to buying off plan
These days it seems everyone is out to make a ‘quick buck’,
and foreign property investment has become big business, particularly
on new developments, where returns are significantly higher than
on existing property. But investing your hard earned cash into a
project in its early stages can be a daunting prospect.
Here we guide you through the ins and outs of property investment
We all want it – a second home in the sun to escape to when
the British weather turns nasty, or a nest egg for the future we
know will give good returns. The secret to good investment is knowing
your market. The more research you do the less likely you are to
In previous years, there was a general feeling that buying property
in Spain was a ‘dead cert’ and almost guaranteed to
be a good investment. But now property prices are rising, particularly
on the Costa del Sol and so investors would be well advised to consider
all aspects of the purchase carefully.
What is buying off plan?
Buying off Plan’ (before a property has been built) has
a distinct advantage over buying an already established property,
particularly for those wishing to buy a property as an investment.
Firstly, the price of an off plan property will be significantly
lower than a property that has already been built and is initially
set well below market value to attract buyers and investors to
help finance the cost of the construction. The price of the property
will then rise during the construction period, giving you good
returns on your money even if you decide to sell before the property
has been been completed. If you do sell before completion you
will also avoid having to pay Capital Gains Tax, so many wise
investors buy off plan as early as possible in the development
process and sell just before completion to make the most amount
of money and incur the least amount of cost.
For those wishing to buy an off plan apartment or villa for their
own use or to rent out for an income, buying off plan is still
by far the best way. Buying a property up to 2 years before it
is even built means that you will only have to pay a relatively
small amount in the early stages (around 30 - 50%) and will have
extra time to save up for the outstanding amount. In the meantime,
the value of your property is rising without you having to do
anything at all! Developers can even change the layout and specifications
to meet your requirements if negotiated at an early stage. By
law your property will also include a 10 year guarantee, which
can alleviate worries of any problems with your property at a
later stage. And remember, at the end of it all you will have
a brand new property that requires no work, yet at a significantly
Unlike the usual method of buying a property, when it is expected
for the buyer to haggle with the price, it is not normally possible
to negotiate the price of off plan developments and the best way
of securing a low price is to buy at an early stage.
The time scale of buying off plan is also likely to differ significantly
from the usual buying process and so you will need to have patience
when buying in this way. The time-scale will obviously depend
on the length of the construction phases and for early purchases
this can be up to 2-3 years.
Be prepared for lengthy waits as constructions rarely complete
Beginning your search
Buying property ‘off plan’ is likely to significantly
increase the return on your investment, so don’t be put
off by doubts about how to go about the whole process. Off plan
properties are often sold directly to the public by the construction
company or through an agent, which is often preferable as they
will guide through the whole process.
There are currently a huge number of new developments taking
place all over Spain. Agents will offer you a selection of available
developments that meet your criteria and will provide you with
brochures, technical drawings and plans for each property to enable
you to make an informed decision.
Community charges are something to consider when buying an off
plan property, as around 90% of property sold in Spain is part
of an ‘urbanization’, which is usually an enclosed
complex often with a communal pool, garden and underground parking.
Once constructed, a new property is then handed over to the ‘community’
and all the owners of properties within that complex form part
of the community, usually electing a management committee who
oversee the formation of the rules and regulations concerning
the urbanization and also agree on annual community charges, although
all members of the community have equal rights.
Costs usually cover pool and garden maintenance and general upkeep
of the development and as a rough guide cost in the region of
£800 - £1000 per year. It is important to consider
all these extra costs before entering into any contract.
The buying process
Initially you will need to pay a deposit to reserve your chosen
property after which you can instruct your solicitor to carry
out various checks and searches on the project. He will ensure
that all relevant licences are granted and will seek to obtain
a Bank Guarantee in connection with any monies you pay in respect
of the development. It is advisable to open a Spanish bank account
at this stage and also apply for a NIE number – your solicitor
will advise on all such aspects. Once your solicitor is satisfied
that all is in order, private contracts will be drafted which
will detail the amounts and dates of any further payments to be
made. Upon signing the contract you will have to pay between 5%
to 20% of the purchase price and there may also be further running
payments to be made during the building process, which will be
required on fixed dates or at different stages of the build ie.
On finishing the main structure or upon finishing the roof etc.
Each developer will have different schedules and all of these
dates and amounts will be outlined in the contract. As a general
guide, the payment amounts for a development are set out as follows: