Benefits of Buying a Spanish Off-Plan Property in Spain
Benefits of Buying a Spanish Off-Plan Property
If you visit the Costa Blanca or Costa Calida areas you cannot help to notice the large number of new developments, the cranes are back. than in the The demand for the modern contemporary designed apartments and villas is high, in fact more than 25% of buyers are choosing off-plan property in Spain as there are lots of benefits for the holiday home buyer or serious investors.
In 2015 the construction industry grew for the first time since 2008 and the number of permits issued in Q1 2015 was up 53% against the 2014 average, in 2016 62% increase agianst previous years
More renters are demanding the new design properties typically paying a 20-30% rental premium, better insulation results in lower running costs for owners
Spain remains the number one tourist destination for UK residents, the demand for rental accommodation remains healthy. The Costa Blanca and Costa Calida both offer a wide choice of properties, from fabulous beach-front complexes to prestigious golfing developments, making this region of Spain an ideal location for off-plan buying.
Why Buy Off-Plan, Risk and Rewards
If you are looking to buy modern designed property then buying off plan is your only option as there are few key ready properties, typically construction times on the popular developments are 6-12 months, but there are lots more benefits, many financial benefits, because prices never remain low for long and, as construction progresses, prices begin to rise steadily. In Spain, as in any other market, it is important to buy your villa, townhouse or apartment as soon as possible during the early stages of development when prices remain very competitive but are already beginning to rise. Early investors will invariably see the greatest returns, on completion of the first show house prices can increase by 20%. With established developer, where there is no show house you can visit previously built properties to assess the quality and design. The major advantage of buying off-plan property in Spain is the lower cost compared to existing villas for sale in Spain.
The fact the building has not been completed means the developer in Spain must compensate off-plan property buyers for the risks they are taking and to secure finance for the project. This discount can be as high as 25% in some areas of Spain.
Purchasing the best units
Buying in the early stages of a development, allows investors to choose the most sought after properties on any given development. The best units always offer the best opportunity for returns, especially prior to a showhouse being built with value appreciation in the smallest time frame and can often demand the greatest rental incomes, by purchasing the top floor properties with roof space and villas on corner plots or larger plots, Soth facing, which are always athe first to sell
Price increases and flipping, selling your contract on
As the development begins to be constructed, the value of the units begins to rise. A completed show home is normally available for viewing at this stage, while buyers are taking less of a risk, as they now do not need to rely entirely on plans and the prices increase as each phase is released, as more units are sold, the price of the remaining units rises. Units sell faster when buyers can physically see them. There is often a phase payment structure in place which mirrors the increasing value of the properties. To the early investor this means that, should you decide to sell your property, it will be worth considerably more at this stage than when you made your initial purchase and paid the 30% deposit, assigning on your contract to another buyer, known as flipping the property, selling avoiding the buying costs, you benefit by selling the property at a profit, the buyers get a property sooner. There is always a risk, we advise NEVER buy a property and rely on flipping it and ALWAYS CHECK THAT THE DEVELOPER WILL ALLOW THE CONTRACT TO BE ASIGNED TO A DIFFERENT BUYER
Design and Running Costs
Off-plan property developers are obliged to use environmentally friendly building materials. New building codes also enforce air flow boilers or solar panels for hot water heating, open plan design with lots of glass to increase light, improved heating and ventilation, underfloor heating and inverter air conditioning. One of the significant changes, resulting from changes in building codes and introduction of energy compliance, the now compulsory EPC Certificates, is in insulation standards, effective soundproofing means you never hear/bother your neighbours again, insulation with better quality windows and doors These additions make these projects more efficient than secondary market property and reduce the annual property maintenance costs as they focus on energy efficiency. New techniques and technology maximise space and adapt the building to new expectations. Home automation systems and video intercom systems simplify your life and increase the building’s overall security
Buying Process, Deposits Finance & Mortgages
As mentioned payments for off-plan properties are protected by a bank guarantee scheme and developers required staged payments, which vary on the type and price of property. A mortgage will not be available until after the property is built. Builders will expect a deposit of between 15% and 50% and you will need to keep to the schedule of staged payments. You might be required to pay 25% when the basic structure is completed, 25% more when another milestone is reached and so on, you should check carefully at time of contract, the stages payment terms and ask that you agent sends you regular photographic updates as the build progresses. Mortgages in Spain are more available, banks are being encouraged to lend money with fixed rate mortgages now available from 1.7%, see our mortgage page for current rates
Consumer Protection, Bank and Building Guarantees
Consumer protection is stronger and strict obligations on quality, delivery and materials coupled with heightened liability for developers has brought Spain’s off-plan market into a new era of quality and buyer satisfaction.
Over the years we have all seen the horror stories of properties not finished, developers going bust, properties and developers not building to the agreed specification and buyers losing deposits. Things have changed, by law, buyers of off-plan property in Spain. Sales contracts must include Developers are required to take out bank guarantees to compensate investors if they run out of funds, before completing the project or fail to deliver on-time, guaranteeing the return of all money paid plus interest and costs.
Developers must abide by the rules Spain’s off-plan buyers are protected by LEY 57/1968 and Building Act LOE 38/99 . The former enshrines the obligation for developers to provide bank guarantees (aval bancario) to buyers for the purchase of off-plan property. The latter holds developers liable for structural and design issues during the years following the building’s commission. It provides for three sets of faults and three deadlines to report them for which the developer will be obliged to fix at no expense to the new owners, are entitled to guarantees against building defects. Guarantees against serious structural problems last for up to 10 years and this is obviously an advantage over older houses or villas for sale in Spain.
With the freeing up of finance in Spain, availability of mortgages with rates starting as low as 1.7% fixed rate, there has never been a better time to invest in an off-plan property. Normally you will only pay deposits of 30%-50% in staged payments. Click here for latest rates
Benefits Buying Off-Plan
There are lots of benefits of buying off-plan, while a resale property, where everything is included, like furniture, AC, white goods, seems better value, buyers often completely re-model the property, change the furniture and upgrade the old technology AC units, which they don’t budget for, with a new off-plan property in Spain you end up with a sparkling new property that incorporates the latest design techniques and technology, furnished to your tastes and a summary of benefits includes
!0 Good Reasons Why Buying Off-Plan in Spain Makes Sense
- You get the best choice, best location, modern property, properties are often cheaper than resale equivalent with discounts for early investors
- The price is fixed, no renovation, no hidden costs
- Building and finance guarantees, safe to buy in Spain
- Flexible finance, you have time to decide best option for you
- Properties are latest design, energy efficient and cheaper to run
- Good potential rental income, newer designs are easier to rent and generate higher rents, more demand, still No 1 destination for holiday makers
- Your property may rise in value because of being initially purchased below its true market value in the early stages of the development.
- Significant profits can be made in a relatively short time span, flip or rental
- Initial capital investment is low.
- Good potential on rentals in the medium to long term.
- Highly competitive mortgage rates in Spain.