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 Condo 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, there are also obvious benefits. A buyer stands to acquire what may be an excellent property (or investment), usually at an initial offer price well below what the finished units will sell for. These “early bird” units often go quickly, so buyers are driven not only by the discounted price, but also by scarcity.
As long as you make the right choice of developer – one with a great track record and solid balance sheet – you are likely to be extremely happy with your investment.
How the Process Differs With Buying Off Plan
Normally, when buying within a completed project, potential buyers will view a number properties, weighing up everything from layout to décor to views.
Off-plan purchases are mainly about the location and the marketing material.
There is no tangible final product to touch and feel. All you get to view are nicely constructed models on a table top display, and other artist’s renderings of what the condo will one day look like.
You can examine floor plans to see where each unit will sit in relation to swimming pools, amenities, lift shafts etc. You can also tell which units have the mountain, pool or sea views.
You may not be able to physically touch the finished unit, but you can usually walk through a specially constructed showroom to view what the interior will be like once completed. Showrooms may be specially constructed on the future project site, but they may also be built at a sales office, many miles from the development’s location.
Wherever it is located, the showroom allows you to view fixtures and fittings, and to paint a good picture in your mind of how things are going to look, as well as the quality of the final product.
From the brochures, the showroom, floor plans, architectural models – as well as a visit to the actual location, to see the area, the views, etc. – you are able to make a fairly informed decision about your purchase.
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. You’re able to grab the “best seat”, so to speak, while the late-comers are often left standing.
It’s said the early bird gets the worm. Translated to off-plan condo investments, the “early bird” gets to pick from the very best units. The first units to sell are usually the highest floors and the sea views, followed closely by any units which look out on the swimming pool.
Early Birds are cagey speculators, and they know that it may be difficult to resell anything other than the very best units. They will be aware that other developments in Phuket may very well have “prime units” with better views available.
Scarcity and Limited Units
There have been an increasing number of “mega developments” on the island over the last few years. Whereas most new projects in the past only had 50 to 100 units for sale, some projects today have hundreds.
Nevertheless, in an active market, new units tend to sell very quickly, as these will always be in short supply.
Buyers who see the benefits of owning Phuket property will know that if they wait there may be nothing left to buy, or what there is will certainly be less attractive.
Probably the most compelling reason to go the “off-plan” route is the fact that buyers pay a lot less than those who arrive late to the party.
These initial discounts, in most cases, are just too attractive for some buyers to pass up. Occasionally, there are additional incentives offered to those buying off-plan, such as free furniture packages or free freehold upgrades.
For buyers viewing a condo as an investment, and who are interested in 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. Historically, prices see attractive growth during the 1 – 2 years a condominium is being built.
This pre-construction appreciation, combined with the discounted “early bird price” paid, makes off-plan units the preference for many property investors.
Why Discounts Are So Appealing
Properties in Phuket are occasionally sold at prices which are slightly higher than the resale value. This is usually done to account for sales and marketing fees a developer must pay, or to offset the guaranteed returns they are offering. And yes – they also do it to improve their own profitability.
It can require a few years of ownership for normal price inflation to overcome this initial overvaluation, meaning your initial investment may not be recouped as quickly when selling your property.
Off-plan discounts make it much more likely that you will see capital appreciation when selling, even if you don’t own the condo for very long.
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 off-plan buyers better terms on their guaranteed returns, especially if they pay for larger proportion of their investment upfront.
Occasionally you are 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
While there may be incentives to do so, if you buy off-plan, you don’t necessarily have to pay the full amount now.
The reservation deposit will be necessary to secure your unit, followed a month or two later by a larger payment, possibly as high as 40% of the purchase price.
But the remainder is usually staggered at each stage of the development cycle, with the final payment only due upon the registration and transfer of ownership of your unit. This could be 24 months after your reservation deposit.
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. These may may include changes to the fixtures and fittings, or the finishings such as the kitchen, bathroom and bedroom wardrobes.
There is typically a choice of furniture packages so that you have the luxury of selecting an interior that is more in line with your tastes.
You might even be able to change the layout somewhat by moving interior walls, or by knocking down walls and turning two adjoining units into one larger one.
Buying a property off-plan, even when there is nothing to see but 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. These lower entry costs often reward buyers when it comes time to sell.
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.
With the best legal advice and guidance, as an investor in a Phuket condominium, you can benefit greatly from discounts, the choice of prime units within the development, as well as being able to customise the unit to your own personal tastes and 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: