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Purchasing property on a new development in Spain

Elvis Elvis

If  you are looking for a new development in Spain how do you decide whether to buy an off plan property or something already built, a resale.

The previous page explored the pros and cons of buying an off plan property and there is one final point left to consider if you intend to buy off plan…

Who else is buying in the development……

Its a well known fact and makes commercial sense that the Estate Agents offer any new development in Spain to a pool of investors before they are launched to the general public.

Its good news for the developers, they can sit back and take deposits which of course helps cash flow and the general feel of the development is lifted because they can advertise that first phase etc as sold.

Its good news for the Estate Agents, they are paid there first commission for a sale to the investor, as the project nears completion the Estate Agents can resell the property to another buyer and take a second commission.

Its good news for the investor, they have the first choice of apartments so they are able to buy the real prime apartments, the ones with the best views, layout etc. They just park their money and as a minimum they can double it  in a couple of years.

There’s one problem…

Someone has to pay for this method of selling a new development in Spain.

And guess what,  its the person who ends up with the flat, YOU!

I know this article sounds a bit sour grapes but it really is a question of people lining their pockets..

or was, I think times are changing..

Purchasing property on a new development in Spain

An Example

If you were an investor and were successful a couple of times you would probably start getting greedy and  loose sight of the golden rule…having enough money to complete the purchase.

More and more investors were and are, reserving more and more apartments on new developments, in effect they are creating a market that isn’t really there.

One new development on the Costa Del Sol has 800 apartments, 600 have been sold to investors hoping to sell before completion. Everyone thinks that the market is busy because they have sold all the apartments, its only now as the development is  nearing completion that the investors are staring to panic, where are the 600 buyers coming from.

What implications does this have for buying a new development in Spain…

I think that you have to establish what percentage of your fellow buyers are investors and how many they are each buying.

Its no bad thing to have a mixture of investors on a development because it can stimulate the demand, its just a question of balance.

The other problem is a little more serious and may or may not happen, it depends on the demand.

Imagine that the investors are forced into borrowing heavily to complete the purchase or worse still, loose their deposits and give the apartments back to the developers.

The big concern here is rental prices and service charges on any new development in Spain…

If all these investors are forced to borrow money then they will need a return, that means short or long term renting, with that many apartments available on a commercial basis it will push the rents down as more and more people compete for the same pool of customers.

It could also effect the service charges and how the community is first run.

If the investors aren’t getting the return they need or the developer is stuck with too many apartments they are not going to want to invest heavily in the maintenance of the complex. It will be more important to pay their mortgage first!

Buying on any new development in Spain or any other part of the world is slightly risky, what I wanted to do in this article is point out the real concerns and the real pitfalls of new developments on the Costa del Sol.

As always please do your research and seek advice wherever you can and remember one thing…

For most people buying a home on a new development in Spain is optional not compulsory!