What is Off-plan Property Investment?

user — Thu, 28 Mar 2019 10:20:35 +0000

xOff-plan investment is an exciting and flexible option for private investors that is gaining in respectability worldwide. Both the UAE and the UK offer established sectors where private investors can gain excellent, long-term returns (in exchange for some risk, of course). And, in South Asia (particularly Vietnam), there are emerging markets that offer great opportunities to get in at the bottom right now in 2019.

What is off-plan investment?

Investing off-plan means buying a property before it is actually built – and, when it is built – rather than living in it, the investor will either sell, or hold the property and rent it out. Many off-plan formats exist. But always the priority is to clarify with an independent, qualified professional exactly what risks are involved, even if you are dealing with a respectable developer. In the off-plan investment sector, an IFA by your side works wonders!

What’s a key advantage of off-plan investment?

As the buyer, you choose how much you want to get involved in your investment. Suppose you were planning to buy off-plan with the purpose of eventually renting the property – companies exist which will take care of all management areas of the project, including furnishing the property and organising its letting to tenants. Buying off-plan from an established agency means you can take advantage of their bulk buying, with “property deals being heavily discounted and high yielding.” (sequre.co.uk) You can even get access to discounted solicitor services thanks to agencies pre-negotiating bulk discounts. Be sure to keep your IFA in the loop, whoever you choose to employ: your IFA has your financial interests at heart, unlike other appointed professionals necessarily!

Will I need a deposit to kick off my off-plan investment?

It depends, but certainly one of the big advantages offered by off-plan investment is the down-payment system. You can often pay by payment plan. This means you can pay in regular instalments – rather than have to cough up in one go the 25% deposit, for example, that applies in the UAE to all residential property purchases.

Can I get a mortgage for my off-plan investment?

Yes, you can. In the UAE, for example, Rakbank, Noor Bank and UAB are providers. Lenders view off-plan mortgages as more risky than bricks and mortar mortgages. And this can be reflected in the rate of interest you are charged. But it all depends on which developer is involved and what stage the project is at (the closer to completion, the less expensive the mortgage).

What sort of prices am I looking at for off-plan property?

As with all investments, the amount of risk determines the purchase price. More risk for the buyer = lower price. Off-plan property is cheaper than built property because it is an inherently riskier purchase. As thenational.ae points out, “there is a chance your property may not be built, may be built late or not to the specifications you expect.” On the basis that they have demonstrated success in the past, developers with a good reputation often charge higher prices than less well-known developers.

Can I sell my investment in off-plan property?

Not until it has actually been built. Unless you manage to broker a deal with somebody you know. There is not an established market in off-plan investments for buyers to sell to other buyers; it is an “illiquid asset” ie. not sellable.

Is buying off-plan better than buying bricks and mortar?

The great advantage of buying actual properties as an investment is in the area of “opportunity cost”. For bricks and mortar purchases, there is no problem with opportunity cost. The opportunity cost of an investment is how much your money would have been earning if it had been invested elsewhere. A rule of thumb is say the opportunity cost is 5% per annum – because you might well get this by simply putting your money in a high interest savings account, or ISA. The problem with off-plan investment is that, until your property is actually built, your money is not gaining any interest at all. It is not as if developers pay you interest on your downpayments. With bricks and mortar, of course, you can immediately start making money on your investment – by either renting it or selling it. With off-plan investment, your money can’t be touched for years. The good news about opportunity cost is that you can factor it into your investment equation – just as you would with any other cost. Just make sure your return on the investment is large enough to absorb the opportunity cost. Keep your eyes peeled, and get your IFA on the case too!

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Investors: Safe Havens for 2019?

user — Tue, 22 Jan 2019 00:38:53 +0000

As 2019 opens, expats and UK investors alike are looking for safe havens for their money. (And by that we mean legitimate asset classes – not dodgy shell companies!) Safe investment havens never go out of fashion. But some experts say 2019 will have us looking harder than usual at the less risky end of the investment spectrum. Brexit uncertainty has led to investors fleeing UK funds to the tune of £2bn since the Brexit vote in June 2016. And expats will not have failed to notice the dive that global stocks took in December 2018. Is a stock market crash on the cards for 2019? And, if so, where can you find a safe haven for your savings? Don’t forget: a diversified portfolio is a tried-and-tested way of futureproofing your investments. This means not putting all your eggs in one basket. You invest across different sectors so that you always make some gains – for, even in a crash, some sectors do well.

2019: Stock market crash?

Let’s keep this in perspective. Only 18% of money managers surveyed by Bank of America Merrill Lynch believe that stocks have peaked.” Reports time.com. But the Global Chief Investment Officer of Guggenheim Partners thinks we will see a 40% drop in stock market value in 2019. Economist Ted Bauman thinks that a 70% fall is more likely. And the CIA’s Financial Threat Advisor Jim Rickards thinks that a 70% fall is the best case scenario! There’s one big reason behind most of the Bear predictions for 2019. And that is that, since the Global Financial Crisis of 2009, we’ve enjoyed “the longest period of economic expansion on record, surpassing the 1991 to 2001 internet boom.” (fxempire.com). The good news has got to end eventually, and probably sooner rather than later. That’s the thinking. What’s also worrying for some pundits is that 2018 was the most volatile year in global markets since 2009. Volatility – meaning that prices move around a lot – is often associated with stock market crises. Experts also say that the S&P 500 (the main US stock exchange) is over-valued, and that 8 interest rate hikes in the US since 2015 could lead to dangerous inflation.

2019: Investor safe havens?

Gold and cash have always been considered two of the safest havens for investors. But there are always currencies and bonds to consider, too. Gold: Over 2018, investors poured $1.7bn into UK gold-based funds. The price of gold as Pound Sterling increased by 3.8%. Since 2015, the global price of gold has risen by 37%. One of the key advantages of gold as a safe haven is accessibility. It is now easy to gain exposure to the price of gold. If you have an IFA, ask them what route into the market would best suit your personal situation. Anyone can go online and buy into a gold Exchange-traded fund (ETF). ETF shares can be traded like normal shares but, unlike normal shares, their value is linked to the price of a particular market. This means you can gain exposure to a commodity (ie. gold) without actually having to buy any of it physically and store it. Unit trusts also offer this “virtual” exposure to gold, often through shares in gold mining companies. Like ETFs, unit trusts mean you can get some of your wealth into gold without the hassle of physical purchase and management. But if you do fancy making a physical investment in gold, the good news is that the internet provides plenty of ways of doing it. You can simply buy gold coins and bars to have at home; in the UK, a reputable seller is of course The Royal Mint. Or, with an outfit like Bullionvault, you can pay for your physical gold to be stored for you. The price of a kilo of gold is currently $41k (£32k). Cash: The advantage with cash as a safe haven is that it is not volatile. The problem with cash, though, is inflation. If the rate of inflation is more than the savings rate you can get on your cash, having wealth as cash means you are losing over the long-run. Even if you are making some interest, nationwide inflation means the cash is effectively worth less as time goes on – which is currently the case in the UK, for example: “Inflation may have dropped to its lowest point for two years this month to 2.1pc, but the average savings rate still languishes at around 0.6pc.” (The Telegraph) Currencies: If you had been holding Swiss francs during the Global Financial Crisis, for example, you would have done well. Holding stable currencies – such as the US dollar and the Japanese Yen – can insulate investors from market crashes. But right now in the UK, for example, Brexit uncertainty makes currencies less safe as a haven. That’s because if (against the odds) Brexit goes well, the pound will rally, and any investment in another currency will be effectively worth less. Bonds: Government bonds are considered to be safe investments because the yield from them is fixed – as well as guaranteed by a sovereign body. Unless the government falls, your money – so the thinking goes – should be OK. One form of bond that is well-regarded as a haven in the event of a market crash is the index-linked bond. This rises in value as well as yield as inflation rises. And inflation is often central to market crashes.

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