Advantages and disadvantages

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Advantages

The key advantage should lie in the price, though a lack of transparency in market pricing can sometimes undermine this. Developers have to compensate off-plan property buyers for the risks they are taking (whenever you hand over money for goods you expect in the future you are taking some sort of risk), for the delay before completion, and for providing them with capital to help finance the development. Therefore buying off-plan should earn you a discount of anything between 10% and 30% off the current market price for a comparable property in Spain.

Then there is quality. Buying off-plan should mean you end up with a property that incorporates the latest building techniques and materials. Building regulations have been constantly improving in Spain over the years so brand new properties should be the best on the market, though it does of course depend upon the spec being offered the developer.

Another advantage comes with the guarantees you are entitled to when you buy newly-built property from a developer. Consumer protection laws in Spain cover different types of build defects for different periods, with the most serious structural defects guaranteed for 10 years. When you buy off-plan you are covered for the maximum period, though the same advantage would accrue to you were you to buy a property just finished from a developer or investor.

In some cases developers allow you some say over the style in which the property is finished when you buy off-plan (colours, floorings, certain fixtures). Finished properties have to be bought ‘as is’ with no scope for building-in your own tastes from the start. Off-plan property purchases can offer more flexibility in this area, though the policies of developers vary enormously on this matter.

Lastly there is an ‘option’ advantage given the delay between the signing of sale contracts and delivery of your property. Should you change your mind about the development or the area you may be able to sell on the purchase contract to someone else, potentially making a profit in the process, and all without the expense of completing on the property. However it is becoming more difficult to sell on properties before completion due to the great expansion in the supply of new properties.

Disadvantages

To say that the long wait for delivery, up to 2 years (or more if there are serious problems), is a disadvantage is only true in some cases. In others it may suit the buyer and thus be seen as an advantage. Even so for many people a delay of 12 – 24 months before they can take possession is a disadvantage that has to be weighed up against the cheaper price and other advantages.

An increasing disadvantage to buying off-plan property in Spain is that fact that many of the best locations have already been developed and all that remains is 2nd or 3rd tier locations with motorway views. I exaggerate but to a certain extent it is true in areas that have been heavily developed to date, for instance Marbella, but much less of an issue in places like Murcia and Almeria where they are still only revving up the engines on the development front.

Turning to the nitty-gritty problems of buying property off-plan in Spain there are several to choose from. The fact that off-plan property hasn’t yet been built creates all sorts of uncertainties that can turn into problems between the time of signing the contract and delivery of the property. Large construction projects, which many developments clearly are, can run into all sorts of problems leading to delays. For instance bad weather, bad project management and problems with planning permission. The point to take on board is that delays are more common that the sales organisations would have you believe. It is sensible to expect some margin of delay and build this into your planning and the contracts you sign.

But the greatest risk of all when buying off-plan, assuming that the developer is financially solvent and your payments have appropriate guarantees (more on this important issue below), is that you end up with something that doesn’t match the plans and specifications that you signed up for. This can happen for 2 reasons: firstly because understanding what plans and specifications mean in terms of finished product is more difficult than it might seem, and secondly because developers have been known (understatement) to promise one thing and deliver another.

According to Spanish consumer protection associations the biggest complaint of all concerns the delivery of built areas that do not match the plans (under build), meaning that you pay for more than you get. Figures from an organisation called Adeprovi show that 44% of all complaints they received in 2004 related to under build. A report from Adeprovi states that off plan Spanish property sales “continue to be inadequately documented” and points out that “the rise in property prices has not been accompanied by a corresponding rise in quality, given that the number of complaints rises year after year”.

The report reminds off plan property buyers that Spanish consumer protection laws give them “significant rights” regarding the information that developers are obliged to provide them with and that they should insist on adequate documentation regarding build specifications from developers before proceeding to purchase. Buyers who experience problems as a consequence of poor build quality or failure to meet build specifications are urged to file complaints against the developer.

The report also gives the following statistics for new build problems in Spain during 2004:

  • 21% of complaints concerned the inappropriate installation of fixed elements such as radiators, toilettes, etc.
  • 10% of complaints concerned garages and parking spaces, which are difficult or impossible to use.
  • 5% of complaints concerned build locations that were not indicated in the plans or that had other unforeseen and undesirable consequences.
  • 1% of complaints concerned unexpected changes to interior distributions such as the elimination of a bedroom or the change in shape of a room.
  • 57% of faults detected in new build properties in Spain were related to damp (damp rising from the ground, or through poorly insulated walls and ceilings).
  • 18% of faults concerned defects in wooden flooring.
  • 15% of faults concerned poor insulation.
  • 7% of faults concerned poor tiling.
  • 3% of faults concerned poor paintwork and other details such as scratched fixtures.

So bear these sorts of issues in mind when buying off-plan in Spain. Make sure that the plans and specs of the developer are sufficiently detailed to minimise such problems, and find out what procedures the developer has place to deal with problems such as these should they arise.

© Mark Stucklin (Spanish Property Insight)