Off-plan spanish property

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Along with the type of property you also have to decide upon the state of readiness for occupation that you are prepared to consider. On this question you have three basic choices: off-plan, newly built or resale.

Off-plan (sobre plano)

Buying property off-plan has been extremely popular in recent years, though to a great extent many of the off-plan buyers have been speculative investors rather than end users. Nevertheless many ‘end users’ also choose to buy off-plan.

Apartments and semidetached properties off-plan

Most off-plan buyers opt for an apartment or semidetached property that forms part of a developer’s project, the plans for which have already been finalised and approved by the municipal authorities.

If this type of property suits you then the key advantage (in theory) to buying off-plan is that you get a brand new property at a discount to the finished article, though you do have to wait for it to be built. Developers who sell off-plan benefit from lower risks and access to your capital during construction, in return for which you should get a discount of anything between 10% to 20% off the current market price for a comparable just-built property. And in some cases developers allow buyers a limited say over the style in which the property is finished (colours, floorings, certain fixtures), whilst finished properties have to be bought ‘as is’ with no scope for building-in your own tastes from the start.

However committing yourself to buy something that hasn’t yet been built creates uncertainties that can turn into problems between the time of signing contracts and delivery of the property. These problems can be particularly acute for overseas buyers.

For a start you have to visualise the property based on plans and specifications, and the finished property might not be what you were expecting. Also detailed plans and specifications, leaving little room for confusion or doubt, need to form part of a watertight contract between you and the developer – another area where many buyers have come unstuck. New developments are complex construction projects that can run into all sorts of problems before you property is finished, including adverse weather, adverse management and adverse local authorities, so the importance of finding a reputable developer cannot be exaggerated. Lastly the audit of the property before completion and the subsequent snagging process have to be carried out with great care, and overseas buyers often fail on both counts to their cost.

None of which undermines the genuine advantages of buying off-plan when done successfully. If you can afford to wait for your property to be built, which in unproblematic cases normally takes between 14 to 18 months, then buying off-plan is the cheapest way to buy a brand-new property. If this suits you then all you need to do is approach the purchase in a way that minimises the risks and uncertainties peculiar to off-plan purchases. To help you do this you will find will find more information in the section on buying on new developments, and further resources at the website.

Having just said that buying off-plan is the cheapest way to purchase brand new property this does need to be qualified in the present climate. Under normal circumstances buying off-plan is the cheapest way to buy a brand new property in Spain. However during 2006 and 2007 it may well be possible to buy newly built properties on good developments for below the developer’s off-plan price by buying from distressed investors. Too many amateur buyers have speculated with off-plan investments, which has lead to an over supply of new properties. Many of these investors may have to sell at any price and bargains may be had.

Detached properties

Detached properties can also be purchased off-plan from developers, with many of the same advantages and risks as described above. Due to the developer’s lower economies of scale when building detached properties the price advantage may be smaller, but on the plus side you are likely to have more influence over the plans.

Buying a detached property off-plan from a Spanish developer involves choosing a plot and defining the plans and specifications of the property to be built on it. Bear in mind that land sales in Spain attract VAT at the standard effective rate, not the reduced rate for new homes. To avoid paying the higher rate for the plot you may have to wait until the property has been completed before signing the Notarised deeds of sale. This is entirely legal and most developers allow you to structure the purchase this way. However it may not be the most sensible way to proceed and you should consult your lawyer on this question.

Developers have different policies when it comes to defining the plans and specifications for off-plan detached properties. Most developers offer a choice of models (predefined plans and specifications), but limit the changes buyers can make to superficial issues such as colour schemes or pre-installed kitchen equipment. Developers are loath to allow more substantial changes as it increases complexity and costs. Some developers also offer the option of working with their architects to draw up plans from scratch. This will be more costly but may be the only way to realise a unique property vision.

Self-build

A variation of buying off-plan is to build your own property, where you play the role of both developer and client. Doing so means that you get to build your dream property to your exact tastes and specifications whilst avoiding having to pay a developer’s margin (though developers’ costs will also be lower, which mitigates your potential savings). However if you wouldn’t consider building your own property at home then all the more reason not to consider it in Spain. There are many complexities involved in a self-build project and only consider this option if you have the time, willpower, know-how, resources and character to make a success of it.

© Mark Stucklin (Spanish Property Insight)