Buying in Spain
Buying Off Plan in Spain
The benefit for investors of property in Spain and those who require a residence is that, currently, they enjoy the benefits of a wider choice of properties, enabling them to purchase to their exact requirements.
When buying off-plan as opposed to buying a re-sale property, you get the opportunity to reserve your property between 20- 30% below market value.
The reason properties are offered initially at such a low price is to attract individuals who are in no hurry to take occupation but realise the significant savings of early purchasing. These early purchasers provide confidence in the project and financial security for the bank or the developer who provides the financing for the project.
Construction in Spain starts with or without these early sales, but of course quick sales at this stage enable the developer to make an increase in prices when construction begins. Prices generally go up in 10% increments during construction. First, when foundations are laid, secondly, when brickwork begins and finally during the later finishing stages.
Example:
- 2 bed unit priced at 150,000 euros
- Amount paid during 18 months construction - 45,000 euros (30%)
- Property value increase during 18 months construction period - 45,000 euros (30%)
- This increase amounts to 100% of the original investment but costs such as legal fees, etc must be taken into account and the property will need to be sold at slightly below market value to encourage a quicker and easier resale. Therefore a profit margin of 80% on original investment is suggested
The figures above are examples of returns that can be achieved by investors who get in first at the very early stages of selected developments. Obviously if the overall Spanish property market continues to grow year on year, the returns will be that much higher.
Possibilities:
You can buy to sell the property at a later date - purchasing in the early phase of an off-plan development, then selling when the property has seen an increase in price, which is generally 12 months after work has started on the project.
You can buy to rent the property out, as well as for investment growth. Ultimately, you can buy a plot to develop and sell, both to investor and end user clients.