New projects in Phuket always offer the opportunity to purchase units before the actual construction has started. This is referred to as buying “off plan”.
Although the finished product may be a year or so in the future, the location, marketing material and attractive pricing of off plan units, often attracts many buyers.
This article focuses mainly on the benefits and advantages of buying off plan units, and the reasons why so many investors choose to go this route.
The Popularity of Off Plan Purchases in Phuket?
For those readers who are not familiar with construction terms, off plan simply means that the units are sold on a condominium project before the building has actually been started.
Buying off-plan is extremely common in Phuket and tends to become even more popular in buoyant markets. As many existing buyers or prospects will already know, some developments in prime locations may be sold out while the land is still only soil and weeds.
It is always worth mentioning that buying off plan is always going to carry more risk than completed projects. However, buyers can eliminate most of this risk if they follow the correct procedures.
You can read our article on the risks of buying off plan here:
Risks aside, the benefits should be obvious. The buyer is looking at a potentially great property, typically at a reduced initial offering price, and is motivated by scarcity and discount.
As long as buyers make the right choices with developers with great track records and solid balance sheets, they are likely to be extremely happy with their investments.
How the Process Differs With Buy Off Plan
Normally in the buying process of a completed project, potential buyers will view the properties. Instead, off plan is mainly about location and marketing material.
There is no tangible final product to touch and feel. Prospects receive only imagery and nicely constructed models that sit on a table top display.
They can examine floor plans to show where the units sit in relation to swimming pools, amenities, lift shafts etc. They can also tell whether the unit they may be interested in has a mountain, pool or sea view.
Although they cannot physically touch the final product they can, however, usually walk through a specially constructed showroom to view what the interior will be like once completed. This may be in a specially built building on the land, although in some cases it may even be many miles from the actual location of the project.
Here they can view fixtures and fittings and are able to paint a good picture in their minds of how things ae going to look, as well as the quality of the final product.
From the brochures, the showroom, floor plans, expertly models and a visit to the actual location to see views etc., the buyer is able to make a decision.
The Early Bird Catches The Worm – The Best Choice of Units
Being the first to the party means you are in a much better position to size things up. Being able to grab the “best seat” obviously has its advantages. Late comers are often left standing.
So unless the buyer was an “early bird” they may not get the prime choice of units. The first buyers always get the highest floors, the views of the sea and/or the rooms facing the swimming pool.
If our early bird speculator does not have a prime unit, they may find it hard to resell, especially with so many other developments available around the island, which may be offering better views.
Scarcity and Limited Units
There have been an increasingly larger amount of mega developments on the island over the last few years. Whereas most new projects in the past only had 50 or 100 units for sale, some projects todays have hundreds.
Nevertheless, in an active market, units tend to sell very quickly. As there will always be a limited number of units, and may buyers seeing the benefits of owning Phuket property,
If the buyer waits, there may be nothing left to buy, or what there is will certainly be less attractive.
Probably the most compelling reason why investors choose the “of plan” route is that fact they pay a lot less than those that arrive to the part later.
These initial discounts, in most cases, are just too attractive for some buyers to pass up on. In some cases there are also additional benefits to buying off plan, such as free furniture packages or free freehold upgrades.
For those buyers looking mainly at an investment and the potential for capital appreciation, off plan is a much more enticing option than buying older established units or completed projects.
Depending on the size of the project, the average completed development cycle is somewhere between 12 and 24 months.
This means that prices have the potential to rise even over the development cycle. This is in addition to the fact that early birders paid less than market price anyway.
Why Discounts Are So Appealing
In many cases, Phuket properties have been sold at slightly inflated prices, in an attempt by the developers to “build in” the sales and marketing fees, the guaranteed returns they offer and even so they can make additional profit.
With such initial overvaluation it can take a few years of ownership before price inflation can recoup the initial investment for someone selling their property.
However, buying off plan, is a sure way to buy at much more reasonable price levels.
In our opinion, as long as the necessary due diligence has been carried out on the land title of the development, the actual developer, the legal structure of the project, the requisite licenses, and the sales and purchase agreement, buying off plan is one of the best ways to purchase new build Phuket condominiums.
More Attractive Guaranteed Returns
Sometimes, developers will offer better terms on the guaranteed return to off plan buyers, especially if they pay for a larger proportion of their investment earlier.
Occasionally they will be able to earn an extra percentage point or two and maybe a year or two more on the guaranteed return time period.
You Can Buy Now But Pay Later
If you buy off plan, you don’t necessarily have to pay the full amount now.
You will have to pay the reservation deposit to secure your unit. This is followed a month or two later by a larger percentage, which might be as high as 40 % of the purchase price.
But the remainder is usually staggered at each stage of the development cycle. The final payment is usually due upon registration and transfer of ownership of your unit, which may be as far as 24 months away.
You Can Choose To Customise Your Unit
Many developers will allow you to make some changes to your unit when buying during the off plan stage. In some cases you may even be able to change the fixtures and fittings, choose the finishing such as the kitchen, bathroom and bedroom wardrobes.
Some even have a choice of furniture packages so that you have the luxury of selecting the interior that is more in line with your tastes.
You might even be able to move walls, change layout and even knock two adjoining units into one.
Buying a property off-plan, even when it is still a field of dirt, may be worth it to discerning buyers.
The most obvious attraction from this strategy is the extremely generous discounts given during the pre-construction stages. Buyers are often rewarded with these lower entry costs when it comes to reselling.
However, it must always be stressed that the necessary due diligence must be carried out on the project in question.
With the best legal advice and guidance, investors in Phuket condomonimums can benefit grealty from discounts, the choice of prime units on the development, as well as being able to customise their unit to their own personal specifications.
This is an excerpt from the Thai Residential Phuket Property Guide 2019/20. To download your free copy, please click here.
You can read some of our related Phuket condominium articles here: