How to choose a reliable Spanish property to invest in

How to choose a reliable Spanish property to invest in

Spain has a desirable real estate market due to its high profitability, dynamic economy, young population and favorable geographic location. However, before buying a house, it is necessary to study the specifics of the real estate market, the possibility of minimizing risks and concluding a safe transaction.

Content:

Is it profitable to choose Spain for real estate investment?

Investing in real estate in Spain today has become one of the critical elements of the growth of the Spanish economy after the 2008 recession. Numbers confirm this reality; according to Eurostat, 76% of Spaniards have invested in real estate and 36.2% have a second real estate. Also, according to the real estate agency CBRE, many foreigners choose Spain for investment (more than 70% of investments). Buying a property in Spain is a highly profitable investment.

It is worth investing in real estate in Spain for the following reasons:

  • Dynamic and open economy - ranked 4th in the EU and 14th in the world with a GDP of $ 1.2 billion; ranks 13th in the world in terms of receiving investments; more than 14,600 foreign companies are located in Spain; and of the 100 largest organizations included in the Forbes Global 2000 list of public companies according to Forbes magazine, 70 are located in the country.
  • Housing prices - while in London, Paris or Munich, the price a few years ago was 16 420, 9869 and 7999 euros per square meter, in Barcelona and Madrid a square meter costs 4215 and 3820 euros, respectively. There is a significant difference.
  • Revaluation of housing and commercial premises in clearly consolidated areas is driving demand and supply shortages while rising prices and rents result in attractive profit margins.
  • An intensive inflow of foreign investment in Spain and growing international trade figures contribute to a noticeable increase in business travel of foreigners to Spanish destinations by 17.5%.
  • High return on investment - the Spanish property market currently offers a high return on investment (ROI).

How to choose a reliable Spanish property to invest in

Why do expats choose Spain to invest and reside in?

At the beginning of the pandemic, many experts said that foreign investors in Spanish housing had reduced investment. However, the situation has stabilized and Spain is popular with investors.

What are the reasons expats have chosen Spain for real estate investments?

  • Improving healthcare.

    Francesc PUJOL, Real Estate Director at Arum Group, says: “We can see that demand is increasing as the pandemic improves and travel restrictions are lifted. Buyers come with the intention of buying and it is a very significant fact that the period for making a purchase decision is significantly shortened.”

  • Striving for a warm climate.

    Raf Jacobs, a real estate expert at SiOu (CEO), adds that a foreign investor will not give up his dream of having a house in Spain even if there was a pandemic. “Moreover, the desire is quite strong due to the isolation carried out in the harsh climatic conditions of Northern Europe.”

  • Lower prices.

    Spain has recorded a decline in prices for investment properties in good locations. Unlike Holland or Belgium where property prices have risen, housing prices have decreased due to the lack of tourists in Barcelona. In addition, foreigners living in Spain want to move from renting to buying or selling their house to have a greater return on investment. At the same time, banks are willing to finance customers by offering them low-interest rates.

  • Remote work.

    Many foreigners work remotely and prefer to stay in an office with windows overlooking the sea. “Second residences are ideal for telecommuting, both because of the sheer scale of new projects and the benefits of high-quality telephony,” notes Francesc PUJOL. For his part, Jacobs notes that 90% of non-resident foreigners choose to work remotely; they are looking not only for housing but also for a place to work.

  • An encouraging future.

    Although the future of all sectors of the economy will depend on the health situation, experts believe that by 2022 the foreign buyer will play an essential role in all segments of the housing market, rental, purchase of secondary residences, and rent investment.

How to choose an apartment to invest in

The goal of any investment is economic profitability. In the case of real estate, this depends on several factors, although localization is one of the most important. Not all areas have the same characteristics or development prospects. Rushing to choose where to invest in real estate can have a high economic cost.

The list of criteria to be considered is quite extensive but the following should be noted.

  1. Characteristics.

    This is a starting point for any investment. With a certain amount of capital on hand, you can focus on finding real estate in a particular area and choose the type of real estate. However, it is worth remembering that more expensive areas do not necessarily translate into higher profits.

  2. Investment purpose.

    When choosing a place to invest in real estate, you need to put yourself in the shoes of people who would be attracted, such as young couples, families, students, workers looking for temporary housing, tourists, etc. These characteristics will determine the housing type and the area where it is most profitable to invest.

  3. Study the rental or sale market.

    Analysis of prices and their changes will allow you to focus your search on the more in-demand property to get high profits.

  4. Market development Analysis.

    Expanding areas generally offer good investment opportunities as starting prices are lower provided that the growth prospects of the selected property are fast as investments are monetized and profits multiply when the area has good infrastructure.

  5. Maintenance costs.

    When choosing areas that are already inhabited such as the city center, the age and condition of the property are critical. Furthermore, with facilities such as a pool, sports and playgrounds, maintenance costs will be higher.

  6. Services.

    Proximity to school or health centers, shopping and entertainment facilities or good transport services are aspects that tenants and buyers value.

It is also essential to monitor the development of the real estate market and the economic and social situation in the country.

How to choose a reliable Spanish property to invest in

What are the risks when buying a house in Spain?

There are essential factors that can pose a risk if not carefully analyzed. They are related to mortgage issues and finance or debt that a property has.

The following guidelines should be followed to minimize investor risks.

Loans

Buyers often turn to recommended and reputable banks for help that is designed to reduce the financial burden on the investor.

Before applying for a mortgage, you need to assess your financial capabilities to avoid problems with payment or arrest for housing.

It is essential to pay attention to the period provided for full payment (from 5 to 30 years). Usually, a house loan has limited funding depending on personal conditions. This means that you need to have accumulation in stock to make a purchase.

Debts of the former owner

Debts that were not paid before buying a house in Spain will become a problem for the new homeowner. Before making a purchase, it is essential to ensure that the debt has been cleared. Consultation with a real estate specialist will resolve any issues in this regard.

Type of locality

When evaluating the benefits that a prospective property may bring, it is imperative to check the quality of the soil. Residential buildings with unstable land can pose a threat to the life and health of residents.

Social danger

Studying the security level of an area in advance can also help avoid social problems.

Purchase of real estate before construction is completed

Off-plan real estate also poses certain risks such as sellers’ fraud, delaying deadlines, problems with documents.

The developer can freeze the construction for the following reasons:

  • Technical deficiencies in the construction process as well as contract violations.
  • The budget constraint is also a concern. For example, the project’s total cost is not being paid which usually increases the project budget and its lead time.
  • Depending on the area in which the project is being built, climatic factors play an essential role that can be unfavorable.
  • Freezing a construction site leads to temporary unemployment and inaction of the local economy which damages the financial well-being of the worker and his family.
  • The construction halt implies the depreciation of infrastructure as property and equipment on the construction site are often depreciated and lost. Equipment ceases to function due to lack of use and/or maintenance.

All this leads to an increase in the project budget and the timing of its implementation.

What will happen to the investment if the developer freezes the construction site?

Suppose the buyer has reasonable doubts that the housing will not be completed on time. In that case, they have the right to sue to terminate the contract and recover damages, the amount of which will be equal to the current market value of an apartment in Spain, similar to an unfinished one.

How is the safety of real estate investments in Spain ensured?

Since real estate in Spain is considered the most profitable investment, many investors dream of concluding a profitable deal as soon as possible and tend to forget about the safety of the deposits.

The investor must be well versed in Spanish law, speak the language, be able to find lucrative offers on real estate sites, navigate well in the regions of Spain, and deal with the transaction to ensure the safety of investments when buying real estate in Spain.

How to choose a reliable Spanish property to invest in

We will help you find reliable property for investment in Spain

Are you dreaming of a profitable investment in Spain? You can turn to the specialists at Spain-Real.Estate for help will all types of real estate for foreign investors to complete any deal quickly and profitably.

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