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Irish Times Take 5- Spain 30/4/2009>>
How to start a search for a property in Spain
With so many options currently available for those seeking to take advantage of the downturn in the Spanish property market, sometimes knowing where to start is the hardest thing.
Should you buy new, key ready property, a resale from a desperate vendor, a bank repossession property, or even an old finca/ farmhouse to renovate? It is fair to say there has never been more choice for those who want to buy a >> property in Spain.
Before you start your search for a home in Spain, it is worth making yourself familiar with the different types of properties and the pro’s and con’s associated with each of them.
New Homes
Essentially there are two different types of new properties that you could consider.
Off Plan Homes
Not so long ago, the vast majority of people buying in Spain, bought Off Plan. The demand was so great that a build time of up to (and sometime in excess of) twelve months was quite normal. Prices were going up quickly and the Off Plan purchase was a far cheaper way to buy in comparison with pre owned (resale) properties. Once the deposit was paid the price was fixed in Euros and in nearly all cases the value of the property had increased dramatically by the time you got your keys to move in.
Once the huge number of buyers started to decrease, the demand for off plan properties naturally decreased too. Prices stopped rising and started to fall back. Developers were not confident enough to start new projects. Many builders began selling their completed properties with very attractive discounts in order to clear their remaining stock.
Now the market is showing signs of a moderate recovery, we are seeing some builders starting new small projects and this is an encouraging sign to prospective buyers that now really is the bottom of the market and a good time to buy.
Key Ready Homes
The worldwide economic downturn affected Spain massively. Builders found it hard to get financing for new and some existing projects. Some buyers who had paid deposits (often 30-40%) now found they couldn’t get financing to complete on their purchases.
In this situation, builders were left with finished properties and no buyer to complete the purchase. Some builders could afford to wait for the market to return so they could get full value for their properties, but some needed to sell quickly to improve cash flow. In these cases the builder would offer the property to market at a knock down price. The price was often just the balance from the original deposit to the sale price. This means some canny buyers were (and still are) effectively getting a property for 60 -70% of the original sale price.
If you are ready to buy and can complete, this option is can be very attractive..
Fincas & Farmhouses
To many, the dream of house in Spain often involves a country property, perhaps in need of renovation. Prices are often incredibly low, but this type of property comes with a huge ‘buyer beware’ warning.
Not only does renovation have the more obvious language problems, there are many legal issues to consider before embarking on this type of purchase. In most cases, these rural properties are lacking in essential legal permissions and documentation that can result in a lot of potential future problems for any prospective buyer.
Access and connection to essential utilities is not always straight forward or sometimes possible. Buying this type of home takes a lot of effort and careful planning, and even then there will always be the specter of problems in the future due to the original lack of correct documentation or possible changes in the land classification. Unless you are extremely experienced in renovation and are happy to take the risk, the purchase of a finca or farmhouse is best avoided at this moment.
Resale (pre – owned) Property
The resale market in Spain is not so different from that of Ireland or the UK. The motivations for selling are similar too. Some are selling to buy a bigger house, a smaller house and some just need to sell because they can no longer afford a second home due to changes in their economic situation.
Whilst there are many resale properties on the market, finding a true bargain amongst the thousands on the market is the key to success and expert advice and visiting Spain for yourself is the best way to find a gem.
Bank Repossession Properties
There is almost an obsession amongst current buyers from Ireland and the UK in repossession properties in Spain. When the market crashed in Spain a couple of years ago, a large number of those who bought at the top of the market found themselves in the unpleasant situation of having their homes repossessed from the bank.
Whilst there will always be the odd genuine bargain, unfortunately in nearly all cases the bank repossession is not the best route to great deal on a property in Spain. Most of repossessions are from those who got 90-100% financing. Banks in Spain will not usually sell for less than the mortgage debt, therefore you are often being offered a property at a higher price than you can get from the regular market.
That said, it is possible to find the odd genuine bargain, but the best properties are sold very quickly, so you’ll just have to go to Spain when you’re ready to buy and explore this option while you are there.
For further advice on buying any type of home in Spain contact Locations on +353 (0) 1 677 11 88
THE SPANISH PROPERTY MARKET
OVERVIEW:
EU member.
Double taxation treaty with Ireland
Cheap financing available
Easy access by plane or car
Rental yields 4-6%gross
85% Owner occupancy level
New lower CGT positive factor
Coastal areas include: Costa Blanca North, Costa Blanca South,Costa del Sol, Costa Almeria, Costa Calida, Balearic Islands, Costa Del Luz, Malaga, Extramadura, Costa Tropical, Costa Azahar.
Costa del Sol Airport: Malaga
Costa Blanca Airports: Valencia, Alicante
Costa Almeria Airports: Murcia, Almeria
Costa Calida Airport: Murcia, Alicante
Spanish Property has always been a holiday location of choice of the UK and Ireland.Present figures indicate there are almost 4 million foreigners owning homes in Spain and should continue to grow, as flights are cheap and regular.
Rental market in Spain
Financing for foreign property buyers is readily available and favourable for overseas property buyers as interest rates are relatively low. While rental income for most property buyers are short lets, it would be possible to break even after mortgage repayments, however it is fundamental to get the right management companies. In general the rental yields would be relatively low due to the fact that there are so many holiday homes. Tourist resorts at the coast and golf properties can be an attractive option for property buyers and rental charges during the season can be high:
Rental management charges vary but as in most tourist locations it would amount to approximately 20%-30%.
The following factors should increase domestic demand:
As the emerging markets are catching up with Spanish property values, and as the Spanish buyers start to re-enter the market, they believe that the Spanish property market will grow in demand again. It is very easy for an Irish person to decide to fly over for the weekend at the last minute. Most emerging markets tend to be 4-5 hours away and do not offer direct flights in off-season periods; however, access to Spain is regular and cheap.
NOTE: WE ACCEPT NO LIABILITY FOR THE ACCURANCY OF THIS INFORMATION.
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