Iconic Films

2 for 1 tickets to Casablanca, this coming Monday

Navigation - link to other main sections from here

From The Times

May 25, 2007

Market report: Spain

The Spanish property market has been plagued with corruption and scandal. Paula Hawkins gives her verdict on the outlook for the thousands of Britons who own a home there

Paula Hawkins

TAKE an overhyped, overheated property hotspot on the Mediterranean, add a splash of corruption and whiff of corporate scandal, and a crisis point is soon reached. That crisis came in late April, when investors dumped shares of Spanish developers and builders, causing the Madrid bourse’s Ibex index to fall by almost 3 per cent in little over a week.

There were triggers for the panic selling. News of tighter planning controls, coupled with the revelation that profits at one Valencia developer, Astroc, had been inflated by the sale of assets to its own chairman, spooked investors. In one week Astroc had 65 per cent wiped off the value of its share price. Shares in other property firms fell by about a fifth in the latter half of April, and the rot spread to construction stocks.

The problems have deep roots. “The market in Spain changed about two years ago,” says Stuart Law, of Assetz, the property investment company. “Almost overnight investors realised that they were no longer able to buy properties off-plan and ‘flip’ them for significant profits as they had done in the past.” Partly the problem is oversupply. Spain last year built more homes than Germany, Italy and France combined. But demand has begun to wane and many developments stand empty – more than 100,000 vacant properties in Málaga alone.

A further problem is that thousands of these properties have been built without proper planning consents. “Permission to build homes was being given left, right and centre, often in return for bribes,” Law says. In addition, speculative investors, who had been driving up Spanish prices, are seeking cheaper properties and wider profit margins in emerging markets such as Bulgaria and Romania. “Investors found that there was no more headroom for prices in Spain,” he says. “To flip successfully, you have to be buying at a discount of around 20 per cent. That differential had disappeared.”

Britons who recently bought new-build property in the Costa hotspots have probably seen values fall, but Law insists that there is no need to panic, with most analysts expecting a soft landing for house prices rather than a crash. Spain remains a very attractive holiday-home destination, with a good quality of life and plenty of flights to and from the UK.

However, investors who bought on the basis of rental guarantees may hit problems, because the tourism authorities must license properties before they can be offered for rent, a fact often omitted in a sales pitch. “Many people are getting their fingers burnt by a handful of unscrupulous developers,” says Katy Katani, UK manager of Grupo Lar Sol, a Spanish property firm. Buyers must do their homework. She advises using an independent international lawyer with expertise in the Spanish market, reviewing the purchase contract, confirming guarantees and checking land registry, planning permission and the financial accounts of the developer. Law agrees: “Do your homework on prices, and don’t buy rubbish, buy quality.”

On this basis, Law argues, you should see a reasonable return. Assetz forecasts annual house price growth of 5 to 7 per cent for the next ten years. “Spain is not going to be a hotspot for capital growth but for rental income it remains one of the top destinations,” he says. And it’s a sign of his firm’s confidence that, having left the Spanish market two years ago, it is now reopening its Spanish division.

If you want to have a realistic analysis of the Spanish Real Estate Market, then take down of the following : Now it is not the moment to sell. The offer duplicates the demand. Prices will be stabilized during the next two years to a grouth of barely 2.5%. Now itÂ´s time to look for some bargains; remember that Spain is the second turist destination of the world after France and this year will receive 60 million people from other countries, so you will always have a reasonable return. Due to the new Spanish Plot Law new building will be almost dead giving time to absorb the stock , then the Spanish market will experience a new growth in prices of the dwelling of 10% from 2.010 onwards. And, as Mr. Law says : donâ€™t buy rubbish, buy quality.

Mike, Miami, USA

I am amazed at the horror stories you read in the papers with people buying illegally built properties, not owned by the seller and so on. And, of course, itÂ´s always the fault of the Spanish.
Buying a house is a very straightforward process. All you need is common sense.
1. Make sure the seller owns the property and that there are no outstanding charges on it (mortgages,...)
Go to the Register ( Registro de la Propiedad ) and ask for a Copia Simple of the property you want to buy. All the information is there. If the property is on illegal ground, you will know.
2. DO NOT hand any money to anybody. ItÂ´s a buyerÂ´s market and you will be able to do things your way.
3. When the sale is agreed, you will meet the seller and the Estate Agent ( if any ) in the NotarÃa of your choice. The Notario is the only person allowed to register the sale and provide you with the new deeds for you property.
4.Only then will you hand the money.
5. No need for lawyers.
No Red Tape, just common sense.

Fermin Garcia, Cardiff,

I would think twice about investing in Spain. I am not at all confindent about the predicted, albeit low, property value rise over the next few years. There is indeed a glut of properties and I have already seen substancial reduction of prices. Whilst the Estate Agents maintain house-prices at more or less the same level it is possible to make offers reducing the price by 20-30%. I do not trust the current prices on the coasts. One of the main reasons is that the spanish are unable to invest in the property market. With rising interest rates and low wages many spanish are finding it extremely difficult to maintain their properties and many are beginning to sell their holiday homes forcing more properties on the market.

Tonia Sheriff, Calpe, Alicante

Hands off that Spanish Mediterranean coast line! Have been here for 3 years now, and while I keep trying to save money, that alone has become offset by increased prices of everything - including of course livelihood and housing. On top, and my family has been here for over 50 years, so I guess we know well enough and can compare, the Spanish local authorities have found a lucrative way of ABusing the LRAU and LUV laws to circumvent proprietors' rights to a point that quite a few of my friends gave up and left; this is not a temporary bubble â€“ it is barely the tip: SPAINtanic ahoi!
While Spain has much in its favour, authorities have done nothing to avoid this disaster and rather keep encouraging builders to go on as if nothing â€“ while half a million housings are empty as I write this.
I too might give up, while I don't own yet, I will not pay those ludicrous prices they got used to over the past 5-10 years.
If you want to buy, good luck! If you find a non-cheating seller that is.
Frank

Frank Ullrich, Calpe, Spain

Dominion Beach Estapone Spain
is one of the best propertys on the Costa.

It has everything, 50 yards from beach, Satalitte t.v
Electric Gate into complex ( very safe for Children)
3 pools one heated one childrens two adults
beautifull gardens, bar, resturant .
amazing.

Elsie, Dublin, Ireland

Myself and my family moved to Catalunya 4 years ago with work. I have a reasonable salary as does my wife but we still cant afford to buy even a decent flat within 60 miles of my workplace in Rubi west Barcelona. As we save, prices increase and our present savings wouldnt even cover the extra 11% of the price of the property needed to pay in the paperwork and fees alone. We would have no trouble getting a mortgage as I work there as a full time employee and have the necessary NIE and bank account. However, we cant find anything affordable and that would be sellable and profitable should we decide to return. (we believe education for our daughters is better in the UK) Does anyone have any good ideas or recommendations on affordable, up and coming areas not too far from Barcelona?

Steve Pineda, L'Ametlla de Valles, Barcelona

Where on earth can we buy a home around Barcelona. I have been working in Rubi east barcelona for 4 years and still cant afford even a decent flat within a 60 mile radius! I live with my wife and 2 daughters in a rented house 30 miles north of Barcelona where there are no bargains to be had. We dont even have enough savings to pay the 11% of the property price extra for the fees and notaria etc. and I am on a fairly good salary and my wife working part time.
Have you any ideas or suggestions on affordable, profitable up and coming areas in Catalunya?

Steve Pineda, L'Ametlla de Valles, Barcelona

Finally we can say that the real estate market around my area has woken up. Quality developments will always be in demand and most owners do not need to sell when the market is slower. Location,location,location and quality, thats what it is all about these days in the Marbella area.

ronald de beer, MARBELLA, Malaga

Anyone considering buying a holiday home should be aware of the economic fundamentals which go towards underpinning the residential property market, worldwide.

In a mixed use community, where for the most part people are living in their principal homes and working close by, any fall in the property market increases affordability for those who wish to buy. This induces many of those renting to secure mortgages and to purchase their own home, which provides the housing market with a soft landing and an assured recovery.

Unfortunately in a holiday home market, other than the odd bargain hunter, there is no such fall-back group, and therefore a market correction normally results in an outright crash. This will happen.

This situation is exacerbated where there has recently been excessive speculation, such as in off plan sales in Spain.

Oversold, overpriced, poorly built resort property remains more vulnerable than older properties situated in established mixed use communities.

Bernard Hornung, Lisbon, Portugal

I think the british media has created a scare regarding buying in Spain, and it is having an effect on those that are (or were) considering buying here. My wife and I moved here 4 months ago and are very much enjoying our new life!
We did what all purchasers of property here should do if they want a positive result - research carefully, use independent solicitors and buy quality, not hum drum.
The real challenge in Spain is understanding the amount of paperwork you need to do anything!!

Happy from Mazarron

chris mckittrick, Puerto de Mazarron, Murcia

I am one of the disgruntled purchasers of a 'canal facing' apartment on the Palm Jumeirah.
Only problem is that there is no longer a canal. It has been replaced with an overhead light railway! Since I am not a train spotter I would prefer to look out across the promised water way. Nakheel, the develpors, tell me that this change in their plans has not devalued my apartment. This is quite patently not true. (Contractually they cannot make any changes that do devalue the property, hence the party line that there has been no vevaluation)
Any other disgruntled 'canal facers' who would like to discuss how best to address our problem?

alan sterling, ightham sevenoaks, kent

Money Money Money!

We came to live in Spain to get away from all this greed and to enjoy living here, not to make a packet on our property. Most of the other british people living nearby are the same.

Unlike those buying new builds most of us have brought old renovated or ruined cortijos and spent are hard earned cash and savings rebuilding them. We are all thankful to be living in such a beautiful place and not money grabbing Britain.

I read the Times on line every so often just to make me feel smug for having made such a wise move.

Linda Babette Briggs, El Fonte, Almeria Spain

Monica, please don't let your experience in Malaga taint your view of the rest of Spain. Your statement that 'most of the constructions have a bad construction quality' is irresponsible and frankly ridiculous, you are talking about Costa del Sol NOT Spain.

snudge, Cadiz,

I doubt very much that that good property in the city of Valencia will be much affected, i.e. I think prices will remain high. But most UK property is overpriced so why whine about Spain simply because the greedy off-plan buyers in out-of-town developments will not make a killing......

Elizabeth, Valencia,

the city of Valencia has been subject to huge hype and speculation on the back of the America's cup there are no bargains in Valencia and the time to buy was at least 2-3 yrs ago

robert skelly, colchester,

Absolutly all properties in Spain are overpriced. This is something we all should take in consideration when we buy or sell a property. Most of the constructions have a bad construction quality. The Costa del Sol has become a "concrete wood" because of corrupt developer and town halls.

Monica Hall, Malaga, Spain

Is this drop going to effect the city of Valencia in your opinion?

Nick, Southampton, uk

Can I please be sent all info about properties you have for sale in Spain

Kelly , Accrington, UK