Is the Spanish off-plan market still a viable option?

In the past, buying off-plan Spanish property has been a popular choice with foreign property investors. Many investors would buy when plans first came out, and 18 months down the line, sell their planned property on for a large profit – sometimes as large as 20%. It was an easy way of making money without being saddled with a mortgage debt. However, the Spanish market is currently cooling and so is it still worth buying off-plan?

There are, of course, positives for both the developer and the buyer for off-plan properties. The developer benefits because the buyers provide a cash injection to help with their cash-flow and helps them prove to their bank manager that their plan is a viable one. Early buyers will often benefit from early-bird discounts of up to around 15% of the market value. Assuming that the market value is correct, it means that buyer has already made a minimum profit of 15% when selling the property on.

Aside from the money aspect, buying off-plan also means that the buyer can pick the best units – usually penthouses, end or corner units and those with top-notch views will go first as they will sell faster and help resale values. Another plus point is that towards the end of the build, buyers are often allowed to choose furnishing and fittings and are able to stamp their own personality on their property.

With property prices in Spain cooling, developers are increasingly turning to incentives to encourage off-plan buyers to invest in their developments. The incentives are varied, but common incentives are furniture packages or mortgage payments.

However, it isn’t all good news. Completion dates cannot be guaranteed and builds often finish incredibly late. If any paperwork is incorrectly filed by the developer, or incomplete or illegal design features found, town planning officials may stop the development altogether. There is also the risk that design features or qualities are changed without your knowledge or agreement.

There is still money to be made in the off-plan property market in Spain however caution should be exercised. When looking at an off-plan property, ensure that market price you are quoted is around the right mark – a 10% reduction in a ‘market price’ which is already 10% inflated will see you net no immediate profits. It is better to go for a well-know developer who has worked on other projects so that you can check their previous work and you have confidence in them.

It is also important you are clear on what features and quality is within your contract to ensure that these don’t change over the coming months – this should include and fixtures and fittings that will come with the unit as well as the square metre build size. With the housing market cooling, some developers may well go out of business, so again, it is important to choose a well-respected house builder who is less likely to be affected by any small fluctuations in the market.

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