THE recent property market upheavals have created ample opportunities for finding wonderful bargains in Spain – but caution is vital in choosing what you buy.

Although fears of a Spanish property crash did not materialise this year, the decade-long housing boom – which gave rise to stories of investors reaping double-digit returns almost overnight – has come to an end. Prices have risen by less than 6 per cent over the past 12 months, according to figures from the Spanish Government, which is the slowest rate of growth since 1998. Put differently, growth has slowed by 70 per cent since April 2004, and in certain provinces the prices have started to fall slightly.

Anecdotal evidence, however, suggests that the Spanish market is even more fragile in parts than the official figures suggest. Research by GRUPO i, the property consultants, reveals that it now takes an average of 20 months to sell a flat on the coast, compared with less than a year in 2004. Spain’s problem with oversupply is highlighted by GRUPO i’s prediction that 35 per cent of all new holiday homes built on the Spanish Costas this year will remain unsold.

But there’s more. The corruption scandals in Marbella earlier this year, in which two former mayors and 20 former town councillors were charged with bribery, embezzlement and fraud, as well as the ongoing woes of British homeowners who bought illegally built properties, are also putting off British buyers.

And Spain is inevitably suffering as people heed the allure of the new property opportunities arising in countries like Morocco, Bulgaria and Turkey.

A straw poll of British agents in Spain reveals a significant drop in interest. Some of those who want to sell are unable to do so unless they are prepared to accept a loss. Patrik Connellan, the managing director of Euro Horizon in the Costa de Azahar, south of Barcelona, reports that purchases of property by British nationals have declined by about 50 per cent. This is bad news when you consider that the British are the biggest group of buyers in Spain after the Spanish. It is not surprising that homes are failing to sell unless owners are prepared to accept a loss.

Despite the gloom, there are good reasons to buy in Spain. The Spanish economy is still growing healthily and unemployment is at its lowest level since 1978. In a weak property market, bad news for sellers is good news for buyers looking for long-term investments.

The continuing price surge since the late 1990s meant that many homes became vastly overpriced – even badly located and poorly built ones – as profit-hungry investors rushed to buy. The recent shake-up in prices has gone some way towards restoring sense to the market. Real differences in prices are emerging between the good, the bad, and the ugly concrete monstrosities put up illegally.

Pockets of opportunities are emerging. Inland properties continue to do well. Growth in AndalucÍa, for example, has been driven by price rises in Seville, Córdoba and Jaén rather than the Costa del Sol.

The Balearics continue to do well. Urban planners in Majorca curbed excessive development over the past decade, so that prices here are higher than on the mainland. Andrew Hawkins, of Chesterton International, says: “While the southwest of the island is the most developed and expensive, northern and eastern parts offer better value for money.” Meanwhile, Simon Conn, the managing director of Conti Financial Services, tips the Costa de la Luz, the so-called Spanish Algarve, and Valencia, which was given a boost by the success of the America’s Cup.

But no matter what or where they buy, investors must proceed with caution. “Many of the problems that buyers have had, such as land-grab, stem from the fact that they did not take independent advice when they bought,” says Conn. Accepting the local notary recommended by your estate agent could be a bad move.

In a weakening market, research becomes even more important if you want to land a bargain, or even simply avoid a loss. Conn says: “There are often two different prices for property in Spain: one for the local market and one for the tourist market. Buyers really must check whether the price they are being quoted is fair, whether the promised rental returns are accurate, and whether there is a resale market for their property.”

Buying a secondhand property may be better value for money, as there is often a premium on the price of new-build. It is not uncommon to get 15 per cent knocked off the asking price.

It is not yet clear whether the turbulence in the market this year is just a blip or whether there is worse to come. The recent panic over a market crash was triggered when the share price of big construction companies took a dive this spring. Spain’s economy relies heavily on its building industry, which is creating an oversupply of property.

But the main factors which have been attracting buyers to Spain in droves remain the same. It is near, it is accessible, the infrastructure is good, the economy and politics are stable, and – most importantly – the sun still shines whatever happens in the markets. Conti Financial Services: www.mortgagesoverseas.com ; Ministerio de la Vivienda: www.mviv.es GRUPO i: www.grupoi.es Federation of Overseas Property Developers, Agents and Consultants: www.fopdac.com www.chesterton-international.com

To search for properties in Spain on propertyfinder.com click here

To find properties in hotspot AndalucÍa on properazzi.com click here

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