Spanish property market

The last few years has seen a dramatic increase in the number of overseas investors buying apartments, homes, and villas in Spain. Warm summers, mild winters, fantastic scenery and great food are just some of the factors that have combined to attract unprecedented international investment. And as if that wasn't enough, low interest rates, the continuing boom of the Spanish property market and the growing demand for accommodation from the tourist industry means that investing in Spain now will yield impressive returns in the years ahead.

If you are considering buying a property in Spain for investment, now is the time to make your move. Interest rates are low and Spanish property prices are rising steadily. At a time when Spain's main airports are predicting a sharp increase in traffic over the next few years, many people believe that the current rate of Spanish property development will not be able to keep pace with the increased demand for private and holiday accommodation. Spanish property prices are set to rise still further so it's a great time to invest. Research by Spain's National Statistics Institute predicts that the Spanish immigrant population will rise to as much as 5.5 million by 2010, representing in the region of 12% of its population, compared to just 5% in 2001. The rising demand for property in Spain will continue to fuel the growth of the Spanish property market. Spain's ministry of development has gone on record, saying that the average increase in Spanish house prices was 17.5 percent in the second quarter of 2003 compared to the same period in 2002.

The Spanish buy-to-let property market is being opened up by reforms of the rental legislation. The laws are being changed under the new socialist government to bring the number of homes to rent up from 11% to 20% over the next four years. This is to resolve problems caused by the inflation of housing prices in the city centres and bring some of the 3.1 million unoccupied homes on to the rental market.

There is a growing popularity for investing in the Spanish property market where a developer decides to build a number of properties on a large plot and needs to sell them before they have been built to fund the development. The advantage here is that you can secure the property by paying a deposit and then a percentage (usually around 30%) of the purchase price. Spanish property that is sold off-plan is usually very competitively priced because the developer will want to maximise the amount of cash he has to fund the development. In other words, the more cash the developer has, the less he has to borrow and if he borrows less then he pays less interest to his bank. You can choose a prime location within the project and you can often specify the furnishings and décor of the property, all of which helps you to get a better return on your investment. As the development progresses and the properties get nearer completion their values rise because there is less urgency to sell them and prospective buyers can get a clearer idea of what the final product looks like. If you sell your property before completion you won't have to pay any capital gains tax.

Properties in Spain are a good investment as normally you only have to pay approximately 30% of the purchase price as a deposit, and nothing extra needs to be put down until completion when the rest can be financed on a 70% mortgage. However, it may be possible to negotiate a scheme of 10-15% deposit and nothing further until completion. Many people finance the deposit by releasing equity for their existing UK property and do not actually have to have any liquid cash to take advantage of this profitable investment opportunity.

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