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Spanish Property Market Update

Market overview

Spanish Property Market Update

DON'T LET THE SUN SET ON YOUR DREAMS

Optimism has returned to the market for vendors with the higher activity that started in February has continued through to a marked increase in viewings and sales. There is now evidence that prices may finally have reached the bottom for quality properties in good locations and with Sterling starting to strengthen some vendors that had priced their properties on a one for one basis and had planned a return to the UK are having to increase their asking prices in line with current exchange rates.

Buyers are returning to the Spanish property market in increasing numbers with the majority of sales still remaining price sensitive. Many of the best deals (or "Steals as they were called) have now gone, however there are still some excellent bargains in quality properties if you know where to look.

Buyers are now more interested in re-sale properties than new and this presents the buyer with plenty of choice and is the best option. There are also some good "key-ready" new property bargains that are also worth consideration but our advice to buyers is to stay clear of most off plan developments as it is just not worth the risk in the current market - otherwise you could end up on a building site for years to come.

Sterling continues to be undervalued against the Euro and our prediction for Sterling is becoming a reality as the exchange rate strengthens despite the hicup over the budget. With the pound getting stronger plus positive signs in the UK property market more UK buyers are showing interest again.

If you are selling your Spanish property to return to the UK the current exchange rate is still good news and presents you with a window of opportunity. The current exchange rate has meant you will receive many more pounds for your euros when you sell. This is also good news for buyers as most sellers are passing on this gain so offsetting the negative aspect of the decline in the value of sterling.

eg: Say you bought a Spanish property for €200,000 when the exchange rate was 1.45 euros to the pound it would have cost you
137,931 in sterling pounds (@ 1.45). Today with an exchange rate under 1.14 you could afford to drop your price by 31%  to get back what you paid in Sterling pounds. 

Many vendors have realised this and have accepted what appeared to be low offers but in fact have not been any worse off. They also have the benefit of falling UK property prices when they move back. These are the properties that are selling and why there are still buyers in the market who are snapping up tremendous bargains.

Buyers
There really are some excellent bargains to be had at the moment particularly for those who have planned to retire to Spain. If you still have money left in the bank or indeed if you still have a bank, then now would be a good time to secure your retirement in the sun with a better quality of life and cheaper living.

Throughout Spain, as in may parts of the UK, there has been an oversupply of two bed apartments (900,000 unsold - mostly in the big City's) causing several large builders to to seek administration and in turn put downward pressure on this are of the property market

Official Government figures show only a small drop in prices, but in reality over the past year prices for most properties have fallen by 10-30%. This has offset the fall in the value of the pound and has attracted the investors back into the market.

Builders of new developments are offering very good deals including excepting payment in Sterling. Re-sale properties have followed suit making prices similar to three years ago. There are also many buyers from Scandinavia and Russian who have not been effected by currency problems and who are snapping up the bargains.

Prices appear to be close to bottomed out and not everyone is desparate to sell therefore the next few months should be the best time to buy a property in Spain, providing you do your homework and buy wisely.

Prices of new property have been static for the last 18 months yet the quality of build and specifications have improved tremendously. Most new developers are offering incentives and some are accepting payment in sterling with exchange rates pegged to the better rates of several months ago. There is a shortage of new detached villas in good locations and these could be like gold once the credit crunch eases off.

There are also great value resale buys to be made as there is a lot of stock on the market.

If you have planned to relocate to a warm and sunny climate with a better lifestyle or you just want a holiday home, then don't be put off by all the negative talk that has been doing the rounds for the last several months.

Yes of course the property inflation boom has come to an end in most countries and this may well be for the best in the long run. Property in the medium and long term has proven to be a sound investment. Whenever there has been a period with static prices or where there has been a short downturn this is always followed by a sharp upturn.

Spain will always be Europe's favourite holiday and retirement destination because it has the best year round climate and boasts a healthy stress free lifestyle.

Unless you are a short term investor looking for a quick profit then there is no reason to postpone retirement plans because of a fear of the ups and downs of property markets. There is an old saying "you are a long time dead" so why put off such important benefits to your life because of a strictly short term problem that will be forgotten in a couple of years.

Q: How will all of this effect anyone planning to buy a property in Spain?

A: Firstly you should determine your reasons for buying. If it is for a short term investment then perhaps you should wait for the market to settle. If however you have planned to retire to Spain (full or part time) or want a holiday home for more than a couple of years then there is no reason to delay. The weather and lifestyle have not changed and now is a buyers market.

The world financial turmoil has meant that there is good news and bad news. The bad news is that with weaker Sterling you get less Euros to the pound. The good news is that the property boom in Spain ended about 18 months ago and property prices have been adjusting for the last 12 months. You now do not have to wait as long for a new build (many key ready properties are available) and prices are now better value than 3 years ago. Developers have increased the quality specification and pegged their prices, so will offset some of the drop in the value of the pound.

There is currently an oversupply of 2 bedroomed apartments in large blocks and also there are many resale properties for sale on the large urbanisations. So there are real bargains to be had. However many resale properties are over priced in our opinion, when compared with some of the new houses which now offer a much better product for the discerning buyer with smaller more attractive developments with much higher specifications.

The market for detached villas in good locations is still strong particularly in the choice inland areas like the one in the photos below.

As always it is Location Location Location! Good quality and value properties in good locations will be sound investments (as well as a wonderful places to live and enjoy the climate and lifestyle)


August in Murcia

We would add the importance of using an ethical professional estate agent and solicitor to find that quality property that meets all of your requirements.

If you are an investor looking for a quick profit, we suggest now is not the time. However the property market in Spain is now a mature one with a good history of growth and so investment prospects are excellent for the medium and long term.

If your main reasons for buying are for a better quality of life, a wonderful all year round climate and a lower cost of living then then don't delay - paradise awaits!

The demand for property in Spain is forecast to grow substantially over the next ten years as increasing numbers of Northern Europeans retire to warmer climates. According to an Alliance & Leicester International in reported that by the year 2020, one in five older people will be living outside the UK, the vast majority in Spain. Spain is the leading country for the many Europeans who desire a property as a holiday home or investment, which has lead to a doubling in prices in many parts of the country over the past eight years. Also, younger families are choosing to build a new life in Spain.

Hot Properties HOT MARKET TIPS

Topic: Golf Property; still a good investment? (posted in 2005)

Is it easy to be seduced by the magazine and TV advertisments for golf developments with their manicured greens and 5 star hotels and featuring famous golf and sports personalities. But wait! Not all is as it is presented.

There are currently almost 30 new golf courses completed or under construction on the Costa Blanca and Costa Calida areas, each with hundreds and sometimes thousands of properties being built. Most of these properties have a premium price tag because they are on a golf course and perhaps have a view of a fairway. Also someone has to pay for the expensive marketing costs with advertising using big name golfers and sports stars.

The properties are being sold with the promise that you will be easily able to rent out the property to golfers for the majority of the year and that the rental income will more than pay the mortgage. They also are promising a high capital growth.

In principal this all sounds fine. However you should consider the following inportant points:

Advantages of buying/renting on a golf course:
(1) Nice location some properties with views of the fairways.

(2) Handy for golfers that only want to play one course. However as most golfers want to play several courses during their holiday this is a dubious advantage.

(3) Reduced rates for green fees for property owners. Will this still be an advantage after you add in the high community and maintenance charges?

Disadvantages of buying(and renting)on a golf course:
(1) You have to pay a premium to buy a property on a golf course. For the cost of an apartment on a golf course you can normally buy a town house or even a detached on a small development within walking distance of good facilities and the same golf course just a short drive away.

(2)A property owner will be charged 2000 to 4000 euros p.a. community charge on most golf courses as against 300 or 400 euros p.a. in the nearby village/town.

(3) The rental charges for a property on a golf course will have to be higher because of the higher buying and running costs and will only appeal to golfers. Therefore you will limit your potental rental income because of price and miss out on rental income from families.

(4) Risky short term capital gain. Many golf properties are sold to investors in order to make a quick capital gain and so in practice a large number of properties hit the market for re-sale at the completion stage ie. at the same time. Because of this and the fact that there is a narrower market for a golf property it has the effect of depressing the market both on that particular course and for golf properties in general.

Many of the courses under construction have a high density of properties which will mean concrete views from the fairways and greens. One of the largest golf resort promotors who heavily promotes in the UK has had to start selling new low priced properties that undercut their own clints re-sale properties.

We believe there are much better investments in some of the smaller new developments close by the golf courses. These more unique little developments appeal not just to golfers but for family holidays as well so the potential rental income is greater. Some also achieve very good bank valuations which mean you can is some cases get 100% mortgages.

The smaller sites are usually a mixture between residential, holiday home and rentals and are often walking distance to the local amenities.They also have the added bonus of being able to drink your Gin and Tonic on the terrace without a golf ball landing in it! Therefore a small development near a golf course not only gives the golfer more choice as to the course that they play from where they are situated, but also a better property investment as, on smaller sites there are less houses the same to be sold or rented. Also they are within a short distance of the SAME facilities as well as many more. In short you have all the benefits of the golf facility and many more, without the disadvantages.

However if you still want a golf resort property then speak to us first because some resorts are much better than others who talk the talk! and in the current market there are some excellent re-sale properties available at bargain prices and in the best locations.