Property investors looking for a little ‘olé’ in the Costa del Sol need to decide between new builds or resales – but what do they need to beware of?
Time and community fees
To secure that coveted new build apartment, you need to be at the head of the queue when the development is released, with your finance in place, say Darren Simons and Sean Woolley from Cloud Nine Spain. The downside is you have to wait around two years for it to be built. Community fees are also often higher.
Price and value
New developments encourage buyers to get in early by offering the very best prices at the beginning of the build process. However, on the flip side, new developments will always attract a premium. It is always good to compare a similar resale property that has been refurbished, as this can be better priced.
Taxation on new builds compared to resales are also different. With a new development, you pay VAT (IVA) at a flat rate of 10%. You also pay stamp duty, which is 1.2%. There are about 11% in taxes, plus your notary costs, your legal fees etc. This all adds up to 13-14% of the cost of the new build property.
With a resale property, you pay a flat fee of 7%, which is a transfer tax, as well as the notary, legal and land registry fee, which takes costs up to around 10%. 3% less than a new build.
Buying process and legal safeguards
With a resale property, you pay a reservation deposit to remove the property from the market while you do your checks. You then draw up a private purchase contract, which can be arranged within 10 to 14 days, at which point you pay 10% of the purchase price to bind everybody in. Then in the private purchase contract, a completion date will be agreed to by both parties.
With new developments, you pay a reservation deposit to secure the property, then you’ll be asked for staged payments typically 30%, 40%, or 50% before completion, after which you’ll pay the balance. With a resale property, you can obtain a mortgage from a bank for normally 60% or 70% of the price of the property in the normal way.
When purchasing an off-plan property, hiring an independent lawyer to do the due diligence is absolutely essential. The lawyer is also important for resale properties.
You need to ensure the development or property has a building license and a first occupancy license, which is a grey area. A lot of property owners get a certificate of non-infraction, which means that although it doesn’t have the final license of first occupation, everyone accepts it’s legal.
