become an issue if there are delays in the development. These can naturally occur without any fault of any party.
- Finishes may be different to the proposed development plans.
- Changes of levy increases if the remaining properties in the development don’t sell or don’t sell fast enough.
Buying off-plan vs buying an established home
Buying off-plan means purchasing something that hasn’t been constructed. The developer will provide you with a building plan only. The financing of construction will be your responsibility, and that can take some time.
On the other hand, an established home is a convenient and popular option amongst buyers, there’s no wait, and you can move in as soon as possible without worrying about buying off-plan.
Investors usually go for buying off-plans, while common people prefer established homes. Even investors buy full-fledged-ready properties where there’s a potential for cost appreciation.
How to buy property off-plan?
- Research the property developer
- Look at show homes and development plans
- Research the location
- Assess the property market
- Find out what all the costs involved are
- Get finance approval
Tips & guidelines to property financing
- Determine what you can afford before making any decisions or commitments. There will be a minimum qualifying salary amount, but that doesn’t mean that you’ll automatically be eligible for a home loan.
- Get a clear idea of what financing type is available to you for the property purchase. A good starting point would be to get pre-qualified. This will provide you with an idea of what you can afford.
- Assess your credit score. The bank will use your credit score to decide how much of a risk you potentially are and this will determine your chances of your home loan being approved. Your credit score will be a 3-digit number that can range from 300 to 850. A good credit score is anything above 600.
- When signing an offer to purchase, you need to remember that it is a binding agreement and you’ll be unable to withdraw from this agreement without incurring significant penalties.
In order to apply for a FLISP subsidy, you must meet the following requirements:
- Earn either a single or joint gross monthly household income of between R3 501 to R22 000
- Be a first time home buyer
- Be over the age of 18 years
- Have financial dependents
- Have never benefited from any Government Housing Subsidy Scheme before
- Have an AIP (Approval in Principle) for a home loan from an accredited South African financial institution
- Property developers generally have their development projects pre-evaluated by all major lending institutions. This makes it easier for the buyer to obtain a home loan, as there is no need for an individual property valuation.
- Your deposit depends entirely on the developer but it’s usually between 5% and 20% of the purchase price.
What you'll typically find in a new property development from UG Homes
- Appealing aesthetics
- Own private yard
- Fully tiled home
- Private schools available in some developments
- Full or sectional title deeds
- Fibre lines
- Modern home with modern fittings
- Solar Geyser
- Separate bedrooms and bathrooms
How do you do your research on the property developer before purchasing?
- Start by looking at the developer’s website and find all the relevant information about the business.
- Then continue the research on other online platforms where users can publish reviews of the business and the experiences they’ve had with them.
- Ask the property developer for more information about their company, past projects, upcoming projects, etc.
- Visit other completed developments the company has done and inspect the quality and experience of those developments.
- When visiting completed developments, see if you can speak to the existing owners on their experience in dealing with the property developers.
- Visit and assess the show house(s) they have available, if any.
Conclusion
We have been in this sector for the past 50 years and have a long line of successful property developments and housing plans under our belt. If you are looking to purchase your next home or want to invest in a reliable property development, get in touch with us, and our support team will answer your every query.