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30/09/06 -
Turks & Caicos - Off Plan or Completed? |
People often ask whether they should consider a preconstruction condo in a new
development rather than an existing condo in an established development. Unfortunately there is no simple answer.
The answer ultimately depends on the individual's objectives, requirements and financial position:
Pricing considerations:
Historically preconstruction condos have proven to be better investments with early purchasers acquiring at a
significant discount to equivalent completed units on the open market. That has changed with developers pricing
preconstruction products more aggressively on the basis that buyers will opt for a preconstruction purchase to take
advantage of the staggered payment schedule, meaning that they can get more condo than they could afford in a
completed development. As a result preconstruction purchase prices have risen from the US$400 per square foot range
to well above US$600 a square foot in some of the newer developments and we are now seeing preconstruction
condominiums on the ground level priced above US$1 million. To be fair the cost of construction has increased ,and
new preconstruction products tend to be more ambitious in terms of design and finish, but that only accounts for
part of it. Because of that value oriented investors in a position to purchase an existing unit that meets his/her
specifications this can often identify apparent pricing disparities.
Another related consideration is that you can't finance a preconstruction purchase unless you have another property
to use as security. Trust companies in the islands tend to be a little more aggressive in their lending practices
than the banks and some will finance the last payment on a preconstruction condo using an assignment of the contract
for sale as security. The bottom line is that if you are an investor looking to make a medium-term investment return
on a Turks and Caicos condo it is worth considering all the available options.
Product related considerations - is newer always better?:
Generally speaking the answer to this is yes. Architecturally, the newer developments have tended to be more
luxurious and better finished (exceptions to that general rule would include the Palms and the Renaissance on Grace
Bay which are both very aesthetically appealing). Creative floorplans for new developments such as the Seven Stars
Resort and the West Bay Club are a new and welcome departure from the boxy (but serviceable) floorplans in older
developments. There are exceptions such as Point Grace which is a gorgeous small resort development and is still a
contender for the best upscale condo development in the islands.
Another consideration which can weigh against older developments is the maintenance factor. If you are considering
buying an existing condo you have to look at that aspect carefully to get an understanding of the extent to which
owners are being assessed (or are likely to be assessed) for upgrades and repairs.
You need to counter-balance the potential maintenance cost against the fact that existing developments have settled
management in place and have gotten over their teething troubles. In the case of condo resorts with established
rental pools you can generally assess the rental return and confirm that it should offset strata fees and any
pending assessments, while providing some additional revenue. Established resorts such as Royal West Indies, the
Sands and Ocean Club have great rental management systems in place and have consistently been leaders in terms of
quality of service and overall organization and management. The Palms is a beautiful development but has struggled
to provide the consistent quality of service expected of a high-end resort but those difficulties will likely be
resolved when Regent International (an international branded 5 star hotel operator) is taken on to manage the rental
pool.
About the rental pool - how much will it generate?
We do not recommend that clients purchase condos in the Turks and Caicos based on representations that the rental
pool will generate sufficient return to pay down a mortgage while covering the recurring maintenance. Generally
speaking in an established resort with a well run management pool if you net 3% annually on your investment you are
doing fairly well. With preconstruction resorts you should expect that it will take some time to build up rental
bookings and work from the most conservative estimates.
Getting precisely what you want
If you want to make specific changes to the interior of a unit there is no better time to arrange it than when a
development is in the preconstruction stage. There have been a number of instances particularly in residential
developments with higher value properties where preconstruction developers and their architects have worked with
preconstruction purchasers to make changes to the interior layout of a unit to suit a purchaser's specifications. On
occasion, such as in the case of the Regent Grand where requests for changes to floorplans were incorporated
throughout the development because they were clear improvements. |
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