NEWS REACHES US from Highbury, the Arsenal football ground, that the flats which will be built there, once the team departs for the nearby Emirates Stadium, are already selling like hot cakes. Investment buyers have snapped up many of the most desirable properties at Highbury Square — those that overlook what is now the pitch and will eventually become a landscaped central garden square — and people were queueing from the early hours on the day the development was launched.

Properties are selling quickly despite the eye-watering price tags: one-bedroom flats start at £290,000 and a mere parking space will set you back £30,000. If you do purchase a flat, the option to buy two Arsenal season tickets is thrown in. These will set you back a further couple of grand and will, of course, be of absolutely no interest to fans of the club’s rivals or to those who simply detest football.

The price seems particularly high when you consider that it is possible to find decent one-bedroom properties in the North London postcode N5 for significantly less than £200,000. These will not, of course, have access to an underground swimming pool and fitness centre, nor are they, in most cases, fitted to the same specifications as the Highbury Square apartments. Moreover, those purchasers are gambling that the property market will rise between now and the time when the flats are completed, which will be between 2008 and 2010, depending on your choice of apartment block.

Purchasing property off plan is always a gamble. It is easy to have your head turned by a glossy brochure, even though the bricks and mortar in which you are investing have not yet been laid. Buying an off-plan property requires very careful research into the local property market, since you are required to make a call on where you believe house prices will be in two years’ time. “When you buy off plan, you usually have around 18 months to two years between the agreement to purchase the property and completion of it,” says David Whittaker, of Mortgages for Business, the specialist buy-to-let broker. “In a rising market, that can be a great deal.”

In a market like today’s, however, buying off plan looks a very risky prospect indeed. So why are buy-to-let investors still so keen on off-plan deals? In some cases, the developer will sell properties at discounted prices in order to get a quick sale. Discounts are also offered because buying off plan is inherently more risky. If you are keen to purchase an investment property to fund your retirement, you can buy off plan and hold the property within your pension. The new rules on holding residential property within pensions — Sipps (self-invested personal pensions) — do not come into force until next April; however, off-plan properties can be held within a Sipp now, as long as the property will not be completed before April 6 next year.

But perhaps the most important attraction is that the investor can do the deal without parting with the capital, even though the value of the property may well be rising. “You usually have to pay a reservation fee of around £500,” Mr Whittaker says. “Then, once construction reaches a certain point, you will have to pay a deposit, which may be 10 per cent — but which can be as little as 5 per cent.”

The final amount is payable on completion. However, there is usually a fair amount of horse-trading before you hand over your final cheque. “The valuer will come up with what is called a snagging list,” Mr Whittaker explains. “That is when he goes around the property, looking at it in detail and seeing what the developer has tried to get away with. They usually try to do as little as possible.”

Once you are happy that the property is up to spec, you will have to complete your payment. And this is the point where many investors get into trouble. “Buyers’ enthusiasm for the sales brochure can cost them,” Mr Whittaker says. Note that, even if you have had a mortgage agreed in principle from day one, the lender may not give you the sum that you agreed at the outset. “A mortgage offer is only valid for six months — that is how long any valuation is legally valid. So the mortgage offer you get at the beginning of the development is really not worth the paper it is printed on.”

If the property market has fallen, if your credit profile has altered, if your employment situation has changed, or even if the valuer simply does not believe that the property is worth what the developers believed it would be, then you may not get the loan that you had hoped for.

Mr Whittaker cautions fans tempted by the prospect of owning a little, or even a large, chunk of Arsenal history to take a strictly commercial view of investment in a property at Highbury Square. “I would imagine that a lot of investment there is sentiment-driven, and the problem with sentiment is that after a few years it disappears down the plughole.”

www.thestadium-highbury.com

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