 Spain Boom or Bust?
The Spanish Costas have experienced turbulent times in the last three years with many Investors choosing to look elsewhere to achieve better returns. Gone are the heady days pre 2004 where off plan investors were seeing annual growth in off plan properties of up to 40% and even more. During this period there was an explosion in construction all along the Spanish coastline and Developers were known to sell out an entire project within hours of releasing it to the market.
Following the Madrid bombing and the general election which followed the Spanish government changed from right wing to the Socialist government which is still in power today. The new government swiftly introduced new policies which meant that 35% of all construction land was designated for social housing, also an investigation began in to suspected illegal practices which had led to many councils granting building licences illegally in exchange for cash from some Developers. In the resultant debacle many council members were jailed as were heads of a number of high profile construction firms.
In Andalucia and other regions of Spain many building licences which had previously been issued were withdrawn and building on many projects was stopped; at around the same time there were major investigations into suspected money laundering and the highly publicised 'land grab incidents' in the Valencia region. All of these things were seized upon by the press and created a lack of consumer confidence in Spain as a property investment target.
However, every story with a downside has a corresponding upside. In this situation the new goverment acted swiftly to appoint new officials in the town halls which had been affected and set new guidelines for the use of land and new controls over the issue of building licences; all designed to restore sanity to the market. Many of the rogue Developers have now gone to the wall and many of the sharp estate agencies who had profited from the practices of the crazy years have gone also.
Those left have survived the fallout and have created a strong business environment ever mindful of clients best interests. Many of the Developers remaining are those who have always supported 'best practice' and are still producing top quality properties to meet the ever increasing demand of 'lifestyle' buyers who choose Spain for a holiday home or retirement ; motivated by the climate, more relaxed lifestyle, less government interference, good healthcare and the fact that it is just 2 and a half hours away from most European capitals.
As well as these lifestyle buyers we are now seeing the emergence of a new breed of investor; not those looking for quick returns from 'flipping' an off plan property prior to completion, but those who recognise the value of building a strong property portfolio for long term growth. For these people now is the time to buy; prices are at rock bottom and it is very definately a 'buyers market'. If you have the funds bargains are everywhere as cash strapped individuals who came for the easy pickings from a rising property market are now licking their wounds and trying to off load, often for less money than they paid three years ago!
Many older residents have found that rising interest rates and the higher cost of living since Spain adopted the euro means they can no longer afford to support their lifestyle and are opting to sell up and move back to the UK. This presents another opportunity for investors as these properties can often be picked up at up to 40% below market value.
It should be remembered that with many people opting to leave their expensive debt ridden lifestyles in Northern Europe Spain is still the number one choice to buy a second home, whether for holidays or retirement; over 52% of foreign home buyers still want to come here. The surviving real estate companies in Spain have had to adapt to new practices, giving clients more and better support and recognising that to survive in the current market the clients interests are paramount. From organising bank accounts, arranging national identity cards, finding the best mortgage lenders and taking the client step by step through one of the most stressful situations he may ever face, our resourcefulness has never been so tested.
The result is a stronger, more regulated industry with many more safeguards for the potential buyer. There are definately signs that in many areas the market is recovering. There is strong growth in the Costa de la Luz and Valencia and inland areas like Granada and Murcia have been particularly resilient. Even the hard hit Costa del Sol is recovering with strong demand for sensibly prices beachfront properties which will be the first to see growth as the market recovers.
My prediction is for a strong recovery over the next two to three years and investors who take advantage of the many opportunites currently available will be very happy they came back into the market.
This is our industry and our livelihood; how many people out there agree with me? Lets hear your views.... | 
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