Riding Out High Rates with Off-The-Plan Investment

With interest rates still high there are some key reasons why investors should consider an Off The Plan (OTP) investment.

Keep OTP Projects in Perspective

Rental Yields Will Continue to Rise

Given the current levels of rental demand and lack of supply due to lack of new housing stock and restrictive planning laws this seems likely to continue for some time.

Interest Rates will Remain High

Well this is the most difficult to predict otherwise we would all me millionaires! The arguement though is that you buy a development at today’s prices but don’t have to start paying the mortgage for another 12 to 18 months you will have saved the interest and the properties value will have risen.

Economy will Remain Strong

I’d be willing to bet good money on this one, at least for the states enjoying the mining boom. So long as unemployment remains low it seems unlikely that property prices will fall dramatically

Opportunity to Build a Buffer

Once you buy a OTP you should save the equivalent of the mortgage payments you will be making on settlement. This will give you virtual immunity if the price of the property does drop in the first 18 months and the banks come demanding a cash injection.

Prices Can Rise

Of course you are sitting pretty if the property rises in price during construction. Though if the development doesn’t sell well its possible that the last remaining units will sell at a discount just for the developer to off-load them.

OTP investments are obviously more risky than buying an existing property. You run the risk that the project either doesn’t finish on time or the developer fails and the project doesn’t finish at all. On the other hand if you buy using the old maxime of within 10km of the CBD in a capital city you may do quite nicely.
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