Discover the 3 most frequently asked questions in the first 4 months of 2023
The real estate market is a living organism that is constantly changing. We have been observing these changes for 16 years and we can see certain regularities and their cyclicality. Some events raise particular doubts among our clients. We have selected the 3 most frequently asked questions in the first 4 months of 2023.
Co znajdziesz w artykule:
- Question 1: How to approach price negotiations? What discount can I expect?
- Question 2: I have XXX EUR and want to buy an investment property on the Costa del Sol. What and where can I buy for it and what rate of return can I count on?
- Question 3: What are ’’ocupas’’ and should you be afraid of them?
Question 1: How to approach price negotiations? What discount can I expect?
There is no unequivocal answer to this question. In this context, the primary market in Spain is governed by different laws than the secondary market.
Developers usually do not negotiate prices, although there are exceptions to every rule. Negotiating is the hardest when the project has just been launched (in the off-plan form, i.e. it exists only on plans and visualisations), is in a good location and sells like hot cakes. Seasoned investors know that by buying at this stage they will earn the most, because:
- Prices at the off-plan stage are the lowest and will increase during development.
- The choice of available apartments or houses is the largest when the project exists only on paper and has not yet obtained a building permit. I will add here that the money of the buyer of the property from the developer is, in accordance with the Spanish real estate development law, guaranteed by the bank. So you can safely buy property even from the plan, because if something happened and the developer could not meet its obligations, the bank will return the funds paid to the buyer.
IMPORTANT! The Spanish development act does not allow the assignment of rights to real estate. So you can't make a down payment on the property and resell it to someone else during construction. Resale is possible only after construction of the property, payment of the full price, transfer of ownership by notarial deed and entry of the change of ownership in the property register.
On the secondary market, however, negotiations are on the agenda. Usually -10% from the starting price is assumed, but there are exceptions to this rule in each direction. It all depends on the situation of the seller. If a quick sale is needed for health, family or economic reasons, the seller will be more willing to negotiate. If none of these reasons apply and the seller knows that his property is worth the price he is selling it for, he may not even want to negotiate. He will prefer to wait until someone pays him what he asked for.
Question 2: I have XXX EUR and want to buy an investment property on the Costa del Sol. What and where can I buy for it and what rate of return can I count on?
In such cases, I start the answer from the end and - unfortunately - with a question that is: "What rate of return are you interested in?" There are various answers, the most common is 7-8% ROI per year. And here I regret to give customers a cold shower. Although official sources say that in 2022 the ROI was around 7%, our experience shows otherwise. No matter how we count it, returns don't want to be higher than between 3.5 and 5%. Neither the purchase price nor the type of property have much influence on these values. If the price was lower, the standard of the property was also lower, so the rent will be lower as well. Similarly, higher price, higher standard, higher rent. Proportional running costs.
When talking about ROI, I often show the example of the Marriott Hotel, which has 3,500 beds on the Costa del Sol and is buying more. For several months they have been selling apartments in a beautifully situated aparthotel in Estepona. New owners are offered a 6% guaranteed return in the first year and a 75% share of the profit in the following years, which is about 8% annually. If Marriott, with its reputation, offers such rates with a significant sales volume, it is difficult to expect that one private apartment will earn more.
GOOD TO KNOW! Generally, let's assume that you can go for property purchases on the Costa del Sol with a minimum amount of EUR 150,000 and don't expect miracles in this budget. There is basically no upper budget limit. For example: for a luxurious 3-bedroom apartment with an area of 300 m2, with a 70 m2 terrace, located on the first line of the beach, you need to pay EUR 3,650,000.
To answer the first part of the question, i.e. "I have XXX EUR and what can I buy with it?", we need to specify the price and location. For example:
- A one-bedroom apartment (ie 2 rooms) with an area of approx. 60 m2 in Manilva can be purchased for approx. EUR 120,000, and in Puerto Banus you have to pay EUR 498,000 for a similar property.
- A 2-bedroom (or 3 rooms) apartment of approx. 80 m2 in La Duquesa can be purchased for approx. EUR 140,000, and an 88 m2 apartment with a 193 m2 terrace in Fuengirola costs EUR 1,095,000
These are areas and prices based on current offers, but selected so as to make comparisons according to the same criteria: area - location - price. It is also important that the prices quoted in the offers should be increased by transaction costs in the amount of 10 to 15%.
Question 3: What are ’’ocupas’’ and should you be afraid of them?
The problem of "ocupas" or "okupas", i.e. the so-called squatters, is one of the problems of the Spanish real estate market. Browsing the internet and information on this subject in media, however, I have the impression that this occurrence is greatly exaggerated. There is also a misnomer such as "ocupados" or "occupantes". Usually, the key information is also missing that if we choose the property well and manage it skill fully, we will not encounter any unpleasant surprises.
Although the law in force in Spain from March 8, 2022 does not sufficiently protect private property, and puts the right of residence and the inviolability of home privacy above it, the widespread use of this legal loophole is not as large as it is presented by the media.
For example: in the province of Málaga (Costa del Sol) in 2022, 415 crimes of unlawful occupancy of property were registered. We have 900,000 properties in this province, so ocupas "occupied" 0.046% of them. The scale of the event is therefore marginal and applies to the vast majority of real estate that is owned by banks or is not the first residence of people registered there.
IMPORTANT! Unlawful entry into someone's home is considered burglary by article 202 of the Spanish Penal Code, but only when it is noticed "in fragranti" - in practice, within the first 48 hours of the unlawful occupants staying at the property. Then the police have the right to immediately "clean" the apartment, which is effective, quick and does not generate court costs.
If you are interested in this topic, I invite you to read the whole article about the ocupas phenomenon