An usual insight of the spanish real estate

Dear Readers and Investors,

As a result of the extraordinary boom of the Southern Spanish property market between 1998 - 2005, and the special events and consequences experienced in the last two years, we have decided, if we may, to give you our opinion on the property market based on our local experience since 1989.  Also, an insight of the basic rules; which we will be happy to elaborate on, in depth, with any of your specific queries.

How is the market?
Indeed the Spanish property market is constantly evolving and in spite of other emerging foreign areas, it is still the number one European destination for property invesment and number one worldwide destination for second and retirement homes.  It also remains lucrative, provided buyers are careful and ensure that they deal with a professional company, that follows a strict code of ethics with all and every party involved.
The boom reached it’s peak in 2005 and as a result sales slowed down.  Some developments experienced difficulties in carrying sales objectives and in particular, many of the speculative orientated sales didn’t always come to fruition as promised.

In addition, the boom, in our opinion, has created an artificial market whereby, unscrupulous landowners, developers or agents were overpricing in search of a quicker higher profit.
We can all understand the damages this behaviour can provoke, not to mention how much less the buyer can expect from his property.

But, how do we know what the true market value is?
It is in fact quite easy, the only reference that determines what the market value is, is the price per square metre and nothing else.
By knowing how to calculate the price per square metre in any given area, which is simply: the cost of land or land repercussion per square metre build, plus the cost of construction with the applicable ratio to cover all the normal professional costs, fees and margins of a development, a buyer/investor can evaluate what the true market value is, assess the value of any investment and therefore seize the right opportunities.

What other factors are important to know?
The infamous saying of “location, location, location” has been around for ever and seems to be the only reference used in this industry. But, it is vital that other significant criteria are considered when purchasing a property.
Location is of course important but it is just one of four fundamental criteria: it is the careful analysis and the right balance between the location, the overall concept, the technical specifications and the price, which will make a project successful regardless of market changes.

What about “Off-Plan” property investment?
Off-Plan property investment is certainly the most lucrative and secure of all investments available nowadays. Of course, as long as the right project is selected, with all the necessary guarantees and at the correct value.

Off-Plan properties investments have to be below market value.
Unfortunately, to justify a high price some Off-Plan are sometimes offered with arguments such as: “you are reserving a property that will be delivered in 2 years…” No way! Nobody would choose to buy stock that is overpriced, invest in a overvalued business, or purchase anything above it’s value… So, why should it be different in real estate?

An Off-Plan project, to be a lucrative investment, should follow the above mentioned criteria and be 10% or more below market value. Consequently, during the entire life cycle of the development the opportunity remains, as well as the resale and other options.
With the new law in place for 2007, capital gain taxes for non-residents has been reduced from 35 to 18%, which will surely have a positive impact on the existing property market.

So, if the advantages of hiring a Real Estate lawyer are so obvious, what, if any are the disadvantages of using one for your real estate transactions in Spain?