Has the market lost the plot?

Campbell Ferguson asks why people buy plots to build houses on

LAST UPDATED: 11 May, 2016 @ 16:18
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campbell_fergusonWHY do people buy plots to build houses on?

The International Valuation definition is ‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’

I’ve underlined the important bit. Because when many villas are selling at prices not much higher than neighbouring plots, to buy land might not seem quite so prudent.

We’ve just carried out a detailed valuation of a number of country villas and plots in a high value, well-established urbanisation.

The urbanisation is beautiful and stretches down a tree filled, south-facing hillside, with a number of valleys and crests giving the possibility of different views and aspects, sun and shade, flat valley bottom or hilltop ridge, extremely private or less so.

The villas, built over the last 40 years, have had the choice of the best sites with established access, great views, privacy and mature gardens blending in with the landscape.

With the older properties, the style may be somewhat dated and the services will need overhaul or even replacement to enable our much more technological lifestyle.

In between those villas there are many sites, some of a hectare or more, which are now slightly off pitch, with overly-steep slopes that need terracing and many steps, or with partially-interrupted views or sun in the morning or evening but not all day, as many of the original ‘settlers’ enjoy.

Now the strange thing is that these sites are being offered at very high prices, while many of the villas are also for sale, perhaps by older first-time owners.

Why ‘strange’?

Because due to surplus of supply, many of the villas are priced at not much more than the bare sites!

Buyer 1. – Lovely site, lovely partial views, not quite private or the best in the area but hey, let’s spend 25% over budget, not knowing what’s happening half the time, and put up with two years of stress and argument so that we can eventually sit on the terrace and recover from it all.

Buyer 2 – Existing ‘run-down’ villa in the best location, as the person who built the house some time ago had the choice of the whole valley. The house isn’t the style we want, but we can change that at half the price, and in half the time, of building new. The roads, the services, the site levelling and planning are all in place, much easier all round.

Buyer 2 will have a more marketable property in the long run because of the better location.

So back to my first question – why buy a plot?

 





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Campbell Ferguson, FRICS, working from Estepona since 2001 plus three years in Madrid, is at the heart of the Survey Spain Network, which links 15 RICS qualified chartered surveyors located all round Spain and the Canary and Balearic Islands. Tel: 34 952 923 520 Fax: 34 951 239 216 Email: [email protected] From UK Direct: 0870 800 3520

6 COMMENTS

  1. His argument has financial logic but he fails to mention that these older properties are rubbish built which is unforgiveable as an experienced surveyor.

    It seems that all those involved in Spanish property transactions continue to not make potential purchasers aware of the reality of Spanish construction.

  2. Strangely enough, the Priors still have their plot, garage and pool, it’s the house that the Junta de Andalucia demolished.

    Country villas are mentioned in this article but no mention of DAFO? People need to know that 99% of all rural villas will be DAFO’d unless we can get it overturned.

    Instead of talking up the market, why not join us at AUAN and SOHA and help us to get the property laws changed to something that actually works and give people the protection they need. Legal certainty is the only way you will get the property market you so desperately want. It is broke and it does need fixing.

  3. you’re missing the obvious, the nationality of the sellers.

    plots – Spanish owners, unrealistically priced but will never be reduced, nor will the owners take 1 cent under the asking price.

    Houses – owned by extranjeros, for sale at the real market value, taking into account condition, market forces, etc etc.

    Its very odd.

  4. Fred, the 99% figure came from the Junta de Andalucia (via a SOHA meeting) who want 99% of rural properties to fall into the ‘DAFO’ category (Declaration de Asimilado a Fuera de Ordinacion) which roughly translated means accepted without planning consent. It is obviously the brainchild of somebody who is very hard of thinking as you will see below.

    The Junta de Andalucia are pressuring all Town Halls to classify all properties on non-urbanisable land as either legal (very few will fit into this category) or DAFO which is the category 99% of people will fall into because only a tiny percentage of properties have the right paperwork to actually be ‘legal’ and hardly any rural house built after 1975 has the right type of permissions etc.

    Last but not least, some of the properties will be classed as ‘illegal’ and they will be demolished. These are mainly properties built on protected land or on flood plains but no doubt there will be some nasty surprises on this one.

    So what is the problem with DAFO? Quite a lot actually:

    (1) If you decide to sell your house, the Town Hall must have first refusal and then, if they decide they don’t want to buy your house, the buyer’s lawyers will want a DAFO certificate or ask for a €3,000 retention (you need new plans drawn up in additions to the plans you already have) in order to obtain a DAFO after purchase.

    (2) You can never make any changes to your house and in the event of a fire or natural disaster, you cannot rebuild or repair it.

    (3) It is virtually impossible to get a mortgage on a house once it has been DAFO’d and therefore the value is seriously compromised.

    (4) Once you have been DAFO’d, all your existing planning permissions and paperwork become null and void meaning all the money you spent on getting plans drawn up and your house registered with the Notary has been wasted and you will have to shell out €3,000 when you sell your house to get all the necessary paperwork and have your house relegated to DAFO status.

    People are being advised not to take any action and not to register for DAFO at their Town Hall. In other words, don’t put yourself on offer and voluntarily register unless you are in the process of selling your house (unlikely as that is) in which case you have no choice. That said, it is probably only a matter of time before all the Town Halls are forced to categorise every property in their area and your property will automatically be DAFO’d.

    So if you have a rural property anywhere in Andalucia, you need to know about this. Check out SOHA.es for more information or speak to your lawyer. We are trying to get it overturned or at least modified because it leaves homeowners wide open to all sorts of abuse and exploitation. So many people say “I’ve got all the right paperwork” but this is the Junta de Andalucia moving the goalposts yet again meaning you no longer have the right paperwork.

    How long before they do something similar for coastal properties?

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