12th April 2007 09:53
Off plan property investment is a growing industry in Europe, with off plan sales reaching a record high in France last year. But in other European countries like Spain, investors have been put off. So what is it that makes French off plan investment hot and Spanish not?

In France in 2006, 126,300 off plan properties were sold, reflecting a rise of 3.9% since 2005. Off plan investments are so popular that prices are fast approaching those of older properties. Off plan properties offer the advantages of a modern house with considerable savings on notary fees. For example, a 5 year old property worth 15,000 euros would incur notary fees of 7%, whilst a new property of the same price would only incur fees of 2%. In addition, the French tax, Taxe foncière, is suspended for 2 years after completion. Insurance on new builds is obligatory in France, and repairs must be carried out by the developers for a number of years, ensuring that construction companies follow the latest building, plumbing and electrical regulations.

In Spain by contrast, corrupt property developers have caused turmoil in the Spanish property market, and horror stories have multiplied of homeowners facing exorbitant fines or having their properties demolished because they are in breech of planning laws. Property investors are urged to seek legal advice and obtain bank guarantees to reclaim their money if things go wrong. But still, many property buyers in Spain have lost significantly as a result of illegalities or developers going bankrupt, making Spain a high-risk investment.

There are of course risks with any off plan investments in so far as delays can push back delivery dates, which can be awkward if you are dependent on rental income. Another problem is that foreign mortgage lending can be complicated to set up. In France there are numerous ways of borrowing sums at different rates for different periods of time. The safest way to buy off plan property therefore is through an independent property investment company, which will not only find a suitable property for you, but which has a longstanding relationship with reliable developers, and expert knowledge of legal and financial processes.

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