If you are considering buying a property in Spain as an investment, now is the time to make your move! Spanish interest rates are low and property prices are rising steadily. At a time when Spain’s main airports are predicting a sharp increase in traffic over the next few years, many people believe that the current rate of development will not be able to keep pace with the increased demand for private and holiday accommodation. The result? House prices are set to rise still further so it’s a great time to invest.

Facts and figures for property investors

It’s impossible to predict exactly what return you’ll get from your investment but recent reports from various sources agree that it will be high. For example:

• Property News reports that house prices on the Costa del Sol rose by more than 18.5% in 2002.
  

• Agence France Presse has recently reported that property prices in Madrid rose by more than 30% in the last year alone.
  

• Research by Spain's National Statistics Institute predicts that Spain’s immigrant population will rise to as much as 5.5 million by 2010, representing in the region of 12% of its population, compared to just 5% in 2001. The rising demand for property will continue to fuel the growth of the property market.
  

• Spain's ministry of development has gone on record as saying that the average increase in Spanish house prices was 17.5 percent in the second quarter of 2003 compared to the same period in 2002.

What to invest in?

Before you decide on what you want to buy, take the time to do some research. Clearly, if you’re planning on earning an immediate income from your investment you should look for an existing property (commonly referred to as a resale property) in an area frequented by holidaymakers. Take a look at the rental market, get a feel for how much you can rent your villa or apartment for. Don’t forget to factor in other costs such as maintenance and management charges (someone will have to look after the property in your absence) and remember that property with pools that are close to the beach will yield higher rental incomes.

Buying a run down place for renovation has the advantage that you can improve the property in ways that will specifically attract holidaymakers. It’s a good way of adding value to your property, but be aware that getting building work done in Spain can take longer than you would prefer.

Off-plan investments and buy-to-sell properties

Another popular option is to buy off-plan. This is where a developer decides to build a number of properties on a large plot and needs to sell them before they have been built to fund the development. The advantage here is that you can secure the property by paying a deposit and then a percentage (usually around 30%) of the purchase price.

Benefits at a glance

• Properties that are sold off-plan are usually very competitively priced because the developer will want to maximise the amount of cash he has to fund the development. In other words, the more cash the developer has, the less he has to borrow and if he borrows less then he pays less interest to his bank.
  

• You can choose a prime location within the development and you can often specify the furnishings and décor of the property, all of which helps you to get a better return on your investment.
  

• As the development progresses and the properties get nearer completion their values rise because there is less urgency to sell them and prospective buyers can get a clearer idea of what the final product looks like.