The Spanish Property Market – What’s Going On??
A few weeks ago the British Media decided it was that time of year again ..... to go Spanish Property Bashing! It would seem that it has become a favourite pastime for the British Press to scare their readers away from buying property in Spain. This of course affects many of us living in Spain as it can have a very negative effect on our house prices. In fact around a third of all the tourist properties in Spain (some 250,000) are British owned so if there was a serious property crash we could all end up being burnt a little more than an afternoon on the beach!
This time last year I was approached by a major Sunday newspaper to take part in an interview for an article about buying a business in Spain. Afterwards I asked to see the transcript of the interview before it went to press which was just as well as the article showed little resemblance to what had actually been said. After much protestation I re-wrote the article and the writer told me that she had spoken to the editor and that all the changes had been agreed. Imagine my surprise therefore when the newspaper was published three weeks later to find that nothing had been changed and the original transcript had been printed!
Now the big issue for me was the fact that the obvious intention was to have a negative slant on moving to, living in and buying property in Spain. So where I had said “white” the article read “black”, and where I had said “sunshine”......it read “rain” and so on!
Some weeks after that I was approached by a well known TV channel in the UK looking for people that had bought a business here in Spain that had failed, and another UK national newspaper who wanted details of people who had moved to Spain, failed dismally and returned to the UK (presumably with their tail between their legs)!
Needless to say we declined to contribute to these wonderfully positive and heart-warming scenarios.
So the recent spate of attacks on our adopted homeland filled the Sunday papers early in May and I am sure there are many people living here who are also wondering what is actually going on with the Spanish Property market so here are a few viewpoints that may help.
So.... What’s going on with the Spanish Property Market?
1. The initial Cause of the panic was the sharp fall in the share price of a Valencian Property Developer called Astroc. This sparked a wider sell off in Spanish housing related shares, which in turn led to fevered talk that the property market in Spain was about to crash.
The real fact of the matter is that Astroc’s falling share price was caused by something specific to that developer as the company revealed that the company had sold assets to its chairman, raising suspicion that it was trying to falsely support the market. So to some degree, the whole issue was an over reaction to one specific and isolated incident.
2. The recent panic even caused the share price of BBVA (Spain’s second largest bank) to dip on fears that it might end up having to shoulder a bunch of bad loans. The fact that U.S. Real Estate is going through a particularly bad time at present did nothing to help the stock market in Madrid, however whilst the share traders were anxiously biting their fingernails, data was published showing that in the first quarter of 2007, Spanish house prices rose at an annual rate of 7.2%.
3. One of the big concerns here in Spain is of an over supply in housing. Some 620,000 homes a year are being built in Spain which is a factor of four times higher than the UK, whilst Spain’s population is only two thirds that of the UK. It is estimated that new Spanish homes may reach 800,000 this year so it is understandable that there are some fears that the market will run out of buyers, but the one thing that the UK media do not seem to be aware of is that property sales by the Spanish themselves, with the increased wealth they have enjoyed largely through the sale of property and tourism over the past twenty years, are buying off plan properties, country retreats and holiday homes again. The Spanish in general and especially in Madrid are now buying more new properties on the Costas, partly due to the forthcoming improvements in both air and rail links
4. With the Spanish economy growing at circa 4% (one of the highest in the developed world), and with forecast growth of 3.7% in 2007 and 3.4% in 2008 it is difficult to imagine a recession led by the construction and property sectors.
However there are many areas along the Spanish coastline that suffer from a glut of overpriced, unattractive and poor quality properties in less than attractive, overdeveloped locations, and it is these properties that are likely to suffer most
5. We all know that property prices have slowed a little here in Spain and that property sales are taking longer than they were. Though contrary to the UK press, this started happening three to four years ago and not in the last few months! There are many reasons for this slow down with the most significant factor being that of supply and demand.
When property prices were much lower five to ten years ago, there was a huge demand for investment property. As this demand continued prices went up and up until they no longer represented a low risk return for the serious financial investor looking to buy off plan and “flip” the property before the build was completed. A high proportion of this type of buyer are now looking to buy elsewhere in some of the many new and emerging markets such as Bulgaria, Turkey and Morocco.
Another reason is that properties have often been given over inflated values by estate agents more interested in huge commission payments than reality.
One of my team recently valued a villa at 550,000 Euros and was told by the owner that a rather large and well known residential agent had valued the same property at 740,000 Euros, giving the owner false hope of selling his property at a level that he will never achieve! This is one of the key reasons why this type of property is now taking an average of three years to sell.
This scenario has also led to property owners being given an over inflated viewpoint of what their properties are worth so that when they want to sell their property they naturally expect a significant return over and above what they paid. Of course this may well be achievable if they bought more than four years ago but if not, the realisable returns may not be up to their expectations.
My advice to everyone wanting to sell a property right now would be to ask the agent what price the property will sell at in the current market, and not simply what they think the property is worth. The two answers may be very different!
At the end of the day Spain is still a great place to live and work, own a second property or holiday home and still attracts more British buyers every year than any other overseas destination. Its economic growth is prolific and let’s not forget the weather isn’t too bad either. Ask the 80,000+ Brits that are relocating here from the UK every year. It is estimated that by the end of this year there will be over one million Brits living in Spain and that of course does not take into account those that have yet to register as living here!
So what’s wrong with the British Press?
I suppose they can be forgiven..........after all, if I was sitting in a cold, rain sodden crime ridden area of the UK, paying a large mortgage, huge council taxes, extortionate gas and electricity bills, worsening health services, a spin ridden and diminishing education system, inadequate transport system, congestion charges, fuel costs, overcrowded prisons, speed cameras, parking fines.............nuff said??
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