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Off Plan Property In Spain Article
Off Plan Property in Spain
from:What is an Off Plan Property? Off Plan Properties, or OPP as they are often referred to, are new real estate developments, where properties, whether apartments, townhouses, single family homes, are purchased before they are constructed.
Why buy off plan?
Price! Developers fund construction with bank loans, and these days in Spain it is a legal requirement that off plan properties be sold with a bank guarantee. Generally a bank will not be happy to proceed until it is satisfied that the development is a viable financial proposition, and to achieve this the developer normally has to sell a certain number or proportion of the planned properties in advance. Financial incentives are offered, the level of discount from the final expected price depending on the stage that the development project has reached. The highest discounts are offered for the very first properties on the market. In addition to the discount, over the past decade or so, the high rate of property price increases in Spain has added substantially to the financial benefit of buying early. For developments constructed in phases, it is expected that second phase properties will be more expensive than the first phase, for example. Apart from the natural inflation in property prices generally, the higher prices for the subsequent phases can be justified by the fact that the first or earlier phases can serve to show the amenities and attractiveness of the development.
What about the on site facilities?
It is now a legal requirement that amenities such as swimming pools, gardens, communal areas, and golf courses (if they form part of the actual development) be finished before the sale of any individual property unit can be completed. So the buyer is protected and can be assured that what the sales brochure promised will be provided. Also it is normal for an entire block of apartments to be prepared ready for hand over at the same time, so although other parts of the development may still be a construction site, the immediate area around the completed unit is comfortable to live in.
Is buying off plan a good investment?
It is certainly possible to show a good return, for various reasons. Firstly, there is the discount offered for early purchase. Secondly, payments are made in stages during the construction period, so it is not necessary to put up the entire purchase price up front. If the build period coincides with a rising market, it may well be the case that a mortgage can cover the entire purchase price by the time the property is ready for handover. It is wise to ensure that you have an assignable contract, which means you can sell the property on before handover. This can provide some protection against unforeseeable changes in your personal circumstances, which may prevent you from completing the purchase yourself. But one should also consider the possibility that investors or speculators may have purchased multiple units, and many properties could be placed on the market at the same time, which could depress prices, or dramatically increase the time taken to achieve a resale.
So what are the disadvantages?
Not being able to see before you buy! However, the developer may have constructed similar developments nearby, so you should be able to assess the standard of design, the general quality of finish, the attention paid to boundary walls, landscaping and so on. And if you intend using the property yourself, either as a vacation home, or to live in, you will have quite a long wait!
So overall is buying off plan a good idea?
It certainly can be, but like everything, only if it is right for you. Make sure you consider all the factors - the area, the developer, the standard of the development, how many units are being offered to investors, what is included or not included in the price, the payment terms, check whether a mortgage will be available to you - all the normal due diligence involved when buying a property. Don't let emotion make the decision for you.