'Off plan' purchases have seen some spectacular returns for thousands of people over the last couple of years here in Spain, especially on the Costa Del Sol.

Buying 'Off Plan' means reserving a property on a new development before the property is completed, often before construction has started and on some occasions before the 'Licencia de obra' (licence to build) has been granted. The developer is obviously very keen to sell as many properties as early as possible to minimise the risk to themselves and to obtain better interest rates on their development loans from banks and investors. To help sell the properties at this early stage the prices are normally extremely competitive for the reason above and also because there is nothing to show potential purchasers except a floor plan and artists impressions of the finished development.

The real key to why buying 'Off Plan' can be such a good investment lies in the fact that normally you only have to pay approximately 30% of the purchase price as a deposit and then often nothing until completion of the property when the rest can either be sold or be financed on a 70% mortgage.

For example:

Purchase Price: 100,000 euros (Jan 2003)
Deposit payable: 30,000 euros

Let us assume that you sell the property in Jan 2005 just before completion and that you sell for 130,000 euros (this is a much lower return than has been achieved in recent years)
Your profit is 30,000 euros which is obviously on the 100,000 euros asking price is a 30% return but remember all you have had to pay is a 30,000 euros deposit so your actual return on cash invested is 100%.


Many people finance the 30% deposit by releasing equity for their existing UK property and so do not actually have to have any liquid cash to take advantage of this profitable investment opportunity. If you would like advice on releasing equity or have any other finance related questions please contact us and we will recommend you to a financial advisor in the UK.

How is such a high return possible?

The following factors all help increase the value of a development during construction.

1) Lower than 'market' prices offered by the developer initially.

As discussed above, the developer is keen to sell the properties as quickly as possible so prices are normally very competitive.

2) Best properties get sold first.

Normally when a development is released a pattern emerges, i.e. penthouses, corner units and ground floor with private gardens tend to sell first which then in leads to price rises.

3) Show home available/building commences.

As soon as the main structure of the development starts to take shape and/or a show home is opened prices normally increase substantially as prospective purchasers can see much more easily what the finished development and individual homes will look like.

4) More units sold.

As the developer starts to sell more and more properties the original prices will continue to increase which obviously means that if you wish to sell your property it is obviously going to be worth more.

5) Final Completion achieved.

Once the development is finished you will be the owner of a brand new apartment/house in a new development with beautiful gardens and a pool. The person who wants to buy at this stage will be prepared to pay significantly more for somewhere they can move into or rent out immediately rather than when the development was just a plan on a piece of paper and a plot of land.

The reasons listed above explain why prices should normally increase as a development is built. It is not uncommon for a property to be bought and sold again before a brick has been laid and even sold again several times before final completion.

One of the final reasons for the popularity of selling before completion is that there is NO CAPITAL GAINS TAX to be paid at all if you make a profit however big by selling before completion.

This sort of investment can bring in significant returns when following a few simple rules!!!!

Not all developers are selling 30% below today's prices in fact the majority are now charging a premium for buying off plan and even at future prices! KEEP WELL AWAY.

Location is the keyword as it is all over the world! some parts of the coast have reached saturation and will struggle to sell later

Payment terms must be attractive the less you have to part with the better.

Think about selling before buying, try to buy the best locations ie penthouses corner units or properties with the most sun, these will sell faster later later.

Do you research and compare with local prices if its a good buy today it will be an even better buy in 18 months!