Don’t panic – the Spanish property market is not in meltdown. What sparked the
recent slew of doom-laden headlines was not the housing market going into
freefall, but a fall in the Spanish stock market as jittery investors dumped
construction stocks in April.
Shareholders reassessed the outlook for the property market, which is largely
a domestic one, catering for Spanish buyers of primary residences. Share
prices have been bullish for the past three years, but, despite the booming
economy, rising interest rates and evidence of a housing slowdown triggered
a correction.
According to figures released by the Spanish housing ministry, average
property prices rose by 9.1% during 2006, down from 12.8% in 2005 and from
almost 20% annual growth in the couple of years before that. So, a market
that was boiling a couple of years ago is becoming tepid. Spanish Land
Register figures reveal that overall house transactions fell by 7.5% in 2006
and, for two or three years now, there has been plenty of anecdotal evidence
suggesting stagnant or falling markets in some of the areas popular with
Britons.
So with the good times seemingly over, what does this all mean if you own a
holiday home in Spain, or want to buy one? The biggest losers are short-term
speculators who overextended to buy off-plan in the final years of the boom,
thinking they could “flip” it and make a profit. In the same boat are those
who have bought an average property in an overdeveloped area in the past
three years, and anyone who didn’t do their homework and paid over the odds.
Losses may become more widespread if Spain goes into a construction-led
recession. This is not impossible, given the extent to which its economic
growth depends on the housing sector. A recession would hit domestic demand
for holiday homes hard, pushing prices down. Even so, good-quality
properties with foreign appeal would probably get off lightly, and the
market would recover in due course.
Any Briton who bought an attractive property in a good area five years ago or
more should not worry. Good capital growth means these properties should
still fetch a reasonable return were you to sell now.
If you are really willing to do your homework, the market wobble could be a
good time to hunt for a bargain – and now is the best time in a decade to
drive a hard deal. Remember, smart buyers look at whether or not a property
represents value for money, not just how cheap it is. This leaves a complex
situation involving different regional markets.
COSTA DEL SOL
Buyer activity on the western Costa del Sol peaked in 2003 and has been
falling since. “Prices are back to where they were two to three years ago,”
says Mark Clifton, a partner at the Marbella-based agency IPP. But the
picture is starting to look less bleak. With corruption being tackled and
infrastructure improved, attractive properties in better areas are selling
quickly for reasonable prices. You can find a two-bed flat in Elviria for
about £220,000, or a two-bed townhouse in Marbella for about £465,000.
Inland, there is even a shortage of the fincas sought by affluent Britons.
“Buyers now are savvy people with money, not the deranged investors with
100% mortgages of a few years back,” explains Barbara Wood, who runs the
Andalusian branch of The Property Finders, a search agency.
Unfortunately, there is also a growing glut of flats in mediocre locations all
along the coast. Their value is likely to fall. The same applies in all
coastal areas of Spain that have been heavily overdeveloped.
MURCIA
High prices elsewhere drove buyers, especially investors, into the arms of
Murcia’s developers. Prices then rose far too fast, and resale prices on
many projects are falling in an effort to woo buyers. Flats that cost
£102,000 two years ago, for example, now sell for £92,000, and an average
three-bed villa is about £240,000, down from £260,000.
“Some developers haven’t built what British buyers want,” says Gordon
Turnbull, of Blue Med Properties. “Prices rise and buyers expect more in
return.” Too many properties are still being built, but high-end
developments such as Hacienda del Alamo, a 550-hectare golf resort inland in
Fuente de Alamo, should still buck the market trend.
COSTA BLANCA
Once a beautiful coast, the southern Costa Blanca, centred on Torrevieja, now
resembles a concrete estate. Inland, it’s a minefield of illegal projects.
If it’s not cheap, it’s not good value; and if it is cheap, then it’s just
cheap. Prices for flats have stayed the same, but villas that sold for
£130,000 in 2005 are asking £116,000.
The northern Costa Blanca is in better shape, especially the smart area around
Javea, Denia and Moraira. The market is subdued but stable, and many vendors
have given up asking silly prices. Flats are typically up 15%, and typical
three-bed villas in Javea, which were about £270,000 two years ago, now cost
about £305,000.
“Transactions are fewer, but there is still substantial interest in quality
properties in good locations from a core of affluent buyers,” says David
Mear, of VillaMia, in Javea.
COSTA BRAVA
Transaction prices have been rising gently in the past couple of years, more
so than in most areas, but the growth is still weak enough to keep asking
prices – which were sky-high two years ago – realistic.
There is a good choice of upmarket properties, and demand is driven by
affluent foreign and domestic buyers. The cooler market means there is more
room to negotiate.
“There are still some ridiculous asking prices around, but the chances of
someone paying them are lower,” says Louisa Grundon, of the local agent PCI.
A two-bed flat in Pals, now selling for £153,000, cost £123,000 two years
ago; three-bed villas cost about £290,000, up from about £240,000.
MALLORCA
Prices here are comparatively high, but buyers are affluent and there is a
large stock of high-end properties. In a rare display of enlightened
thinking, the island’s planners banned development for a couple of years; it
resumed in May 2004.
The market has cooled in resorts, but growth is still running at about 12%. A
traditional village house inland, for example, would cost £225,000, compared
to £177,000 two years ago.
“Buyers are better informed and vendors are more disposed to negotiate if they
want to sell,” says David Novi, director of the local agency Novi
Properties.
Mark Stucklin runs www.spanishpropertyinsight.com,
an independent online consultancy. spanishpropertydoctor@
sunday-times.co.uk . What do you think? Post your views on
the Spanish property market at timesonline.co.uk/
overseasproperty
It seems the "have your say" has been hijacked by the estate agents, and what a load of rot they have to say.
Prices are 30% of their 2003 peak in the Costa del Sol, at least with the agents that aren't trying to rip you off. Nominal prices are lower than in 2003 and that is before you take inflation into account.
If anyone uses the words spanish property and investment in the same sentence then walk away from them.
Buy in Spain if you love the country, but do not expect to make any money from it.
Bear in mind that you have to pay 10% over the asking price in taxes and fees.
forest, london, uk
Regarding the Murcia area, I think Mark is wrong to suggest the price of an apartment is down by 10% in the last few years. The fact is they have largely remained the same in some parts of Murcia Province and increased in others.
One cannot take the average price of an apartment and compare it to the same price 2 years before, it would be inacurate to do so. Prices appear cheaper by 10% in the Murcia Province than they were a few years ago only because a few very large developers have released a huge amount of budget properties onto the market to kick-start it. These apartments are smaller and less well appointed than the average apartment on offer a few years ago.
So Mark has not accurately proved prices are cheaper, because they are not, he has simply given an average price indication which has been distorted by the large amount of budget properties coming into the equation.
With a new international airport coming in 2010, there will be continued growth in Murcia
Ken W, Fuente Alamo, Spain
I'm a real estate agent in Javea, on the Costa Blanca of Spain and yes, the bearer of not so good news (whilst out working each day), the market has slowed right down compared to the boom years. However, those who have invested or purchased that holiday home in the sun will only feel the cold, as you mentioned, if they are trying to speculate within too quicker time frame or if the purchase was made at during the peak years. If the property can be held onto to mature a few years longer, the market will follow its cycle, pick up and the fruits of investment can be harvested. For those who cannot wait, the solution is to sell in the market as it presently is - low - and make the next purchase in the buyers market of today. This will surely become a fruitful by the time of its next sale so, not all is black on the Spanish real estate front.
Sarah Hobbs, Javea, Alicante
So what is the situation in the Canaries, particularly Lanzarote? Is now a good time to buy a resale villa?
A.Jones, Bristol, UK
Very persuasive argument. It seems to me that it all hinges on the Spanish economy and whether it can withstand the increase in euro interest rates likely to begin now that the French elections are out of the way.
It is entirely possible that eastern Europeans now earning and sometimes saving money in western Europe might prefer to meet families in therir holiday homes in Spain and dream about a holiday/retirement home in the sun rather than the prospect of enduring bleak winters in eastern Europe.
fred keeling, Almunecar, Spain
Hi Mark,
An objective piece which will deliver added comfort to those who are purchasing quality property or are continuing to seek it.
Having been based on the Costa del Sol since 2001 we have watched the buyer's market develop over the last 18 months. The prospect of great infrastructure and levelling prices is compelling.
As other commnetators have reported it is likely that there will now be a period of stabilisation - say 6 to 18 months - during which off plans - apartments, townhouses etc. will be completed and the smart buyer - whether an end user or investor - looking for long term capital growth and some mid term yield will again see Spain as a good investment.
It's an exciting time to be active in this market. We are being approached by mature investors seeking to build portfolios - and there are deals out there. Combine good, realistically priced property with great rental management and the formula is complete.
Are we seeing Spain becoming a Hotspot?
Mark F.R. Wilkins, Marbella, Malaga
I have been a Spanish home owner since 1979 and have had a few ups but more downs. The problem for many UK residents is that the buy is on impulse and Spanish real estate operates within this framework. Honest advice is often difficult to find even amongst local law firms. The reason there is so much fraud which persists despite the so called clean-up is the extent of vested interests. Be it Local Authority, banks, lawyers and real estate agents which means that they continually attempt to milk the golden cow. This raid is damaging the environment and turning pleasure to hell whilst at the same time sucking-in criminal elements at an alarming rate . What is more very few Spanish professionals seem to care particularly those involved in earning from the delpleted cow, I include government departments in this also. My advice to any potential purchaser is rent for at least 6 months in your chosen area and make your own assessment of the market and those operating in that market.
Bob Hallam, West Yorks, England