Investment property in SpainA PROPERTY MARKET GUIDE
For 6 years we have had a sales boom, where all lights have been on green. More than half a million properties have been built every year since 1998, representing 40% of all constructed properties in the European Union.No boom will continue into heaven, so be prepared for a change in the market. The end of 2005 showed the first signs of a slow down in the sales. The investment property in Spain trend has continued and strengthened during 2006. If you are a buyer
Residents are offered 100% financing (in some, maybe not so serious, cases even more), with payment terms over 40 and 50 years and several years grace from paying back the initial down payment. But in such a market situation it is more imperative than ever that someone buying an investment property in Spain based only on plans, gets the guarantee of finishing the project, in accordance with law 515/1989. Remember that this guarantee must be issued by a bank or insurance company, not the promoter himself. With less buyers in the market, some of the makro-developments with thousands of houses and a golf course may never be finished as planned, and it should not be you who is loosing the money. 
If you are a vendor In case you already own a property and are thinking of selling it, it may be wise to do so while the lights are still on orange and the real estate agents can find you a client. If/when the lights switch to red, there may not be any takers for your property for a period of time at a price acceptable to you. You should not let any buyers move into the house after paying a small down payment, but insist that the full sales price must be paid before keys are handed over, based on a contract where the buyer accepts, knowing the actual state of the property. Ahh, and Arnold says you should not accept any agreements, not with a real estate agent, nor with a client, that bind your hands for a longer period, and hinder you in selling to another, better client. If you already own a property in Spain If you are happy with the property you own in Spain, that is fine. Then you should only look into four possible problem areas: 1) Have many years passed since the last revision of the fiscal values (valores catastrales) in your municipality? Ask the local town hall or IBI-collection office if a new revision should be imminent. In some municipalities the fiscal values have gone up several hundred per cent, increasing taxes. 2) Are there any plans for new developments or urbanisation plans in your area, that may affect your investment property in Spain, or your purse negatively? You may ask the town hall for an urban report but you should also talk with some better informed Spanish neighbours. 3) Calculate what the Capital Gains tax will be if you should for one reason or other be forced to sell the property, taking into account the intention of the authorities to bring the declared value in the new title deeds up to market value. 4) Calculate what the inheritance taxes will be for your heirs. Arnold suggests that you do not depend on letting income As a buyer, or as an owner with increasing taxes and costs, do not depend on a letting income guaranteed, promised or calculated. The only exceptions are if you are letting out on a year long lease (but then you must remember the 5 plus 3 years of automatic renewal for the leesee , or if you buy or own an apartment registered for tourist letting.) To stimulate lagging sales some promoters try to be inventive in their marketing, including furniture in the sales package, extended financiation, free membership in a golf club…..or a rental 'guarantee'. One promoter near me even threw a lancia car into the offer (and yes, all the neighbours then had white lancia cars parked outside their front doors!). *The rental is sometimes just a calculation of the letting income, if the buyer lets out the dwelling over the summer (easy to calculate, without any guarantee). |