March 12, 2005 at 7:03 pm #51045
In the About Us (A last word of advice) section of your website you have stated “Unless you are a professional investor with experience of the Spanish property market do not go anywhere near off-plan investments in the present climate”.
Please could you expand on/clarify this statement a little since we are planning to buy off-plan in Costa de Almeria or Costa Calida in the near future (but have not yet committed to this course of action).
Thanks in advance for any advice you can offer and our compliments on your website. We have found it very helpful.
March 14, 2005 at 11:32 am #58101
Thanks for your question.
My warning is directed at people who: 1) are considering buying Spanish property off-plan as a speculative investment, 2) who plan to sell on the purchase contract before completion (they have no intention of taking possession of the finished property) and 3) who are ‘amateur’ investors – that is they don’t invest in Spanish property for a living.
The reason I have issued this warning is because it is turning out to be much more difficult to sell on the purchase contract than estate agents (selling the investments in the first place) make out. There are various reasons for this, which I am not going to go into here as I plan to prepare an in-depth report on this in the near future. However in simple terms it is due to over-supply and agents not helping people sell on (they are too busy selling ‘investments’ to the next group of investors rather than helping previous client ‘realise’ their investments).
My warning is especially relevant to (amateur) off-plan speculators whose financial position cannot withstand a worst-case scenario – that is who don’t have the finances to complete on the property if they have to. If you can’t afford to buy the property outright and then deal with having the property stand empty for months or even years (without any rental income – another over optimistic claim made by many agents) then I must advise you, in the strongest possible terms, not to consider speculating in off-plan Spanish property. If you have a strong balance sheet that will cope with a worst-case scenario (having to complete on the purchase, no or very patch rental income, negative cash-flow due to financing costs, maintenance costs, taxes, etc.) then it is up to you – at least it won’t put you into serious financial difficulties, which is what is happening to a growing number of people. When I talk about worst-case scenarios you should read most-likely scenarios, as that is the impression I have of the market at present.
If you are planning to buy a holiday home or second home off-plan then my warning does not apply. My warning only applies to off-plan speculators who don’t have strong balance sheets and who can’t cope with the consequences of the worst-case scenario, which as I have just said I think is also the most likely scenario.
If you are a professional investor with sufficient experience of the Spanish property market my warning does not apply. These kinds of investors should know how to structure their investments and what to look out for.
A good rule of thumb is to ignore 100% of the claims that estate agents make when selling off-plan property investments.
I hope that helps.
March 14, 2005 at 6:18 pm #58102
Costa del Sol certainly looks overdone in the short to medium term.
Have been looking around Granada– RyanAir and Monarch just flying in,new m-way to coast being built,close to skiing,etc.
There are a couple of new devs with 3 bed/2 bath houses, communal pool and tennis in the £150/200k bracket.
March 15, 2005 at 9:28 am #58103
Thank you for the advice. We are not proposing to buy off-plan for the purposes of speculation but are simply looking for a modest holiday/future retirement home for a sensible price.
March 25, 2005 at 1:44 pm #58114
interesting thread. My parents are looking for a second home for the winter and are starting to look at the Costa Blanca / Calida region close to Murcia airport.
My question is what is the scope for getting a discount on off-plan prices? Obviously the agents claim the prices are fixed BUT if you are sitting round the table and are willing to part with hard cash will they consider % cuts to get the deal? Given the current climate of over-supply I would have thought so 🙄
March 26, 2005 at 2:01 pm #58115
There are many clients that dived in to the “off plan investment ” game without I have to suggest,exercising due diligence and research. Property is not a short term investment vehicle as generally those who try to take a short term outlook end up being dissapointed.
View your purchase with a mid to long term outlook and you should do fine. Only opt for an off plan purchase if you have the means to complete that purchase.
With regard to discounts,it is still a very good way of locking a property below the price of an equivalent finished unit and this then represents in real terms a discount. Looking for developers to knock a little off the price for you is next to unheard of!
However before placing any deposit,do not just go on what your real estate guy or the developers own sales staff tell you.Do some research,compare the quality specification and NEVER put money down on anything without the relevant licenses actually being in place. “Expected soon” or other warm phrases are meaningless believe me. Do not be pushed in to parting with your cash based on the line,”These will rocket in price when the license is issued”
if you ignore the above advice,just consider how much of the money you could part with are you happy to lose in a worse case scenario?
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