While there are many reputable developers around, there are also many who are not up to the task. Do your homework before you commit.
Although the construction industry is suffering under the present economic climate, there are still plenty of South Africans who prefer to build their own homes and who continue to invest in estates that offer the plot and plan option.
Essentially, when someone buys into these sorts of schemes, they purchase a piece of land with the proviso that they will build a prescribed style of home, using the services of a particular developer. The beauty of properties sold using this method is that not only is the home owner getting the home finishes of his choice, he is usually given a number of house designs from which to choose and is able to take advantage of the plethora of amenities that these sort of estates generally offer.
In what, and where, the buyer invests relies heavily on how much they are willing to pay and investments of this nature can cost anywhere from around the R500 000 mark for a smaller home to millions for an upmarket home on one of South Africa’s more prestigious estates.
During every boom period, developers seemingly spring up like mushrooms and not surprisingly, a great number disappear when the property market slumps. For that reason there are questions that anyone considering investing in property of this nature need to ask before they sign the sales agreement, and these include:
Who is the developer and does he have a solid track record?
Are the banks supporting the development?
What is the levy structure and how long will it take before the estate is completed?
Are the prices being asked in line with the buyer’s own budget and perhaps even more importantly, are they in line price-wise with similar properties in the area?
Exactly what the buyer is getting for his money.
This last point is particularly important as many buyers assume that the costs are all-inclusive, but very often this is not the case and the home owner remains responsible for a number of different features, which could include any upgrades to the finishes, landscaping and paving as well as additional security.
Important factors to consider
There are also other aspects that buyers need to factor into the buying decision – including the entire cost of the completed project as well as the financial implications that moving home always entails.
It was fairly commonplace during the boom for investors to make a buying decision based on a picture of what the home would look like once it had been completed as opposed to physically seeing the actual bricks and mortar. For the most part this has changed and these days, the average buyer wants to see an actual building in order to get a clearer understanding of what his own home will look like once it has been completed.
Risks involved
There are some risks associated with buying a plot and plan property that operates under a sectional title scheme and these include the developer’s pre-sale requirements. Any developer who secures funds through a bank has to prove that he has sold enough units in order to finance the development. Very often a developer will sell one or two units but is not in a position to build as he has not met the banks’ financial criteria. In these instances, the people who have invested in the development may well find that they are still waiting for their unit to be built two years down the line.
It stands to reason that a developer who has had to delay a project for a lengthy period of time is going to struggle to build at the price that was initially quoted, given the rate at which the costs of building materials and labour escalate. In these instances, developers very often try to cut corners and one of the first areas where this is seen, is in the quality of the finishes.
The number of developments dotted around this country clearly indicates that buying on an estate is a lifestyle choice and one that is popular with South Africans from all walks of life. This type of investment has numerous benefits, but as with any major investment, a little homework needs to be done before the buyer commits.
Written in association with James Arnott, marketing director, Stedone Homes
