Buying off-Plan. Is it dead in the water?????

[Grazy]

Hi All,

I bought 2 apartments (for investment) in Manilva,, off-plan adjacent to golf, south facing, large terraces. This was 2 years ago. When the right time came to sell them i.e. before I had to sign the mortgage agreements, I put them up for sale, priced to include a very modest profit, but had no takers. I am now paying the mortgages on them and will have to sell them at cost or less.

Is buying off-plan dead in the water, or did I just pick the wrong product or the wrong area?

[omeyas]

Ah! You're one of many that seems likely to get their fingers burnt. In the past, with rising prices, it was a good idea, and many made a killing. For those not familiar with the process, the plan was to buy off plan, ie. maybe 2 years before the properties were actually built and finished, and in the ensuing two years, the properties shot up in price, and the "speculators" would then sell at a profit before having to start paying the mortgage. But unfortunately, property is not going up so much nowadays, in fact in a lot of cases, it's going down, and people that had no intention (or in many cases,not sufficient money) of ever paying the mortgage, now find themselves having to pay it, or selling at a substantial loss. You gotta feel sorry for them, haven't you?:)
Personally, I don't feel sorry for them, they were in to make a quick buck at someone else's expense, and they seemed to ignore the golden rule, that property prices can go down as well as up.
I'm no financial expert, but I think the generally feeling is that property prices, especially on the Costa del Sol, are long overdue an "adjustment", and that it will end in tears for many. Property seems to be well overpriced, and with the current situation, where there is more supply than demand, I think some could be in for a bumpy ride.
Looking at the seminars they hold in the UK, it used to be all about selling Spanish properties, now Spain is just one of many countries featured, with probably all of the rest selling properties a lot cheaper.
People that have bought properties to live in, rather than to sell on a profit, should be ok, they can sit back and wait a few years until prices come back. They usually do!

[omeyas]

Is buying off-plan dead in the water, or did I just pick the wrong product or the wrong area?

Wrong product, wrong area, and more importantly, wrong time, would be my guess. We have often commented, "who's going to be buying all these properties" as we drive along the motorway (carefully avoiding the CDS itself).
There seem to hundreds of thousands of them everywhere. I think all of us have an "ology" in hindsight, if only we knew then what we know now!

[Stephen]

I'm no financial expert, but I think the generally feeling is that property prices, especially on the Costa del Sol, are long overdue an "adjustment", and that it will end in tears for many. Property seems to be well overpriced, and with the current situation, where there is more supply than demand, I think some could be in for a bumpy ride.



I read that 40% of people who move to Spain are back home within 2 years. With figures like that I don't understand why property prices in Spain have been going up for so long. All those people returning home must greatly add to the supply of houses for sale. Economics textbooks always say that when supply rises, and demand stays the same, prices fall.

[lenox]

I think buying 'off plan' is highly dangerous.
Will they ever build them?
Will they be legal?
Will they be as you expected?
Will the neighboorhood be as you would wish?

In Almería there are several urbanisations which are partly completed, with different people having contracted to pay different proportions, where the whole place has been several years off completion date (even a year is a long time for somebody retired who only has a few years left) and where the urbanisation has not been recognised as legal by the Junta de Andalucía and thus no electricity beyond some generators...

[omeyas]

Just reading a report (http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/04/25/nspain25.xml) that was written this April, and part of it is,

Spanish house prices averaged £187,000 in December. Homes are twice as expensive as in 2000.

That's some jump, a doubling of prices in 7 years.
Since 1997, house prices (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/29/ccliam29.xml) have risen by an incredible 170 per cent.

[Beckett]

Just reading a report (http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/04/25/nspain25.xml) that was written this April, and part of it is,

Spanish house prices averaged £187,000 in December. Homes are twice as expensive as in 2000.

That's some jump, a doubling of prices in 7 years.
Since 1997, house prices (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/29/ccliam29.xml) have risen by an incredible 170 per cent.

If the average annual salary in Spain is less than 20,000€, where are Spaniards getting money from to purchase 280,000€ properties? Salaries definitely have not doubled in the past seven years. And in the major cities, like Madrid and Barcelona, 280,000 euros doesn't even get you in the door.