What should I consider when i buy an off-plan or new-build property?
If you are planning to buy an off-plan or new-build property, there is a couple of points worth knowing.
First come, first serve - Developers are usually required by their financing bank to sell at least 50% of the units in their projects before they are allowed to start construction. This means that by the time construction is completed, the development could be sold out. So if you have a serious interest, do not wait with your purchase. First comers have the widest choice of apartments and sometimes developers can accommodate special wishes (apartment layout, extra features, etc.). Also, developers tend to increase prices once they see that the project gains interest and sales accelerate.
VAT - Brand new property usually attracts 20% VAT. However, if your property has a "Tourist Residence" status, then you can save all or a large part of this amount, depending on the annual length of your private use (i.e. you can claim tax rebate for all the periods when your apartment is offered for rent to visitors).
How is VAT payable? Typically, you will pay full VAT on purchase and then reclaim it back within 2-6 months following purchase. In some cases, developers have pre-arranged an easier solution for buyers, so sometimes buyers are only required to pay a small portion of VAT (e.g. 1-2%) or other times they do not pay VAT at all. Domus Global will put you in touch with a local tax advisor to assist you with the process.
Staged payments - Buying off-plan offers advantageous staged payment schemes. This means that you pay for your apartment in stages corresponding to construction milestones. Each instalment is made into the escrow account held with the notary, so your money is safe, and each instalment is only released to the developer once an independent surveyor has inspected the construction. Below is a typical staged payment schedule for an off-plan development:
- 15% at start of building works
- 35% on completion of the shell and roof
- 20% on completion of plumbing and electricity
- 12% on completion of the façade & windows
- 12% on full completion of the property
- 4% on formal handover
- 2% after 2-3 years