Off Plan Property in Spain
Buying a Property off Plan.In recent years buying a property “off plan” has become very popular. In the United Kingdom many new apartments are sold on this basis and in Spain large numbers of these schemes now exist to purchase property in this manner in many instances, the initial purchaser is an investor and not the actual person that finally movers in to the property. Often off plan property is a means of purchasing property and making a quick profit in times of rising house prices. it is particularly popular for acquiring property in Spain, What are the processes involved with this type of purchase and what ( if any) are the pitfalls.
Buying a building off plan , almost always involves buying the property from a developer rather than a private individual. The property will not have been built and you will usually be presented with a set of glossy plans and often a model of what the development area will look like after completion. Often people are persuaded to reserve these properties by sales staff and the usual sales techniques are employed by many but not all developers. Often you may be asked to sign a reservation contract and may even have to provide a deposit. It is always best to discuss matters with your solicitor (particularly if you are buying in Spain, before you sign any form of contract.) Of course, for many, the advantage of buying off plan is the possibility that the value of the property will rise between the start if the construction and the completion date. If after you have carried out all due diligence etc you are satisfied and want to proceed, you will find that that a deposit of up to 25% will have to be paid to the developer (this is not a reservation deposit but a down payment). It has become very popular to use this leverage to obtain property then sell it on at the actual completion date for a higher amount.
Whilst in essence this seems to be a reasonable prospect, there are a number of factors to take in to consideration. In times of rising prices, this idea works quite well, however, there now appears to be a glut of new development, particularly in Spain and with so many new homes coming on to the market, there is more choice and you may not be able to find a buyer so quickly. Of course when making your decision to buy off plan you should take in to consideration the location of the property, this is also a factor if you have decided to keep the property as your holiday home in Spain and also wants to offer it up for rental. Properties that are located near the sea side and near to golf courses are always fairly easy to let, however property in isolated positions does not rent or sell so easily.
When negotiating the purchase of your off plan property with the developer, it is worth while asking for a discount, although you will often be told that the development is selling out quickly, you may find that declaring your interest in a number of other properties in the area may focus the developer attention a little. Some of plan property comes with the guarantee of a certain rental yield often for a fixed period of time, logically if you think about this guarantee; it can only really be achieved if the developer factors in an amount for rental in to the purchase price. You may find that the property you are buying is thus at the top end of the valuation scale to start with.
There are without doubt some good off plan property purchase deals available but it is a good idea to obtain as much information as possible before committing to a purchase.