Purchasing Pre-construction Property – Risks and Benefits

For buyers looking for the convenience of a managed property that they can live in, rent out, or use as a vacation home, a condo is the obvious choice. But the next question is: should you purchase an existing condo, or opt for a pre-construction project?

Many property developers in the Cayman Islands make units in residential developments available for sale before even breaking ground. Buying a property pre-construction means that you sign a contract (and put down a deposit) agreeing to buy the unit when the build is complete – even though it may be a year or two from the scheduled completion date.

Purchasing pre-construction has some definite advantages for investors – but it also comes with certain risks. Here we outline the main pros and cons of buying pre-construction property in the Cayman Islands.

Benefits of purchasing pre-construction property in Cayman

It costs less than a resale property

Developers offer pre-construction units at very competitive rates because the buyer is assuming a certain level of risk (see below). If you were to purchase the same property following completion, you would pay substantially more.

It will (most likely) have appreciated by the time it’s built

If you sign in 2022 for a property that will be completed in 2025, you are locking in 2022 prices.

Given that property prices in Cayman have increased at unprecedented levels over the past few years, this means that by the time your property is complete it will be worth significantly more than you are paying for it.

You get the pick of the units

When looking at resale properties you will usually only find one or two available within a development, whereas if you opt for pre-construction development, you have far more choice of units. You may be able to pick and choose the best unit, whether that’s a corner or end of row one, or the one with the best views, most privacy, largest gardens, etc. The sooner after sales open the better, of course, as the most desirable ones get snapped up first.

You get to customize finishes

Most property developers in Cayman allow buyers to customize their pre-construction condos to a certain extent. You may be able to choose the flooring, kitchen cabinetry, countertops and bathroom fixtures and other finishes from a selection offered, ensuring the end result is to your taste and style.

Warranties and lower maintenance costs

In addition to all your brand-new appliances coming with a warranty, in a new build the contractor typically provides a warranty on the construction itself. A new build will also require little to no maintenance for the first couple of years, representing an additional saving. 

A brand-new home

Whether you’re buying as an investment, with a view to renting out your property, or as a home for yourself, there is an undeniable appeal to a brand-new home that no one has lived in before.

Risks of buying pre-construction

Of course, just as there are many advantages to buying pre-construction, there are also disadvantages. The main ones are:

You can’t see or feel the property you are buying

You’re buying something that doesn’t yet exist, so you don’t know what you will get in reality. You’ll be able to scrutinize floor plans and renderings, but you’re also trusting that the final product will live up to the marketing.

To minimize the risk, do your due diligence on the developer: what other properties have they built in Cayman? Can you visit these to get a feel for the quality of construction and finishes? Is the developer Cayman-based or an overseas developer? Your realtor will know which are the established Cayman-based developers and their reputation.

Property *can* depreciate

Although property prices are unlikely to fall, nobody can guarantee that they won’t. Therefore, while the hope is that the value of your property will have increased by the time it is built, there is always the chance it could also come down, and you will be left shouldering that loss.

Completion dates are not set in stone

While any reputable developer will do his or her very best to ensure they deliver on time, as the Covid lockdowns and shipping delays of the past couple of years have demonstrated, some circumstances are simply beyond anyone’s control. So keep in mind, that if you were planning on moving in on a specific date, or were counting on earning a rental income from the estimated completion date, there is the possibility that date will get pushed back.

Interested in a pre-construction condo? Ask us about available developments are taking shape now.