Re: Re: Deal or No Deal

#103034
Anonymous
Participant

I think the issue for John is by saving €60,000 on the cost of entry now this can be offset against the costs he will incur over say the next 5 years, even if the current value of the apartment drops. Costs like community fees and property taxes taxes should in reality be strip out because these are lifestyle costs and John will be enjoying the usage of the apartment in that period, so his rental costs can also be offset against these costs. As John is going to continue visiting CDS regardless if he buys or not.

If John can fix the interest rate at the 2%, say for 5 years, then he is in a win win situation because cost of borrowing is only going to go one way, upwards. But whether John pays cash or uses the mortgage is really a separate issue, as you should really only look at what would the €278,000 earn in interest, less tax, if deposited somewhere over the 5 year period. Whatever this amounts to should be added to the overall numbers.

So when you re-look at the numbers John is spending €250,000 purchase cost + €28,000 buying costs + interest (on €278,000 @5% annum over 5 yrs.) €70,000 = €348,000 added to this would be the selling costs of say €18,000. Is this a good deal really depends on one question, what will the property sell for in 5 years time and this is when a person becomes either a speculator or a reserved safe banker using only historical facts to make his decision. I have also ignored inflation which could easily be in the 3 –6% bracket over this period.

If we all believe that there will not be any major changes on the CDS over the next 5 years then property prices of A class stock will probably remain the same as today but Central Government could change that in a number of ways because they have to boost jobs here to reduce unemployment. So why not just set up development zones for large businesses to move to the area or just give tax concessions because everything else is in place, roads, rail links, major airport, docks for container ships. Tourism and everything linked to it will always be the main stay of revenue on the CDS, but there are many other types of clean businesses that would be attracted to this area especially R&D Facilities etc. Outside of Europe this method is used all the time and Spain has only one choice now and that is to boost foreign investment into Spain – just look at the latest trade missions that have been visiting Spain just this year.