Buying ‘Off-plan’ means committing to purchase at today’s prices a property which has yet to be built, and selling it at an enhanced price on or just before completion.

The objective is to benefit from capital growth in the value of the property over, say, a two-year period whilst it is being built, without tying up more than about a third of its purchase price. Buying off-plan also enables you to secure the most favourable prices and terms by agreeing to purchase a property that hasn’t actually been built yet. You’re buying it from the developer’s plan, in other words.

Why is this such a wise move?
Because developers normally increase the prices of their units at certain stages of construction, most notably once a show home is built and open to the public. Worse still, it is not uncommon for developers to increase prices by 10% if their weekly sales targets are being reached!

When reserving property off-plan, you have a number of options open to you. The beauty of the arrangement, however, is that, unlike with most other investment products, you have 18-24 months (the construction time) to decide which option to take.

This allows the investment to track and reflect your own individual, yet often changing, life needs and desires.

How do the financial arrangements work?
A reservation deposit of either £2,000 or £4,000 (+ 7% IVA) secures a property. Contracts are usually exchanged about 4 to 6 weeks later, when 30% or at most 40% of the purchase price is paid.

There will be no more to pay until completion, and the property can be sold at any time thereafter. Naturally most growth will be achieved if the property is held for longer and only sold just ahead of completion.

Investment Senario:
Two bedroom units are available from about £130,000 in the Fuengirola and Calahonda areas, ranging up to £200,000 towards Marbella, with front-line properties on existing or yet-to-be-built golf courses costing somewhat more.

This means that with £50,000 to £60,000 an investor can enter a market where recently values of newly-built properties have increased by as much as 50% over a two-year construction period.

A £75,000 increase on a £150,000 purchase, where £52,500 of capital has been committed, represents a 142.8% return over two years, or 71.4% per annum. (Past performance is of course, no guide to future returns).