Polaris World Guide how to buy a property
'Off Plan' in Murcia, Spain..
our clients who are looking to
make a capital return their main priority, to maximise their
investment returns or who are interested in buying a property
for themselves but are not worried about having use of it in
the short term buy 'Off Plan'.
'Off plan' purchases have seen some spectacular
returns for hundreds of people over the last couple of years
here in Spain.
Buying 'Off Plan' means reserving a property on a new development
before the property is completed, often before construction
has started and on some occasions before the 'Licencia de obra'
(licence to build) has been granted.
developer is obviously very keen to sell as many properties
as early as possible to minimise the risk to themselves and
to obtain better interest rates on their development loans from
banks and investors.
To help sell the properties at this early stage the prices are
normally extremely competitive for the reason above and also
because there is nothing to show potential purchasers except
a floor plan and artists impressions of the finished development.
The real key to why buying 'Off Plan' can be such a good investment
lies in the fact that normally you only have to pay approximately
30% of the purchase price as a deposit and then often nothing
until completion of the property when the rest can be financed
on a 70% mortgage.
Purchase Price: 100,000 euros (Jan 2004).
Deposit payable: 30,000 euros
Let us assume that you sell the property in Jan 2006 just before
completion and that you sell for 130,000 euros (this is a much
lower return than has been achieved in recent years)
Your profit is 30,000 euros
which is obviously on the 100,000 euros asking price
is a 30% return but remember all you have had to pay is a 30,000
euros deposit so your actual return on cash invested is 100%.
Many people finance the 30% deposit by releasing equity for
their existing UK property and so do not actually have to have
any liquid cash to take advantage of this profitable investment
If you would like advice on releasing equity or have any other
finance related questions please contact us and we will recommend
you to a financial advisor in the UK.
How is such a high
The following factors all help increase the value of a development
1) Lower than 'market' prices
offered by the developer initially.
As discussed above, the developer is keen to sell the properties
as quickly as possible so prices are normally very competitive.
2) Best properties get sold
Normally when a development is released a pattern emerges, i.e.
penthouses, corner units and ground floor with private gardens
tend to sell first which then in leads to price rises.
3) Show home available/building
As soon as the main structure of the development starts to take
shape and/or a show home is opened prices normally increase
substantially as prospective purchasers can see much more easily
what the finished development and individual homes will look
4) More units sold.
As the developer starts to sell more and more properties the
original prices will continue to increase which obviously means
that if you wish to sell your property it is obviously going
to be worth more.
5) Final Completion achieved.
Once the development is finished you will be the owner of a
brand new apartment/house in a new development with beautiful
gardens and a pool. The person who wants to buy at this stage
will be prepared to pay significantly more for somewhere they
can move into or rent out immediately rather than when the development
was just a plan on a piece of paper and a plot of land.
The reasons listed above explain why prices should normally
increase as a development is built. It is not uncommon for a
property to be bought and sold again before a brick has been
laid and even sold again several times before final completion.
One of the final reasons for the popularity of selling before
official completion of the construction is that you can drastically
mitigate your capital gains tax liability. For more details
on taxation please speak to us and we will be happy to help
you resolve your questions, either ourselves or by recommending
a local Spanish lawyer.
At Spanish Mortgage/property we deal with numerous new developments
on the Coast from the cheapest one bedroom apartment to multi
million pound luxury villas and we are able to offer professional
friendly advice on all aspects of buying 'Off Plan'.
We hope that the above guide has been of help to you, please
don't hesitate to contact us if you have any further questions
or would like to arrange to view some of the stunning properties
on offer on the Costa Del Sol.