The project solution of the time is the future in Spain! - up to 25% cheaper new development via housing cooperative - Spanish Real Estate

The prices of land and building materials have skyrocketed in recent years in Spain. At the same time, larger and larger projects are being built with increasingly higher margins. Most assessors realize that this risks building up mini-bubbles in the market, and that several projects that are sold will never even be completed as they will not sell enough apartments/houses to break even for the promoter (builder) who finances the individual project. This problem has only gotten worse with inflation and interest rate hikes.

In these construction projects, the transparency and security for buyers is also substandard. This development worries many, not least the major Spanish banks that are responsible for security. However, there is a way forward that takes Spain out of this dilemma, and this way is found in a working model that was successful in the past.

Housing Cooperative are cheaper and significantly safer for the buyer

The solution is so-called housing cooperative , which not only push down prices but also increase security for both the individual buyer and the bank.

The above lines are already now and will become even more relevant in the wake of the Corona and inflation crisis. Many of the giant projects that are now being sold in Spain will simply not come off. Smaller projects, where the buyers, as a group, instead of a promoter, buy up the land and build is the only way forward.

When you read the Swedish newspapers, you can easily get the impression that everything is delayed and that everything has become more expensive, etc. This is not a general truth. Our project Colina de Alta in Nerja, as an example, started construction in Q1 2022 and in the autumn we were about 3 months ahead of schedule and it has continued to roll. It is true that certain materials have become more expensive, but other materials have become cheaper. Prices can still go up a bit, of course, but as it looks now, the prices of materials and supplies will normalize. This building community had really good prices when we launched it and the location as you can see in the picture from the building is excellent! Finally, we would like to add that we are very satisfied with the construction company and they will definitely be commissioned to build more of our future projects.

The value of attractive, turnkey new development will, with great probability, during the first half (from the second half of 2024) of the 20th century rise enormously. Especially in areas such as Malaga and Nerja and surrounding areas where there was already a lack of new development before Corona. As the desire for new development has increased (prices rose by 10% in July 2021 alone), it remains to be seen whether the market can solve all the thresholds that have arisen and deliver new development faster than expected after all.

In this article, we explain why the housing cooperative model is on the rise again in Spain (but also in Sweden, and not least in Germany and other countries) and why you should also consider investing in an apartment or house in a housing cooperative in Spain - as security for you is much higher, and prices up to 25% lower (but even lower according to the actual figures we are sitting on in winter 23, from various projects. There has been less construction than expected in recent years, while the demand for turnkey new development is greater than in many years, which pushes prices up further on completion). The housing cooperative model is also for several reasons, in addition to the depressed prices, more attractive to the investor. More about the safety and other advantages of this model below. You will also find further down in the article all projects that are sold here and now, and that are ongoing during the year. Let's first define this cost-effective construction concept.

Note that prices are usually so much lower per square meter for a housing cooperative that Spanish law aims to prevent speculation. According to the Spanish law that regulates this project solution, each individual (this law also applies to companies) may therefore buy a maximum of 2 homes in a housing cooperative per autonomous region . However, it should be pointed out that when the homes are completed (and housing cooperative is dissolved and they legally become ordinary owner-occupied apartments) you can buy in additional communities if you so wish. The reason for this law is that housing cooperative are cheaper than promotions and they want to prevent individual investors from concentrating on a single area, buying up several properties and distorting prices through high rents or pure speculation.

Spanish banks increasingly reject the current promoter model and believe that housing cooperative are a safer form of construction for all parties. However, it is a legally complicated process to pilot this type of project through all the heavily regulated bodies and it will take quite a while before this concept is available on a broad front again. Most commonly right now, it is in the competitive market in Madrid, where increasingly high land prices have caused banks to put the brakes on costly construction promotions. With the Great Recession of the first decade of the 2000s fresh in their minds, banks now again want to see projects where financing (including financial review of each individual buyer) is more secured.

What is a housing cooperative ?

What is housing cooperative and why invest in this model instead of a normal promotion model?

Housing Cooperative .se has the following definition about the model:

"The driving forces for wanting to be part of a housing cooperative can vary. It can be about wanting to live together, about the design of the home, about ecological construction, about how you want to live as an elderly person - or about wanting to keep the profits from building in attractive locations yourself.

For society housing cooperative are a way to achieve a more interesting and varied urban development. The experiences from Germany show a higher quality, more interesting architecture, greater diversity and a deeper commitment to one's own accommodation. Disadvantages can be that conflicting wills make for a more difficult process, while at the same time efforts of patience and money are required for a long time before the reward comes.

A housing cooperative (ie. Baugemeinschaft) is simply an association of individuals who jointly buy up a plot of land, plan and have one or more buildings built.

Housing Cooperative can then use different forms of ownership in the completed property, such as tenant ownership, cooperative tenancy, ownership or tenancy. As a rule, the association usually has a special orientation for the housing, such as environmentally friendly or child-friendly housing, etc. Our orientation is to find the best possible investment for both rental and value increase. We find lots in attractive locations with an attractive price picture, and build at the lowest possible cost without compromising on quality. We then offer an overall concept for renting the homes, which includes janitorial, key management, license management and marketing in international portals for maximum occupancy. Already in the planning stage, we have investors with whom we work with in terms of the design of the buildings. However, there are no requirements for the buyers in our housing cooperative to agree to invest. Approximately 50% of the buyers are de facto families with children who want large residences in safe locations, close to the airport and the sea, etc. For them, the rental potential and the increase in value are a pure bonus, and not the primary purpose of the purchase.

NOTE that when the construction is finished [in Spanish housing cooperative ], the community is dissolved and the apartments are considered legally as ordinary owner-occupied apartments again. There is thus no difference whatsoever between owning an apartment bought via a housing cooperative compared to any other promotion model in Spain. A Spanish housing cooperative is simply a cost-effective and safe way to build homes.

In Sweden and Germany, it is common for all owners to be involved from the beginning and design the accommodation, but this is not the case in Spanish housing cooperative . There, the main aim is to push prices down compared to a promoter model. Having 10 different nationalities participate in the foundation process would slow down the entire construction process too much. In addition, you have strict Spanish building standards and detailed plans to work with. In Spain, it is also more about the location (preferably an elevated location, near the sea, near the airport) than about the design of the accommodation itself.

However, the prices of the plots are skyrocketing, so a wide network is required to find the remaining and reasonably sized plots, in good locations that are sold at reasonable prices, in order to build an attractive and affordable product. Finding these plots is our main task. In addition, our strategy is to mainly sell to Scandinavian buyers, which simplifies the whole process as most people (who, for example, do not want Scandinavians to limit the possibility of renting out their home) have the same idea of the design of the community, as well as the rules of the housing association, etc.

The association has no debts after moving in

Also note that in Sweden the housing association is often in debt, which affects the rents for the housing units in the association. That's not how it works in Spain, because in Spain there are generally no loans in the associations. Although Spanish housing associations have no debt, area fees (the amount varies, ranging from €500 per year to €2,200 per year) are added once a year for the maintenance of the property, pool, lighting, green areas, etc.

All payments in a housing cooperative take place during construction and finance it step by step (they are also secured by an external insurance company which guarantees that you will get back the money deposited plus interest in the event that something unforeseen happens during construction). All payments to external parties take place via the bank's separate account for the project according to a strictly regulated payment ladder. Commissions to the project's architects, brokers, project managers, accountants, etc. are also paid via the bank that has been commissioned by housing cooperative to handle the building's finances.

Ownership communities appeal to investors who want to see a high Return of Investment

The Swedish Housing Agency defines a related concept: "The concept of building community also occurs and can be synonymous with housing cooperative , but can also mean that one or more of the members of the group will not live in the house themselves, but participate as long-term investors and see co-ownership in the finished house as a capital investment.”

Approximately 50% of our buyers belong to this particular group of buyers, ie. investors who invest for income through rental as well as value increase in the longer or shorter term (already upon moving in, the price of an apartment increases significantly on an off-plan apartment in Spain). In the strict sense, it is thus "Building Associations" that we market because several Scandinavian buyers, to whom we mainly direct these projects, are pure investors.

Thus, as previously mentioned, we offer an overall concept with a separate rental company, and that we help with the process of getting your license for rental, etc. A very important aspect in this context is also that we include in the association's statutes, right from the start, that it will be permitted in the future to rent out one's home to those who wish to do so. Once you get your rental license, this cannot be retroactively revoked according to the law. We are doing this because of the new law which means that housing associations throughout Malaga province can prohibit or limit rental for tourist purposes by putting it up for voting at an association meeting. It is enough for three-fifths of the owners in a housing association to vote in favor of a ban for it to apply. This also includes new projects with new development , where in several cases the possibility of renting out to tourists is prohibited from the outset. However, the newly produced apartments that are allowed to be rented will be pure hard currency in markets such as Malaga city, Nerja and Marbella where the demand is enormous.

spanskafastigheter.se and our history and future with Spanish housing cooperative

Our corporate lawyer, Francisco López, whose father used the housing cooperative successfully in Malaga province several decades ago, realized even before new development took off again after the crisis that in order to sell a project within a reasonable time, prices had to be depressed without Thumbs up for quality. He therefore took up the concept of housing cooperative again, and obtained financiers for a plot of land in an attractive location in the popular resort of Nerja. We sold that project, Terrazas de Ladera, in record time.

We then launched another housing cooperative (Balcon del Mar) in the same area, Ladera del Mar in Nerja, the following year. Even that project sold out quickly due to the competitive pricing.

Already in the planning stage of our previous developer communities there was great interest among banks etc. and we made important contacts. housing cooperative model mainly appeals to the banks because it is a safer way for everyone involved to plan and build. Prices are lower and transparency is better, and the heavily regulated model, with an independent auditor, special bank accounts set up by the bank that handles all payments to subcontractors as well as brokers and project managers, etc., and an insurance company that guarantees all deposited money by buyers, is significantly safer. The banks' national risk departments also have a greater opportunity to regulate this type of project. For example, each individual buyer must be approved by the bank, whether or not they apply for a loan.

The big challenge has been to find employees who are familiar with how it goes in concrete terms to comply with all the laws and regulations that apply to this type of construction. That's where our team and basically just another big player on the Costa del Sol know this work model.

Together we scan the Costa del Sol for attractive plots in central locations in growing Malaga as well as plots by the beaches in the surrounding coastal towns. We then draw up houses/apartments, and form housing cooperative that we market to mainly Scandinavians. Through our international partner, we also rent out the homes to an international market. However, this concept is something that international investors are also interested in. We will therefore not limit ourselves to the relatively limited Scandinavian market in the long term.

Our latest housing cooperative

At the beginning of 2024, we launched a new project with 8 new townhouses in the luxury class at attractive prices. Located in one of Nerja's more popular areas, within walking distance to the center and the beach. Private pool, roof terrace and community pool. Around 110 m2 construction area. 3 bedrooms. From €550,000

Write to info@spanskafastigheter.se if you want information at an early stage in the process. Read more about the townhouses in Capistrano here.

Sold/under construction below:

18 townhouses near the beach in Punta Lara Nerja

Large roof terraces. Equipped kitchen. Community pool and nice meeting areas in the area. Southern location. 2-3 bedrooms. [note, sold and under construction, but write to info@spanskafastigheter.se if you want to stand in line, in case someone comes back) Read more here.

8 apartments in an elevated position in Nerja- Colina Alta

Colina Alta in Nerja

After the turn of the year 21, we launched 8 off-plan apartments in Nerja. Elevated location with sea view. Afternoon sun. Small urbanization in a quiet location, with walking distance to the center and beach, with both pool and garage. Negotiated and market prices for the land have given us the opportunity to offer these apartments at fantastic prices. 2 bedrooms, terrace, from under €200,000. Under €350,000 for duplex with 2 bedrooms and 3 bathrooms. Read more about Colina Alta here. These are sold but some may come out for sale after completion. If you want to stand in line, write to info@spanskafastigheter.se

We always launch our projects (but also regular promotions for which we get sales rights, as far as possible) with housing cooperative in in advance to our newsletter followers.

Sign up for the newsletter for Nerja, Torrox and Costa Tropical here (as well as Malaga city).
Sign up for the newsletter for Marbella, Estepona, Benalmadena, Torremolinos and all other resorts on the west Costa del Sol (as well as Malaga city) here.
Please also write directly to info@spanskafastigheter.se

Housing Cooperative is in the planning stage in 2024:

Nerja

At the time of writing, we are negotiating prices with landowners, while bringing in financiers to tie up land.

Conclusion and summary

The profit margin for a traditional promotion model, which is customary in the Spanish housing market, is significantly higher. Lower commissions etc. for everyone involved in a housing cooperative means lower final prices of around 25%. In addition, the working model means greater transparency and co-determination for buyers. The board is elected by all members who also have the right to vote on several important issues during construction. The board is continuously informed by the project management and independent auditor about everything that happens in the construction, and makes certain decisions on behalf of the members. However, certain decisions must be voted on by each individual member. Everything is regulated by the Spanish laws that specifically apply to housing cooperative and all payments of commissions to brokers, project managers as well as subcontractors/builders etc. are handled by the bank via a specially established bank account that only the bank has access to. An insurance company guarantees all payments made by buyers during construction.

Broadly speaking, this is how housing cooperative in Spain :

1. The project management identifies a suitable plot of land (lawyer checks the detailed plan for the plot, that it is suitable for a housing cooperative ) for sale and starts negotiations with plot owners. The plot is tied up for a certain period of time.

2. Then a housing cooperative is registered, and an account is created in a bank that also accounts for bank financing of the construction, while a plan for the construction is made by the architects.

3. Reservations for the homes begin to be collected and at the same time a building license is requested from the municipality.

4. When all the homes are sold, a board is formed for housing cooperative . All buyers are invited to a board meeting, where the chairman is chosen, among other things.

5. The construction company is selected by the board in consultation with project management following a tender process.

6. The land is bought up by housing cooperative and then construction begins.

7. When it is completed, deeds are written to each individual owner and housing cooperative is wound up. Each apartment is now considered according to the law as any owner-occupied apartment. The same applies to the housing association itself for the complex. It is also important to point out that this financial association does not have a loan with joint and several liability for payment after completion. Association fees (to be considered as rents) are thus not affected by a possible higher interest as there are no debts in the association.

⁃ The two most fundamental aspects of the housing cooperative working model in its Spanish design:

Lower prices when you remove the promoter from the equation (this does mean that both we and others involved in the project receive significantly lower commissions than usual, and that we have to wait for these until it is fully built, but it also means that we get a much more easily sold product). Ordinary building promoters are simply not willing to cut into the profit margins in the same way that a housing cooperative does. Depending on the complexity and volume of the project, the margins for a normal construction promotion are at least 15% and up to 25%. The fees for the project management of a housing cooperative are 7-12% ( read more in the Spanish article about Spanish housing cooperative in Madrid here ).
Stronger financial and legal security with increased transparency as everything is strictly regulated by Spanish laws (independent auditor, greater transparency and co-determination of owners, etc.) and that the board actively participates in all decisions.

Further reading:

info@spanskafastigheter.se