New Development vs. Resale Properties

MiMove on 2023-09-21

Investing in Spanish real estate is an exciting venture, but one of the critical early decisions you’ll face is whether to buy a new development or a resale property. Each option has its distinct advantages, and understanding them is crucial. In this blog, we’ll explore the benefits of buying a new development property and the advantages of purchasing a resale property in Spain while also considering the tax implications associated with each choice.

Advantages of Buying a New Development Property

  1. Modern Amenities and Design: New development properties often come equipped with the latest amenities and cutting-edge designs. They typically adhere to current building codes and regulations, ensuring safety and compliance.
  2. Customization Potential: Buying a new development property off-plan allows you to customize certain aspects, such as finishes, layouts, and sometimes even floorplans, to align with your preferences. However, customization options may vary depending on the developer’s policies.
  3. Warranty and Quality Assurance: New properties typically include builder warranties, providing assurance regarding structural and mechanical aspects. Quality control is stringent during construction, ensuring a well-constructed home.
  4. Energy Efficiency and Sustainability: New developments often prioritize energy efficiency and sustainability. Features like double-glazed windows, efficient insulation, and renewable energy sources can lead to lower utility bills and reduced environmental impact.
  5. Community Amenities: Many new developments offer communal facilities like swimming pools, gyms, landscaped gardens, and security services. These amenities enhance your quality of life and can be attractive to potential renters or buyers in the future.

Tax Considerations for New Development Properties: When purchasing a new development property, buyers should be aware of the following taxes:

  • Value Added Tax (VAT): New properties are typically subject to VAT, which is currently 10% but can vary. Buyers must factor this into the purchase price.
  • Stamp Duty (AJD): The Stamp Duty applies to new properties and is usually a percentage of the purchase price. It can vary among Spain’s autonomous communities.
  • Property Transfer Tax (ITP): In some regions, new properties may be subject to ITP instead of VAT. ITP rates also vary by region.

Advantages of Buying a Resale Property:

  1. Immediate Availability: Resale properties are ready for occupancy, allowing you to move in or start generating rental income immediately. There’s no waiting for construction to complete.
  2. Established Neighborhoods: Resale properties are often located in well-established neighborhoods with mature landscaping and existing community dynamics. You can get a feel for the area’s character right away.
  3. Negotiation Opportunities: Buyers of resale properties may have more room for negotiation on the purchase price, especially if the property has been on the market for a while or requires minor renovations.
  4. Historical Charm: Resale properties can exude historical charm and unique architectural features that reflect the local culture and heritage. These characteristics can be appealing to buyers seeking character homes.
  5. Immediate Rental Income: If your goal is rental income, a resale property can provide an immediate return on investment as you can start renting it out without delay.
  6. Tax Benefits for Resale Properties: Resale properties are often subject to a lower Property Transfer Tax (ITP) instead of VAT. ITP rates vary by region but are generally lower than VAT rates for new properties.

When choosing between a new development and a resale property in Spain, it’s essential to consider your personal preferences, investment goals, and tax implications. New development properties offer modernity and customization but may involve VAT and other taxes. Resale properties provide historical charm and immediate availability, often with lower ITP taxes. Carefully assessing these factors will help you make the right choice for your Spanish real estate investment.