The appeal of new-build
New-build on the Costa del Sol is popular, and understandably so. You get a modern home with good insulation, low energy costs, often a communal swimming pool, gym and gated security, and you can sometimes still have a say in the finish. On top of that you buy at today's price, while you only receive the keys one to three years later.
That last point is at once the biggest opportunity and the biggest risk. You are buying something that does not yet exist, based on plans and a scale model. Those who properly cover the risks benefit from the rise in value during construction. Those who do not, take on needless danger.
With off-plan you buy at today's price and take delivery in one to three years. If the market rises in that period, you effectively buy at a discount.
How off-plan payments work
With off-plan you do not pay in one go, but in instalments tied to the construction phases. A common structure looks like this:
- A reservation deposit on signing, often 6,000 to 10,000 euros
- On the private contract: a top-up to roughly 20 to 30 percent of the purchase price
- Interim instalments tied to construction phases, usually another 10 to 20 percent
- The remainder (60 to 70 percent) on completion and notarial transfer
- On each instalment of a new-build you immediately pay 10 percent VAT
The bank guarantee is not negotiable
The biggest risk with off-plan is that the developer goes bankrupt or fails to deliver while you have already paid tens of thousands of euros in advance. Spanish law (law 20/2015) obliges developers to protect all advance payments with a bank guarantee or insurance.
If the project does not go ahead, you get your deposits back plus interest. So never sign an off-plan contract without this guarantee being arranged in writing and watertight. Have your lawyer check this explicitly. It is the single most important protection you have.
Never pay a single euro on new-build without a valid bank guarantee on your instalments. It is required by law and your only safety net in the event of default.
The risks, in summary
Besides the risk of bankruptcy, there are other things that can go wrong with new-build. Delay is the rule rather than the exception: completion dates often slip by months. The end result can also differ from the brochure, in finish, materials or layout.
Furthermore, you cannot be certain how the immediate surroundings will develop: an empty plot next to your home may be built on later. And the price on the price list is not always the market value, as new-build too can be overpriced. An independent check on price and contract is therefore far from a luxury.
The contract and completion
The purchase contract for new-build is more extensive than for an existing property. It must set out the completion deadline, the specifications (memoria de calidades), the bank guarantee and what happens in the event of delay or deviations. Always have this reviewed by your own lawyer, not by the developer's legal team.
On completion you carry out a thorough inspection (the snagging) and record any defects in writing before you make the final payment. A professional completion inspection prevents you from being left with unfinished items afterwards, with no recourse.
Who is new-build right for?
New-build suits buyers who are in no hurry, who want a modern, low-maintenance home and who can handle the wait and the uncertainty of the construction phase. For those who need a home quickly or want certainty about the end result, an existing property is often the wiser choice.
The key is the same as with an existing property: do not buy on the attractive render, but on a sound contract, a watertight bank guarantee and a price that is right. With independent guidance, the risks of off-plan are well manageable.
Frequently asked questions
How does payment work when buying a new build in Spain?
With off-plan you pay in instalments linked to the construction phases: a reservation amount (often 6,000 to 10,000 euros), a top-up to around 20 to 30 percent at the private contract stage, interim instalments of another 10 to 20 percent, and the remainder (60 to 70 percent) at completion. VAT of 10 percent is due immediately on each instalment.
Am I protected if the developer goes bankrupt during construction?
Yes. Spanish law (law 20/2015) requires developers to protect all advance payments with a bank guarantee or insurance. If the project does not go ahead, you get your payments back plus interest, provided this guarantee is arranged in writing and watertight before you sign.
What are the biggest risks when buying a new build on the Costa del Sol?
Besides the developer's bankruptcy risk, delays are more the rule than the exception, with completion dates often slipping by months. The final result can also differ from the brochure in finish, materials or layout, and the list price is not always the market value.
Who is a new build on the Costa del Sol suitable for?
A new build suits buyers who are in no hurry, want a modern, low-maintenance home and can handle the wait and uncertainty of the construction phase. For those who need a home quickly or want certainty about the end result, an existing property is often the wiser choice.
Buying new-build safely, without surprises
We check the contract, the bank guarantee and the price of every new-build project, and guide you all the way through to the completion inspection. Schedule a call.
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