PROP UP: Investing during uncertainty — The value of pre-selling properties

Published August 21, 2021, 4:07 AM

by Joseph C. Tay

If there’s one thing in the property world that is never in short supply, it’s the variety of pre-selling deals in the market. From entry-level homes to luxury residences, developers are vying to offer the most attractive deals to buyers often times before even breaking ground on their latest properties.

But how can home buyers extract the best value from these deals? Carlo Gahol, corporate communications manager at DMCI Homes, lets us in on how to best use pre-selling to our advantage.

Pre-selling is the period before construction of a property is finished, or ready for occupancy (RFO) in developers’ jargon. It is during this period that developers offer best deals to entice buyers, and the key is to invest early. “Pre-selling units are much cheaper than RFO units,” Gahol explains. “Plus developers usually throw in additional promos during the early stages.”

Most developers allow for amortized down payments during pre-selling, so no large cash-out is required.

In addition, many developers price their pre-selling units below market price in the initial phases. “We start below market price and adjust depending on market conditions and sales take up of a project,” he says. What this means is that buyers who purchase early are almost certain to get a discount from the prevailing market price. 

Another benefit to investing early is that payment plans are usually longer and more affordable. Most developers allow for amortized down payments during pre-selling, so no large cash-out is required. And buyers have the choice of the best unit types and locations before they get snapped up.

For most of DMCI Homes’ buyers, condominiums offer the best value, combining ideal locations within the city with amenities such as pools, gyms, and function rooms.

“The ideal time to invest is four to five years before RFO,” says Gahol as this gives buyers enough time to accumulate their down payment in affordable monthly installments.

Like any investment, buying a pre-selling property comes with its share of risks, so it’s important to buy from an experienced developer. “With so many developers out there, it is important to buy from a developer that has a good track record of successful developments,” he explains. A track record of on-time completions, high occupancy rates, and well-maintained properties are all good ways to gauge the reliability of a developer.

The developer has avoided micro units in its developments, in favor of larger, more spacious units such as one- and two-bedroom units.

While he advises it is best to visit properties in person, online webinars and virtual tours these days are also effective as most developers have ramped up digital marketing since the pandemic, offering the experience of being there in person while mitigating the risks from physical visits. 

But what are the best types of pre-selling properties to buy? For the core buyers of DMCI Homes, which include mid to upper-middle income families, young professionals, and OFWs, there is a clear preference for condominium developments.

“Condominiums offer the best value in terms of proximity to work and places of interest; amenities such as pools, gyms, and function rooms; and safety and security.”

For those who worry about the limited space in condo dwellings, there are developers that have eschewed micro units in favor of larger, more spacious units.

Pre-selling refers to the period before the construction of a property is finished. It is during this period that developers offer best deals to buyers.

“In most of our properties, we start with one-bedroom units that are 30 square meters or larger,” he says. “That, coupled with the fact that our properties are built to maximize open spaces and ventilation, gives our residents the feeling of space despite living in the heart of the city.”

But with another recent round of ECQ and a pandemic with an increasingly unpredictable trajectory, is now really the best time to buy? For him, there could not be a more opportune moment.

Condominium developments by DMCI Homes are designed to maximize open spaces and ventilation through features like landscaped atriums.

“When the market is on a downtrend, that’s when buyers have the most options for choice properties, as well as the most access to special promos. Now is the best time to invest in pre-selling properties because of the many promos being offered.”

Flexible down payment options, rent to own, and payment terms stretched to as much as five years are just some of the benefits that buyers enjoy today as a response to the overall downturn in the real estate market.

For home buyers looking for their post-pandemic dream home, a pre-selling purchase today for a property due in a few years may just buy enough time to tide over the worst of the pandemic and the real estate market.