What to look out for when buying a new home ‘off-plan’

As a renter in my early 30s, I check online property listings almost daily. Though I check what’s for sale with avid interest, I know I will only be able to afford a new-build – and that’s if I can find one in the first place. And after that it will need to be priced below the €500,000 threshold necessary to avail of the State’s Help-to-Buy scheme.

It’s a bit pathetic that after saving a large chunk of our salaries for the past five years, my partner and I can’t afford anything else. But it’s a situation many of our peers find themselves in. We know buying a house in Dublin is out of our reach, despite both of us having secure jobs. We moved to a rental house in Waterford last year and that’s where I’ve been focusing my search.

There are eight new-build housing estates being developed within our search area at the moment, mostly in the seaside town of Tramore, as well as some in Waterford city. We are almost in the position where we have enough saved for a deposit, so we have been poring over listings, but keep coming up against the same thing: there are no open showhouses available to view.

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While there are some lovely estates that are already in their third phase of development, I’ve been surprised to learn that they have all been sold off-plan.

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As a prospective first-time buyer who graduated from school during the last recession, I remember only too well the ghost estates and half-finished schemes that many people had to live in when the housing bubble burst. Based on that memory, my partner and I do not want to buy unless we see a house first. It might be only a small reassurance, but it is something that we are determined to stick to.

If they have any other ongoing developments, you can ask the agent if there is a showhouse available to see there, and that will give you an idea of the quality of a developer’s work

—  Colm Byrne, Sherry FitzGerald

A recent case in Meath where the developer asked buyers for an extra €60,000 to finish houses has also made us wary. The flipside of this is that I’m scared the houses we could potentially afford could all be sold before we get a chance to view a showhouse. Am I starting to panic? I’d be lying if I said no.

This fear, coupled with the seemingly never-ending increases in mortgage interest rates, could easily make a person rush into a decision that might not necessarily be the right one.

So while I don’t see us buying off-plan any time soon, for those who do, estate agents have offered advice on how to minimise the potential risks involved.

“Research the developer and look into their track record of previous developments,” says Colm Byrne, director at Sherry FitzGerald New Homes. “Most developers nowadays have their own websites so you can see what they have done in the past.

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“If they have any other ongoing developments, you can ask the agent if there is a showhouse available to see there, and that will give you an idea of the quality of a developer’s work.”

Byrne says if it’s a bigger or more established developer, such as Cairn, Glenveagh or Ballymore, they will have older developments so you can see how their schemes are presented upon completion, and, in the case of older developments, how they have matured.

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The reason selling off-plan is becoming more commonplace is two-fold, says Gemma Lanigan, partner at DNG’s new-homes division.

While in an “ideal world” agents would always have showhouses available for viewing, she says, this isn’t possible, because many developments these days have multiple types of units, making it impractical.

In addition, most housebuilders want to have people signed up to the initial phase of a new-homes scheme before building further. “They will want people ready to go into the houses once they are complete,” she says.

Marketing

Savill’s Beverly Ensor says “good marketing collateral is essential” for people to buy off-plan, and is something housebuilders are increasingly deciding to utilise. This includes interior and exterior computer-generated images (CGI), site plans and/or a virtual walk-through.

People are more comfortable to buy off-plan because CGI has improved so much in recent years

—  Beverly Ensor, Savill

It is the selling agent’s job to make it as easy as possible for people to visualise what their house will look like if there is no showhouse available to view, Lanigan says. The potential buyers should be able to see floor plans, site plans, layout and detailed specifications as well as samples of the materials that will be used throughout the homes.

“Samples are important. Kitchen counters, wardrobe doors, bathroom tiles... We have gotten many samples over the years from builders to help buyers visualise what their new homes could be like,” she says.

“People are more comfortable to buy off-plan because CGI has improved so much in recent years,” according to Ensor.

However, she says, comfort with the use of CGI is “demographic dependent”, meaning older buyers usually prefer to see a showhouse, while younger buyers, who are usually more at ease with technology, are happy to buy off-plan.

Other first-phase or off-plan buyers are usually people familiar with the area where the development is taking place, she adds.

“There will always be a place for showhouses, especially with larger developments, but CGI materials make more sense for developers in the early stages of most projects,” Ensor says.

If a potential buyer is very keen and has mortgage approval, a site visit can sometimes be arranged to help people visualise the house, “provided it is safe”, she adds.

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Demand

Many off-plan buyers want to get in early, Byrne says. They sometimes have been in touch with the agent before, having missed out on another development in the area, he notes. If they have decided that the location is where they want to be based, they are ready to go when the next opportunity comes up.

Ensor and Byrne both point to high levels of demand as a factor driving an increase in off-plan sales. “You may not want to buy without a showhouse, and that’s fine, but agents usually have a line of 20 people waiting to buy who will, and developers’ funders sometimes require them selling 20 or 30 houses off-plan before a showhouse goes up,” says Byrne.

[ ‘More to be done to ensure supply is accelerated’: What estate agents say about the new-homes market ]

An individual developer’s financial situation is also a factor when it comes to the provision of a showhouse, says Lanigan. “Usually their funding is dependent on how many units they have sold or how many contracts are signed,” she says.

Priorities

Prospective buyers should make sure they know their priorities before deciding to go off-plan, Byrne advises. “Some people don’t care which way their garden faces, but some really want a south- or west-facing garden.” It’s about knowing what you want when you go into the process, he says.

Although Lanigan acknowledges there are many people who are nervous buying off-plan, she says there are incentives for those who opt to go down that path.

Usually, she says, the prices are lower than when a showhouse is in place. “It wouldn’t be as much as €50,000 or €60,000 but it could be about €10,000 to €15,000.”

Byrne says there is some reluctance for buying off-plan in the case of bigger or more expensive houses. “If people are spending €1 million or more on a home, they usually want to see where their money is going.

“Three- and four-bed semi-Ds don’t differ that much in terms of layout, but if you are selling something different there is more resistance to buying off-plan,” he says.