All,
This VAT business has happened before in Morocco. I can't recall which development it was that I was considering reserving on (I think it might have been Paradise Beach) but I remember complaints on that particular forum about the developer adding VAT
after deposits had been paid...
That's why, when I reserved at Alkudia, I double checked that VAT was included in any prices I was quoted... If Shak's right, the mystery VAT was added to the prices before I was given my first quote as my price only went up from the indicative £55k to the now quoted £57k and these both include VAT.
Unfortunately, what's happening here is common practice in the building trade, and many other markets where demand outstrips supply... When you come to sell your apartment you'll want to get as much as you can for it (although my personal values would prevent me from increasing my price mid-negotiations!).
Fadesa have been surprised by the level of demand on Alkudia and so are trying to get as much for their initial set of developments as possible. Unfortunately for us, that means we have to pay more. However, if you follow the supply/demand model through, that
should mean better returns for us when it comes to renting and/or selling our properties later...
But wait... There is a risk element.. Risk isn't just a negative in financial terms, it's basically a measure of the possible variability of profits or losses. The higher the risk, the more you can win - but also the more you can lose.
You could regard Alkudia as low risk on the negative end of the scale. Property prices are unlikely to drop, Fadesa are unlikely to screw up to the extent that the properties are unsaleable and the bank guarantee protects against bankruptcy etc... However, the returns risk is high.. Returns could be negligible or they could be as much as 60-80% over 5 years.... The things that I think will increase the risk on sufficient returns at Alkudia are:
Buy price is relatively high if you compare to other developments, including Marina Smir where you can buy a 2 bed, fully furnished at £53,000 today.
Low cost airlines have no definite plans to fly into Tangiers at the moment
British rental market is very immature and has an unpredictable future
There are questions about Fadesa's build and finish quality on past developments (doesn't automatically mean this one will be poor)
It's a very large development. For those wanting to sell sooner rather than later, they'll be competing for buyers with the yet to be built, off-plan apartments available
There are few (if any) sea views
Morocco (outside Marakech) is still to prove its potential in terms of property market growth. Look at Bulgaria as an example where returns for all but those who got in really early have been less than expected.
However, factors that might influence a higher end return are:
Demand is obviously high for this development and the region
Although the buy price is higher than hoped, the returns could still be just as high percentage wise
Fadesa have other reputations which suggests quality build
The development will have lots of facilities others don't, like shops, restaurants etc
The area is up and coming in terms of tourism
Low cost airlines are considering flying into Tangiers even if there are no concrete plans
The Spanish rental market opportunity is high
They are very close to the beach compared to properties available in other countries (for much higher prices)
If the Sofitel can charge £220 per night for a room in a hotel just down the road from Alkudia Smir, the area can't be that bad and obviously attracts the right sort of tourist (i.e. one with cash to spend!)
I could go on, but you get the gist. There is risk involved in any investment. In Alkudia I think you've got moderate risk as the risk of losing bucket loads of cash is minimal. However, if you're thinking of using a mortgage to buy here you have to consider the costs of the interest on that and I think that's where the risk of satisfactory returns becomes high... It's down the the individual. There are other investments (Fidelity have a Special Property ISA that could return 30% pa) but the risk usually reflects the levels of reward...
The choice is down to the individual. If you want to play with the property market and maybe make some money, enjoy the challenge of buying overseas (it's great fun!) and marketing a holiday rental property on the internet whilst having a bolt hole for those dull, wet English winter months, then go for it....
Use my Business Case elsewhere on this forum to work out the different scenarios... Basically, you need to know what your break even point is. If you include all your buying costs (including solicitor, taxes, furniture, viewing trips, maintenance costs etc) and your mortgage payments, how much would the property value have to rise to get your cash back... This is the zero risk scenario. Then work out what return you could have got from investing in an alternative zero risk scheme such as a government bond or building society account... The tool does this too. That's the magic number, because any £1 rise in the value of your property above that is pure profit you would not have seen taking a zero risk option...
Personally, I'm waiting for the plans before making a final decision. I'm weel and truly on the fence at the moment...
Sorry for rambling, but hope the above is useful...