Off-Plan Investments First Page | Second Page | Third Page
Lifecycle
The life cycle of a new development can be thought of as the stages which the development goes through to get off the ground.
After a developer secures the land and completes their due diligence, the project is fully conceived and approval to build is acquired from the relevant authorities.
Once that approval is granted, the developer sets up the bank guarantees and finance arrangements for the initial investors.
Finally, the developer secures the contractual arrangements for the execution of the project and begins to market the properties to the initial investors.
In order to actually begin construction, around 30% of the development usually needs to be sold off-plan – and this is where Essential Estates comes into the equation.
Our expertise in finding the very best off-plan opportunities in Spain is unparalleled and we provide honest assessments of all of our recommended projects. There are also a few Developers that we refuse to work with or recommend due to their notorious track records of poorly built projects or high amounts of complaints from owners. Thankfully, the amount of reputable developers offering high quality built products greatly outweighs the few 'bad apples' that remain in Spain.
back to top
Property Prices
Prices for new Spanish property developments are often quoted on the basis of price per square meter built.
Prices per square meter are calculated on the basis of location, quality of building specifications, and the overall quality of the project.
Once the initial offer price has been determined, timing is everything. With the bank guarantees in place and their equity fully guaranteed and/or insured, the smartest investors move in early during the launch phase to secure the best possible prices and the best possible returns.
It is inside knowledge of this ‘lifecycle of a new development’ that makes it possible for serious investors to make a far above average return in a fully secure way.
back to top
Property Values
During the construction phase, your property rises in value.
As more and more properties are sold the developer's sales requirements are met. The developer therefore increases the price of the remaining properties. This has an immediate effect on the value of your property.
The developer increases the prices of the properties in the development in order to regenerate the income from the discounted properties sold initially. This can happen without depending on any overall market growth because the developer is simply raising your previously discounted property’s price to what it should really be.
The true market value is of course derived from the current prices for existing properties in the same location, built to similar specifications.
Usually the first significant price increase takes place when the required number of off-plan sales has been reached. This period is usually two to four months after the launch.
The second significant price increase takes place when construction actually begins. This usually happens another two to four months after the required percentage of off-plan sales has been achieved.
Remaining price increases then occur periodically throughout construction as the development progresses. These price increases eventually result in your property reaching a selling potential of at least equivalent to today’s price per square meter for similar developments in the same location, built to similar specifications.
The other factor which has a major impact on the value of your property is the strength and stability of the Spanish property market.
As one of the fastest growing property markets in the world, your strategic investment in off-plan property is made even more secure. The record gains of 3-4 years ago is now in the past but there is still the possibility of above average returns of 15-20% in the best new developments.
Not only are you buying into a buoyant, growing and very stable market, but you are also buying into that market via an investment scheme that ensures you have the very best chance to make a very handsome return on your equity.
back to top
Potential Returns
As you are now aware, the returns for serious investors who enter Essential Estates’ recommended projects at the right time are above average. This is due to the limited equity required and the nature of the price increases which result from the developer achieving their off-plan sales targets.
As mentioned previously, any further growth in the overall property market will only add to your already above average returns.
The added growth that a positive movement in the market adds to your returns simply makes the prospect of getting on board early even more attractive.
Remember, the sun will always shine in Spain and the balmy evening breezes will still come off the sparkling Mediteranean Sea. Beautiful high spec buildings overlooking glorious moutain vistas and tranquil golf courses are the stuff of dreams of countless people in dreary and damp northern Europe.
Unless peoples' attitute to physical pleasures changes completely, there will always be a strong demand for living here - part-time or full -time. And that demand will have to be met by properties, and the best will always sell and re-sell and re-sell many times over in our lifetimes and those of our children's.
