Investing in off-plan property in Spain

During the last decade or so, numerous foreign and Spanish investors have purchased off-plan properties in Spain. Investors have been drawn to off-plan properties, primarily for two reasons the overwhelming quality and diversity of the properties available and the phenomenal capital growth achieved in recent years.

Funnily enough, many of the irritating aspects traditionally associated with the Spanish construction industry, such as the long construction times of many developments and the release of developments in various phases has actually enhanced the gains to be made. In recent years it is not unheard of that Investors who have purchased the right properties at the right time have returned in excess of 150% within 18 months. Along the Costa del Sol especially in areas such as Marbella, Puerto Banus and Sotogrande, many significant fortunes have been created.

Market data suggests that demand is likely to exceed supply of new properties in the coming few years at least, and with property inflation on some coasts reaching nearly 20% per annum, sourcing the best properties should ensure that further substantial gains should be possible.

Although Spanish property is still a sellers market and prices continue to rise, gone are the days when real estate agents could honestly promise capital growth of 50 plus percent on off plan property investment across the board. Of course high returns are still possible, but what is required in today’s Spanish property market is access to the best quality developments as early as possible to ensure the highest returns on investment.

This also means that buyers must be ready to ‘pounce’ when the best quality developments come on to the market to ensure the lowest possible prices. At Arena Estates we pride ourselves on having the most reliable and up to date market information and the confidence of the best developers to ensure we can provide the highest quality investment product.

It is likely that once we have been contacted by an investor our telemarketing team will be in close contact to ensure we can pass on up to the minute information with pre-notification of quality investment product entering the market place.

How does off plan investment in Spanish Property actually work?

In normal circumstances a reservation deposit will be required to secure the property, with up to 30% of the property value due at exchange of contracts one month or so later.

In certain situations the bank financing the developer, also offers a pre-arranged mortgage at the time of completion. This system has proved popular in recent years with those seeking buy-to-let investment opportunity. There are however other options available and it makes sense to discuss with our advisors the range of options available. Once the 30% has been paid, the investor can sit on it whilst capital values of the property increase.

Many developments are released in stages so it is common for the builder to discount the prices on phase one. After all investors at this stage are taking on board the most risk however well managed and essentially all there is to see at this stage is a Greenfield site and a set of architects plans and the banks insurance policy. The price is lowest at this stage to encourage quick purchase, improve cash flow, and to demonstrate to the bankers financing the development, that the project is likely to be a success.

By the time the second phase begins, phase one will be at least part complete. Spanish methods of construction differ from those in the UK and elsewhere, in that often one part of a building can be virtually (or fully) complete while parts of the same building are not far past the foundations stage. As phase two begins potential buyers will be able to clearly see what they are buying and often a show flat will have been built by then allowing potential buyers to see the quality of the fixtures and fittings.
As phase two is launched onto the market, the initial discounted price (applicable to phase one) will no longer be available and prices will also have increased to reflect local property inflation and the fact that fewer properties are now available for sale within the development.

On completion of the whole project the investor owns a unit or number of units in a new development usually with well-maintained gardens and pool. The fact that the properties are completed in various phases ensures that the property is of significantly higher value than at the start of the project. Other factors to consider are the absence of cranes and dust, which accompany the building phases.

Arena Estates can help investors to secure properties at a significant discounts in the most viable new urbanisations and projects. We can also assist in the sale of the unit at any stage beyond the initial reservation deposit generating profit and return. For any further information on how Arena Estates can help in the purchase of off plan real estate in Spain or Spanish property investment opportunity in general please contact +36 1 266 5968 or e-mail info@arenaestates.com and an experienced investment advisor will be in touch as soon as possible.

Disclaimer: The factual information within the Arena Estates website has been created using numerous sources. While every effort has been made to ensure the veracity of the facts contained within this website, Arena Estates assumes no legal liability or responsibility for the accuracy, of the information contained therein. Prices and exchange rates are also subject to change.