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.esGRUPO 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
