To complete or not to complete

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This topic contains 34 replies, has 12 voices, and was last updated by Profile photo of Anonymous Anonymous 9 years, 10 months ago.

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  • #52574
    Profile photo of Anonymous
    Anonymous
    Participant

    I purchased a 2 bed 2 bath townhouse at Jockey Villas development Mijas Costa in Dec 2005. Built area 91m2, garden 50m2,Garden Front & Rear private parking place, gated community with pool.

    The property is due to be complete in July 2007. I have paid 20% so far 48K Euro), my PPC contract states that if I do not complete the developer will return 25% of my investment.

    The question is should I complete or not?

    I have invested in UK property & seen moderate growth during the same time period 2005 – 2007. My concern is that I could be pumping more resource into a stagnent market. I can see similar re-sale apartments advertised locally La Sur at 220K, which is concerning.

    Initially I planned on turning around this investment in 5-7 years. But I’m intrested to hear all views on the subject based on the mid term 5-10 years.

    PS. I can cover the mortgage repyments without rental income but needless to say this would be painful especially if I see a decline in property values.

  • #68551
    Profile photo of Inez
    Inez
    Participant

    Its a tough decision for you. Although the developer and contract may state a refund, the likliehood is you would have to sue for it! I have numerous owners in the same situation – different developments.

    With the market at the moment you would be lucky to achieve a price of 70% of actual bank valuation – not what an estate agent reckons he can get for it. This would be minus commisions and costs.

    The market is very slow – very few buyers and even fewer with actual money. Most buyers are trying to buy fully financed.

    Too many properties as well, interest rate rises here and UK combined with a slow saturated rental market do not make a healthy outlook.

    I personally would recommend if you do complete you look at keeping the property for around 5 years when it should have recovered and you will have a better chance of selling.

    If you go for the devloper refund, do it quickly as for sure other owners will be doing the same. Good luck

  • #68553
    Profile photo of Anonymous
    Anonymous
    Participant

    Inez,

    Thanks for your advice which is valued, so far the developer (FM Consulting)have been 100% honest & upfront (this may be a naive on my part as it seems developers show true colours on completion). Are you suggesting that I try to recover 25% of my investment prior to notification from the developer that the property is complete?

    I can afford to sit on the property for 5 years but would be disappointed if the market only started to move then. The other option is to re invest my 25% in the UK property market which is on the up and has not failed me so far.

    I think it is worth pointing out (not sure if you remember) that I did speak to you about property purchase in CDS prior to my purchase. Your advice was to hold fire & observe the market in the short term.

    I ignored it as I felt I could afford to take a gamble. Seems you were right & I was wrong!!

    Should have known better.

    DGR

  • #68555
    Profile photo of Inez
    Inez
    Participant

    Hi there – Sorry to hear it didnt turn out well for you.

    Personally I still firmly believe the Costa is a good place (I have recently bought myself) but I have for the last couple of days been talking to close business friends and we are all seeing the same writing on the wall. It was bad enough with a simple oversupply in the market but now with all the illegal builds and no idea what has a license or not – speculation is rife.

    It is very quiet here – not many people even out and about. My rental portfolio (not mine unfortunatley is very quiet, even the hits on the rental site are very low!

    You need to judge if you can use the 25% wisely elsewhere and recoup the loss. Bear in mind if yuo do complete you will have community fees and rates to pay even if the place is left standing!

    I still dont think it is right for investment and another 12 months or so will see more deistressed sellers and bank repos on the market. It says a lot when developers and bank managers are coming to us asking us to shift their stock!!!

    I would not like to actually give you advise, I prefer to give you the picture so you make your own mind up.

  • #68557
    Profile photo of katy
    katy
    Spectator

    What an honest answer, sound advice. I think bargains are already starting to come on the market, bound to be some distress sales.

  • #68558
    Profile photo of Inez
    Inez
    Participant

    Hi Katy – bargains have been coming on for a number of years now. I started this business 4 years ago with the hindsight of the UK market late 80s and early 90s. We are now getting more and more properties on, but finding even though we have interest, people are still holding back or making even lower offers.

    Anyone able to buy and do a few rentals – nothing to cover mortgages or make an income would do ok now and will realize capital gain, but probably not for a few years from now.

    Despite what other views or info you will get from agents, something is only worth what someone else is prepared to pay for it!

  • #68559
    Profile photo of Anonymous
    Anonymous
    Participant

    DGR,
    I would listen to auntie Inez and take it on board. She is in the thick of things with properties from all kind of developers to be off loaded via the Auction route.

    Further she has broad exposure of the market and is not tied to one agent/developer therefore her view is unbaised.

    On a personal note I should not compare Uk/Spanish market as the dynamics are very different. I however understand the opportunity cost.

    good luck

  • #68562
    Profile photo of Anonymous
    Anonymous
    Participant

    DGR
    As per your 20%, it seams that you will get back €12000, ( In theory yiou should also get the 7% vat attached ) after legal cost very little.

    Thus loosing €34,000 ( €46,000 -€12000 ) It also seams that you have the staying power, when the market recovers is a million $ question.

    I still feel that if you not under pressure to sell or complete and the property is in a good location you will not loose.

    If I was in your position I will complete.

  • #68571
    Profile photo of katy
    katy
    Spectator

    If its a good location, many new builds aren’t.

  • #68575
    Profile photo of Anonymous
    Anonymous
    Participant

    Thanks to everyone for their views.

    I think it’s fair to say that if I pull out now I stand to lose 75% minimum of my original investment.

    On the other hand I could complete & pay the associated costs.

    In this instance I have to cover mortgage repayments over the time it takes the market to stabalise + all other associated costs (insurance, community fees etc). It looks like the market is saturated with rental properties so it would be difficult to count on an income from letting the property.

    To recover this cost I need a pretty big correction.

  • #68586
    Profile photo of Anonymous
    Anonymous
    Participant

    DGR.

    Its long shot. but try an negotiate a reduction in price. Depending on the developers liqudity and the non compliance of other contracts due to the market conditions they might agree. As I said its a long shot.

    The developers have the market intelligence and they can see in their crystel ball that its not looking good.

    In the present climate only developers with sound capital base/reasonable cash flow and a flexible business approach will be able to ride the storm without serious dent to their Balance sheet/market reputation.

  • #68591
    Profile photo of Anonymous
    Anonymous
    Participant

    Shakeel,

    I had not considered negotiating a reduction in cost.

    If I choose not to complete & apply for the 25% refund the developers response will be telling.

  • #68593
    Profile photo of Paul
    Paul
    Participant

    Definitely don’t complete,is my advice. Good luck!

  • #68594
    Profile photo of Anonymous
    Anonymous
    Participant

    Paul,

    Thanks for your thoughts, if you have time I’d been intrested to hear what factors form your opinion.

  • #68596
    Profile photo of Anonymous
    Anonymous
    Participant

    I am in much the same position as yourself, only set to lose a darn site more money than 48k euros. I signed up for a luxury two bedroomed apartment in summer 2004 for completion in July 2005 (Through Ocean View Properties). I am still waiting. What a great investment!!

    Hindsight is a wonderful thing and looking back I can see all the classic mistakes that I have made. So from now on it is going to be a damage limitation exercise – my first decision having to be whether or not to complete and I am increasingly erring on the side of pulling out as I can’t keep my life on hold any longer. I can see the project being a bottomless pit of expense for the next few years and if I were in your position, with a chance of 25% return of funds paid I would certainly not complete.

    Keith1

  • #68597
    Profile photo of Anonymous
    Anonymous
    Participant

    The way I would look at it is to weigh up which is the better option:

    a) to invest another 192,000 euros (balanced owed) on a property whose future over the next five years is unknown.

    or

    b) to accept the 36,000 euros loss and ask myself…. “could that 204,000 euros (192000 + 12,000 euros refund) be better/safer invested elsewhere?”.

    If you choose to invest elsewhere, looking back in 5 years time, losing that 36,000 euros might just seem like a drop in the ocean.

    My advice would be to get out of something uncertain, and put your money somewhere where the market is more ‘positive’.
    Preferably in a place where perhaps there is a better rental income potential to cover those insurance/maintenance costs.

    A friend of mine always buys-to-let in a town/city near a hospital – guaranteed rental income from the nurses!!

  • #68598
    Profile photo of Anonymous
    Anonymous
    Participant

    Keith

    which development? Have you taken advice from a good independant lawyer, on which way to go?

  • #68599
    Profile photo of Anonymous
    Anonymous
    Participant

    I have had buy to let near a hospital in London for over 15 years. Not once I had a tenant from the hospital.

    The theory is right but the reality may be different.

  • #68600
    Profile photo of Inez
    Inez
    Participant

    Well, I heard a good one the other day. Spanish lenders are brining out a buy to let mortgage.

    I had to tell them in order for this to work, there has to be a rental market!!

    Also I have off plan mortgages where the initial 30% is covered followed by 80% loan to value effectively giving a 100% purchase finance.

    All wonderful!

  • #68601
    Profile photo of Anonymous
    Anonymous
    Participant

    Seems more like “desperate” IMO

  • #68603
    Profile photo of katy
    katy
    Spectator

    One factor you should consider, will you really get any money back from the developer? In theory you should but…we all know what happens here, can’t even activate a bank guarantee without going to court and incurring legal fees.

  • #68606
    Profile photo of Inez
    Inez
    Participant

    Finding out the facts from your lawyer will help, but in the long run it may be better to cut your losses and recoup elsewhere.

    Unfortunately this is advice we have to give to a number of our clients recently.

    I could give you numerous horror stories about people in a similar position but due to personal changes in their circumstances are ruined.

    Its very upsetting to have people crying on the phone or in the office and to feel so frustrated and helpless!

  • #68607
    Profile photo of Anonymous
    Anonymous
    Participant

    I’m new to this forum so don’t mean to be confrontational but here goes.Buying off plan is a gamble
    You should not gamble unless you can afford to lose your stake!

  • #68608
    Profile photo of Anonymous
    Anonymous
    Participant

    Katy,

    To be honest I hadn’t considered the developer would not honour the private purchase contract terms (maybe I need to get real). But this is based on the fact he /they have been 100% honest to date.

    I have contacted my lawyer to check the 25% refund clause. It has occured to me that this development is late (should have been finished Dec 06, due to be complete July 07) I’m hoping the refund clause runs past the forecast completion date of Dec 06. Also hope the same applies to bakn gaurentee.

    Keith,

    I’m sorry to hear your story and as always there is somebody in a worse situation than the one I’m now in. Hope all goes well for you.

    Charlie,

    Thanks for the advice which is increasingly the way I’m thinking. I guess I bought at the top of the market (DEC 05) & at top of the market prices. I think the only way to invest at a profit in this market is to buy at auction or from a distressed investor when the market has hit the bottom.

  • #68609
    Profile photo of Inez
    Inez
    Participant

    Very good and fair point. Trouble is many people are novices and are really speculators, not true investors.

    Speculators relied on advice given by estate agents and thought they could make a quick profit by flipping, others expected to cover costs by rental.

    Thorough research was not done and also was not done by the agents who looked at their commission figures not at what their client wanted.

    I used to be in the difficult position of working for Interealty. I set up their property management and rental division in 2000. I had 150 sales staff calling me every day to give `guaranteed renalt prices`to purchasing clients. This I would not do and eventually left as the stress was too much and the arguments with the sales guys was daily.

    Pressure and lies or awkward questions were glossed over the buyers, which has resulted in the mess e see now.

    4 years ago, with hindsight of the UK market late 80`s and early 90`s I set up the auction house, knowing people would have to sell fast. I did not forsee the Marbella illegal license problem which has frighted off our database of investors and buyers who now choose to wait until price stability in the market comes around and more importantly for the governement to make a decision as to what is illegal and what is not.

    2007 will be the death knell for spanish property!

    I hope my views, whilst miserable and depressing will help people to make their own decisions about property here.

  • #68610
    Profile photo of Anonymous
    Anonymous
    Participant

    Latchy,

    To a point I agree my purchase was a gamble. In my case the REA & the developer did not make wild promises regarding capital growth / rental income. At the moment the gamble looks to be a poor one. The money invested in the CDS was a result of good UK property investment so I’m in a position where I can lose the money without being ruined. This said it will still be painful.

    The idea of my post was to get advice on the best action to take now ie get out or invest further.

    However their are plenty of people using this forum who were lied to and decieived by developers / agents / lawyers. In some instances these people worked together to part investors from their cash. In my view this is criminal and is NOT a gamble. Many of the people who have been ripped off have sunk all they had into CDS property and are left with nothing.

  • #68613
    Profile photo of Anonymous
    Anonymous
    Participant

    Gamble is one side. DGR your final paragraph is the pertinent one.

    Many, people also lost in the 80s property crash in Uk. They were not lied about, cheated by the lawyers/developers, or the local Council.

  • #68660
    Profile photo of Anonymous
    Anonymous
    Participant

    Keith1

    Would your purchase with Oceav View Properties be at Manilva Beach.
    Have just returned from Spain to view my apartment there.
    Send me your email via Private Message.

    Back to subject

    DGR

    Agree with Paul.
    Do not complete.

  • #68665
    Profile photo of Anonymous
    Anonymous
    Participant

    Edgecliffe,

    Thanks for posting your thoughts, If you have time please post factors that have influenced you.

    DGR

  • #68667
    Profile photo of Anonymous
    Anonymous
    Participant

    Am fascinated by Shakeel’s suggestion to ask the developer for a discount on completion.

    In theory this strikes me as a brilliant idea.
    Surely there are many many developers out there who face ruin when their multiple “off plan investors” are having to complete and cannot afford to for many reasons including the Spanish banks clamping down on their lending policies.

    OK, so the legal eagles out there might have a word or two to say about the fact that there is a contract in place but surely this is worth a try. The profits that some of these developers stood to make are decent enough to warrant a reduction, especially if they are willing to give back 12,000euros in the event that you don’t complete. Yes, they get to keep your 36,000 but they still have to find another buyer in a tricky market.

    Do see one big downfall though. If they do give you or anyone else a discount once and it becomes public knowledge then surely they’ll have to give all of their clients the same reduction?

    As to whether or not to complete? Well it seems to me like its either Jockey Villas or the 3:30 at Newmarket on that one. A gamble, pure and simple…and not my place to comment.

    Good luck with it all.

  • #68669
    Profile photo of Anonymous
    Anonymous
    Participant

    sdodgson,
    As, I understand that there are 100,000 units, empty/unsold. Would the market want to add 1 more ?

    I, feel that DJR has prepared him self mentaly to take a loss, which is half the problem solved i.e. he is thinking from his head and not heart. So at this juncture no point it trying a discount in order to complete.

    The contract is private at this stage and such subject mutual agreement can be amended if both parties are willing to do so.

    In so far as others asking for a discount. A descretion by DJR should be the order besides this is Spain and what do they say ” Spain is different”

  • #68715
    Profile photo of Anonymous
    Anonymous
    Participant

    Re Shakeel’s sdodgson’s comments (re negotiate ppc at time of completion)

    In my view this is a difficult situation morally. Lets imagine my investment went very well (many did prior to 2005) & at the time of completion the developer tried to re negotiate the contract. Lets face it the investers would have raised merry hell.

    If the PPC contract allows the buyer to withdraw & retain some of his investment he has the right to exercise this clause.
    I think it would be unfair for the buyer to prompt a re negotiation of the purchase at time of completion on the back poor market conditions. However if the buyer notified the developer of his intention to withdraw from the purchase as is allowed within the PCC & the developer offers to negotiate this is a diffrent matter (in my book anyway).

  • #68717
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi DGR, I commend you for your moral standing. Unfortunately this only works if we have even playing feild.

    As you can see the Forum is full of people who acted in good faith and morals. The construction sector, a few layers, town halls in Spain does not subscrible to ethics. so you cant Tango with them.

    Besides, You have a choice to walk out and leave the property to the developer or salvage a situation which will be damage limiting exercise.

    Your action will not harm anybody, will not hurt anybody, it will only affect the profit margin.

    It will only hurt Capitilism. Does capitilsm have morals?

  • #68722
    Profile photo of Anonymous
    Anonymous
    Participant

    Shakeel,

    Point taken and I can see the validity in your comments (possibly a good fix all round is some cases).

    My comments in my last post relate to my opinion only & also are applicable in this instance only.
    If I felt the wool had been pulled over my eyes or people had been less than honest I think my reaction may be a little more ruthless in nature.

  • #68728
    Profile photo of Anonymous
    Anonymous
    Participant

    DJR
    I have been brought up with very high morals and i am very gratefull to my parents to set such standards.

    I am all ways up front in my business dealing and can honestly say that knowingly, I have never cheated anybody, my word is my bond, I negotiate hard and once I shake hands I do not go back on my word.

    However, in a dog eats dog world if people are not honourable than I am happy to lock horns at what ever level is required.

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