Buying Off Plan Property Costa del Sol Spain. New Developments Costa del Sol. Off Plan Property Spain

Buying off plan property in Spain | Advice on buying off plan on the Costa del Sol and Spain

Property hunters scouring the Spanish coast for a new holiday or retirement home are increasing yet again in numbers.

The idea is that a property developer sells yet-to-be-built (off plan) property at competitive prices, which means he gets cash flow and his clients get a bargain.

The plan is that a year or two later you can pick up the keys to a new Spanish apartment or villa having already notched up a decent gain over the purchase price. The buyer pays anything between 20 per cent and 50 per cent after signing on the dotted line and the balance on completion. A competent lawyer will check all the paperwork is correct, particularly building permits and land use regulations.

A large proportion of new property developments on the Costa del Sol go up on former agricultural land. The regional government, or junta, is the final arbiter on land use and publishes any accepted changes in a daily gazette.

Granada-based lawyer José García-Valdecasas of Lexur Abagados says: "The government will always protect the consumer if you have all the correct paperwork." After all, he adds, "it is not in the interests of Spain to have a negative impact on tourists and foreign residents".

However, off plan property buyers who have been persuaded to turn a blind eye to the planning laws do so at their own, considerable, risk. This underlines the importance of only dealing with reputable property developers.

British buyers who wish to minimise risks may consider dealing only with developers who have an established presence, and a reputation to protect, in the United Kingdom.
Another potential landmine for the unwary comes in the shape of hard-sell agents who claim there are easy, tax-free profits to be made by selling off-plan property before completion comes around.
It is a widely-held belief that sales of unfinished homes in Spain are exempt from the local equivalent of capital gains tax, which runs at 35 per cent for non-residents.

Mr Valdecasas says residents and non-residents alike are obliged to declare all capital gains made in Spain, whatever their source. As to those get-rich-quick schemes promoted by unscrupulous estate agents and spreading across the internet, he says: "This is very dangerous tax advice." .
There is relief of sorts on CGT levels.

The European Commission is taking the Spanish government to the European Court of Justice over what it claims are discriminatory practices as residents only pay 15 per cent CGT (due to rise to 18 per cent).

Expect to be billed about one per cent of the purchase price for a lawyer's conveyance services. When searching for that dream villa, allow for an extra 10 per cent above the asking price. This will be made up of VAT at seven per cent, stamp duty at one per cent and the rest for fees such as the lawyer, the notary and mains electricity and water connections.

Also keep in mind you will need to have a will drawn up in Spain covering your property to avoid complicated inheritance issues.

Resist being hurried into signing the private purchase contract until you are satisfied it is explicit about the property particulars.

This also means buyers have recourse at the completion stage if the property doesn't quite match that picture in the brochure.

The contract should include a bank guarantee stating your deposit funds will be held in the builder's accounts until specific conditions are met. This means Spanish Property buyers can get their money back, maybe plus a bit of interest, if for some reason the project is abandoned.

Reputable builders in Spain will also state a target completion date. In practice, this means if a project runs more than three months late you can haggle for some money off or perhaps an upgrade for the white goods as compensation.