With the current state of the property market, including certain instability after the coronavirus pandemic in Spain, people are looking for cheaper ways to purchase a house or flat in Spain, especially new constructions with larger surface areas and outdoor space. One way of cutting down costs is to buy an off-plan property, which are estimated to be 15% cheaper on average than buying a used, second-hand home.
What does off-plan property mean?
An off-plan property is simply a building that hasn’t been built yet, meaning that potential buyers make their decision by only seeing the plans of a property.
How does buying off the plan work?
An especially popular option among property investors and speculators, buying off-plan in Spain is a way of purchasing a house before the construction work has begun, but after the building plans are drawn up and the planning permission is granted. This gives the buyer some level of security that the place they are investing in is all above board and legal, and the chance to see what the place will look like in the end. One of the great advantages of buying off-plan, besides the reduced price in comparison with other housing types, is that it may allow you to buy in an up-and-coming area or somewhere you’ve really got your heart set on before it’s all built up and there’s too much demand.
Things to bear in mind before buying off-plan
While off-plan purchases may be more attractive thanks to their significantly reduced cost, there are certain risks connected to it which don’t apply to other types of transaction. Not least of these is the fact that the property developer can run out of money before the work is completed, meaning that your investment money goes down the drain.
Off-plan property options were fairly popular in Spain up until 2008 when the economic crisis took hold, and many people lost the money they had put into buying properties pre-construction. Since then, banks offer guarantees (avales bancarios) against this possibility. Before you sign anything with the developer, you are strongly advised to get one of these with your bank for your individual property, rather than a collective one for the whole development, as it will offer more protection.
The developer is also required by law to secure all deposits with a bank guarantee once the planning permission is granted. You can check the planning permission either with the developer themselves or on the Land Registry, to make sure that the developer has all the legal paperwork in order and the land they are building on really is registered to them.
As well as this, make sure the developer has their own separate insurance against structural damage to the building, which is available to you in the property manual (libro del edificio).
Additionally, you should get a Cadastral certificate stating information about the land, such as where the boundaries really lie, and a certificate which gives the planning situation, including any building restrictions, green zones, public footpaths or any future construction plans on the same plot of land. These are available at cadastre offices or online and at the local town hall (ayuntamiento), respectively.
Only once you are positive that everything is in order should you sign a contract, ensuring that it contains the amount to pay and the deadline for completion of the construction work. After the building is finished, you will be issued with a finalisation certificate (certificado final de obra) from the seller, and a licence of first occupancy (licencia de primera ocupación) meaning it’s safe to live in. If you want, you may also have a chartered surveyor look over the property just to check everything is in order as the developer promised.
If any problems do arise with the developer, such as them not completing the work on time, or not meeting the standards stipulated in the purchase agreement, you are entitled to either extend the deadline or rescind the contract, having all your deposits returned to you with interest. Should you decide to take the latter route, you’d best get a lawyer to help you with all the necessary documentation and processes. A lawyer would also be able to help you in the case that you have to go to court.
While all of these risks may sound daunting, don’t let it put you off buying off-plan. As long as you are willing to wait until the construction of the off-plan apartment or house is completed, buying your next home or investment property in this way is likely to work out perfectly, provided that you take all the necessary precautions and don’t cut corners.
At idealista, we have a large selection of off-plan developments for sale in Spain. Have a look and find your dream home for a great price!