Property in Spain

Secrets of Offplan Property Investment in Spanish Costas

There's been much media coverage and property websites in Spain are highlighting the benefits of buying a property in Spain “offplan”, often highlighting “double your money” opportunities in new and obscure locations.

Many buyers invest their money, sit back and wait to strike gold as they read about the soaring prices on their favourite Costa and the new air links that are going to bring more and more buyers and tourists to the area. Instead of forecasting what might happen, Property in Spain executives prefer to report on what has happened to our off plan investors and offer similar opportunities to new off plan buyers.

The official EU figure for property growth in Spain is 18 percent and the highest in all Euroland in recent years, so a return from an offplan investment around that percentage is going to be – as is the EU figure – average. Our recent investors, selling on their off plan buys, have made 17-18 percent from holdings over 12-15 months and that's after deducting all buying and selling costs. In every case but one (he bought a country pub instead!) they have been happy to re-invest in another property in Spain.

The return on investment depends on the actual amount of cash invested. €30,000 paid towards a €100,000 apartment in Costa Blanca that sells for €130,000 16 months later and just before completion, results in a profit of €30,000 which is a 30% return. But remember, all you have had to pay was €30,000 euros deposit so the actual return on cash invested is 100% - less buying and selling costs. For off plan buyers not wishing to sell on their contracts during construction there are low cost mortgages of 70-80 percent built-in by the developer or available from other lenders.

How is such a high return possible?

By undertaking careful research to establish the best area for investment, taking advice from a trustworthy expert or two who operate in different parts of Spain (today's best area could be superceded tomorrow by a new airport or low cost airline route) and can provide the Big Picture. Then check the planning status and track record of the developer and only then get serious about handing over money. Property in Spain offers the only Independent Legal Sureties in the industry and when coupled with a Low Deposit Purchase offplan development can make a lot of difference.

The following factors all help increase the value
of a development during construction:

(a) Lower than 'market' prices offered by the developer.
The developer is keen to sell the properties as quickly as possible (get a better interest rate from his funding bank etc) so prices are normally very competitive and below those of equivalent nearby schemes. Some start selling on a pre-launch basis before they gain a building licence, which can mean even lower asking prices.

(b) Best properties get sold first.
Normally when a off plan development is released a pattern emerges, i.e. penthouses, corner units and ground floor with private gardens tend to sell first – and will resell easiest as in exclusive Resale Specials offered by Property in Spain.

(c) Show home available/building commences.
As the main structure of the development starts to take shape and/or a show home is opened prices normally increase substantially as prospective purchasers can see get a better idea of what the finished development and individual homes will look like.

(d) More homes sold.
As the developer starts to sell more properties, the original prices will continue to increase which means that if you wish to sell your off plan property it is obviously going to be worth the same or more as those on offer in the latest phases because it was a prime “Early Bird” buy.

(e) Final Completion achieved.
When the development is completed you will be the owner of a brand new apartment/house in a new development with beautiful gardens and a pool. A buyer at this stage will be prepared to pay significantly more for a place they can move into or rent out immediately rather than when the development was just a plan on a piece of paper and a plot of land.

It is not uncommon for a property to be bought and sold before a brick has been laid and even sold again several times before final completion. Property in Spain sells these as Resale Specials and offers an optional network of 750 investor groups around Europe seeking these types of properties.

One of the best reasons for the popularity of selling before completion is that there are no Spanish taxes or registry fees and, say some, NO CAPITAL GAINS TAX to be paid at all if you make a profit by selling before completion. Some financial advisors might hold a different view, so consult and decide.

Many people finance the 30% deposit by releasing equity for their existing UK property and so do not actually have to have any liquid cash to take advantage of this profitable investment opportunity. If you would like advice on releasing equity or have any other finance related questions please contact us and we suggest you consult a financial advisor in the UK.

Checklist for investment potential

The opportunities in Spain are many and varied and can be fully evaluated elsewhere in the Property in Spain Network websites, but here are some of the basic reasons for investing with reduced risk:

• Unique micro climate with over 300 days of sunshine a year
• Potential long term rental returns from golfers and holidaymakers
• Relaxed, laid-back Mediterranean lifestyle Blue Flag beaches – most in Europe
• Sophisticated shopping, nightlife, and international restaurants
• Scores of world class golf courses in the area with skiing only 2 hours away
• Classic Andalusia cities of Cordoba, Grenada and Seville two hour drive of several Costas.
• Easy accessibility from UK and northern Europe through expanding Spanish airports
• Lower cost of living than Northern Europe or southern France
• Property prices still good value compared to the UK and Ireland
• Excellent investment potential in still rising market
• Highest property growth in Europe – official EU report
• 52 million “Baby Boomers” in northern Europe looking at retirement homes in sun
• 88 percent in Sky News onscreen survey would quit UK for sunnier climes
• New restrictions on building density and enforced environmental “green” areas
• Ten year building guarantees
• Legal protection in Spanish Law for money invested
• Legals, mortgages, banking, currency exchange non-resident friendly
• Constant improvements to infrastructure - golf courses, amenities, roads, airports etc
• UK 's Office of National Statistics reports Spain now the number one holiday destination for British tourists – over 12.5 million in 2003.
• UK ONS Report reaffirms trend towards a continuing strong investment property market
• Property Demand

The Big Question asked by serious investors is: “Will the Spanish property market remain at its current levels, providing sufficient demand to ensure that I can sell during construction and realize an above average return?”

Our Answer : All independent indicators would argue in favour of this happening. Spain 's real estate stability and growth has been well recorded by Governmental and European agencies and current forecasts indicate continuity through at least to 2007 with a visible demand in UK and other European markets, including now Russian and former Soviet block countries recently admitted to the EU.

The market in parts of the Costa del Sol is softening with prices topping out and big villa sales plummeting. This follows reported increases of 21 percent year on year in the first quarter of 2004 and will serve as a “check” on market growth that will allow bargain hunters to invest in this favourite Costa or look at alternative Costas with greater growth potential.

However, overall a stable real estate market, coupled with built-in advantages such as excellent weather, improved infrastructure, and easy accessibility all help the potential off plan investor in making an easy decision. Bank repossession bargains cazn make excellent investments as they tend to be in prime locations with high rental demand from local and tourism markets.

Useful websites for general research

Spain website | Costa Blanca | Valencia Province | Alicante Province | Murcia Province | Benidorm | Castellon Province | Finestrat | Benissa Resort | Torrevieja Guardamar | Villajoyosa