Buying Off Plan

Buying Property off Plan in Spain

Buying property off plan - what does this mean? In simple terms, property that you decide to buy "off-plan" means reserving a property from builders/developers plans that may have just started, or on a development or plot yet to be constructed.

Reserving or buying off plan is now becoming the most common and popular way to purchase property in Spain, and is growing year on year. With this type of purchase it suits many people these days, as in effect they are benefiting from a considerable discount off the actual finished product, which makes it a more affordable option.

Reserving from plan certainly has many advantages. You can gear your finances over the build time - normally around 12-24 months, and experience indicates that by the time you get your keys to your newly built property, it will have appreciated considerably in value, thereby giving a good return on your investment.

Remember - once that you have selected the plot/property and paid your reservation deposit, the purchase price is fixed and will not increase, so the earlier you buy into the development/project the greater the capital growth you are likely to attain.

The Golden Rule

The Golden rule is to instruct your lawyer, who will now make the vital checks on your behalf and check that the developer has the all the appropriate licenses, that he is in fact the true owner of the land under development. You also need to protect yourself against such eventualities as the developer going bankrupt, or failing to complete the property several months after the agreed date in the contract.

To cover any risk builders are required to take out a special bank guarantee that will compensate any investor should things go wrong, and this is something your lawyer will insist upon for you.

The best time to purchase off plan is at the builders first of the development, so you will take advantage of the first release prices. It is normal in Spain, as in UK, to increase prices throughout the construction process, usually after certain stages in the build have been reached or after a percentage of sales reached. So, normally should you purchase at the release of the development which will be below market value, the return of between 20% - 40% is usually achievable.

The price increases coincide with the level of risk the developer is taking throughout the project, so as the project progresses and the risk diminishes, the developer increases the prices.

Many investors will decide to sell the property prior to completion and make handsome profits, see the example:

• Property purchased €150,000 at early stages of development.
• Stage payments of 30% (€45,000) paid in the initial stages, 70% on completion in 2 years.
• The property is put on the market just prior to completion valued at €195,000.
• This is a typical example, as new properties in good locations could easily have this growth.
• Sale yields a profit of €45,000 Euros on the initial investment of only €45,000

If this purchase continued to completion, the remaining amount could have been financed by a mortgage and even higher profits attained over the ensuing years.

Like all good investments, you need the help of your agent to guide you and recommend the best locations and developments for maximum growth.

With the UK buy-to-let market now at an oversupply of properties in many areas, and rentals decreasing, many investors are now turning to Spain and increasing or moving their property portfolios due too the capital growth/profits achieved on new build properties, plus rentals. A report from the UK's Office for National Statistics shows the Spanish market accounts for 27% of the 23 Billion pounds spent by UK buyers/investors on second homes and that this is set to continue and to lead the market.

There is an ever-increasing demand for new second homes and it is estimated that spending on Spanish homes will double from approximately 25 billion euro in 2005 to 45 billion euro by 2010 (Report Ian Maitland, 17th February 2006)

Spain has a strong and healthy economy, and UK housing expert Iain Maitland writing on March 10th 2006, states that a new report from the European Commission reveals that "improving economic conditions in Key European markets will push up prices higher this year" and that The Spanish market is named as the first and foremost as it has an economy that is growing by a healthy 3.1% pa.

Azahar Dream Homes & Off Plan Developments

Azahar Dream Homes S.L. has an excellent selection of prime off plan developments in some of the best areas of Spain, by such quality developers as Taylor Woodrow Espana, Blauverd, and Albert-Villas S.L. We are informed of prime projects by our partners that are only in the planning stage, thus enabling our investors to "get in early to maximize profits".

There is no time like the present to purchase in Spain off plan.

Please Note: Azahar Dream Homes S.L. offers no guarantee that the price of a property will increase in value year on year, nor past performance of property are a guarantee of future performance.