Although the Spanish property prices are no longer increasing with 15-20% per year and some people are talking about crisis (the 2007 numbers show an increase of 4,8%) it can still be interesting investing in off plan property due to the great offers available at the moment for early buyers. The extensive market furthermore makes off plan properties accessible to all types of budgets. Small investors as well as large professional investors can find satisfaction in the off plan Spanish property market. Some areas of Spain are starting to get saturated but here are many new and interesting areas coming up.
If you want to buy to sell again and thus be an investor in Spain then you need to take a several factors into account. As explained in the section Off Plan Property, the price of an off-plan property will increase during the construction until it reaches market value. Furthermore, as the price initially is set below market value to attract investors, the earlier you buy a property the greater the profit you will ultimately make. Besides if you invest at an early stage of a development you will have more choice among the units of the projects.
Aside from concentrating your research on the initial price, it is essential to think about the future buyers you will encounter. You need to consider about what potential buyers will be looking for in your property. It might not be the best thing to buy as cheap a property as possible that later on you will be unable to sell. Furthermore, you should know that to make the best profits you should aim to sell the property before the completion of its construction. Although with today’s market condition (greater supply than demand on properties) you should be prepared for that you might not be able to sell exactly when you want to.
Questions to ask yourself are: Who is going to want to buy a Spanish property? What will they be looking for? Private buyers will be looking for a holiday home or a place to settle down in Spain. They are going to be looking for a high quality property and with particular characteristics (swimming pool, golf course vicinity, number of bedrooms, safety of the area, views, etc…).
Depending on how much you are willing to risk, the amount of money you have available and your general requirements on the real estate, there are different types of investment strategies to apply.
The following comments are an introduction to the different financial factors that come into place when dealing with off plan properties. Nevertheless you should seek for legal and financial assistance to accompany you through the buying process.
For off plan properties the developer will normally provide you with a mortgage. However, sometimes you have the option to get your own mortgage with another bank from Spain or abroad. The mortgage the promoter proposes might not offer the best conditions as it will usually give you between 60 and 80% of the initial value of the OPP and will not consider the value of the property after it is built. It is very possible that another bank will be willing to consider the price increase of the property throughout construction and make a final valuation. Thus you might be able to get a better deal with a higher percentage for the loan on the property. Moreover, the bank will need to contact a ‘tasador’, if it is not offered by the promoter, to make an appraisal that will set the market value of the property.
What comes is an account of the likely payment process for most developments when a property is bought up to 6 months before the end of construction.
Once you are interested in a property you will have to pay from 3000 to 6000€ deposit so that the property is taken off the market. After a month you have to sign the private contract and pay from 10 to 20% of the price of the property. The outstanding amount will be paid progressively either monthly or in quarterly payments until reaching 10 to 20% of the price. Sometimes this amount is paid according to the stage at which the construction is. The final amount is then supposed to be paid when the title deed is signed or it can be taken over as a mortgage.
If you buy the new property nearly finished you will usually make two payments initially: the deposit and then between 20 to 40% upon signing the private contract. Finally, after you sign the title deed you will need to pay the outstanding amount or the mortgage.
Do not forget that when purchasing a property in Spain, you must also account for some initial costs that will sum up to 10% of the total price of the property. You can find more details about these in the Financial Issues section of Buying Property.
Never forget to make sure that all legal paperwork is clear before you do any purchase. A lack of care could lead to serious legal problems afterwards. To avoid this check the name and type of company of the constructor as well as its address, official inscription and license. You also should take care of the details about the house and the government legislations for the area where you construct. The promoter should also give you access to the property deeds, the deed of the declaration of new construction, construction licenses and the bank guarantee. Overall the legal procedures are the same as in the section Legal Matters of Buying Property. If you are looking for a legal advice please see the section Ask a Spanish Lawyer.
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