Buying Off Plan in Tenerife – the Facts
Buying an “Off Plan” Property is becoming more and more popular as investors seek to maximize their returns. This method of buying has seen spectacular profits for purchasers over the past few years, particularly in the Canary Islands and Cape Verde.
Buying “Off Plan” means that you reserve a property on a new development before construction is completed, or even before it has started. Prices are low as you are being offered the chance to purchase an empty plot of land which will eventually become a property.
At pre-construction the developer is eager to sell as many units as possible as this lessens his risk. Therefore the plots are priced accordingly. You will be expected to pay out a deposit and then arrange stage payments as your property advances throughout construction. You will be able to get a mortgage on the completed property.
Buying off plan affords you chance to cherry pick the prime plots on the development. With apartment blocks generally the first to go are the penthouses, corner apartments and ground floor with gardens.
As the construction develops, the prices will increase as other prospective buyers are able to see what is on offer. Purchasers are often more willing to buy a property that has been completed and has pretty gardens and functioning swimming pools. This is often the prime time to sell on your investment. However, if you sell on your property before construction is finished, prior to taking the title deeds; there is 6.5% Capital Gains tax to be paid on whatever payments you have made to the developer. Normal Capital Gains tax in the Canary Islands is currently 18%.
Buying off plan is a prudent investment for those who don’t mind waiting before taking possession of their new home and those investors looking for a substantial gain on their property purchase.
Example of stage payments:
Prices start from 130,000 euros for a 1 bedroom and 195,000 euros for a 2 bedroom Easy stage payment terms and with mortgages of 80% available to non-residents.
Payment terms
• 20% On signature of contract
• 80% at completion 16-18 months after 1st payment
IGIC Tax of 5% and legal fees of 3% will be become payable at completion
Information kindly contributed by Horizon Property Group
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