Important factors to consider when looking at the Spanish property market

At this moment in time there’s probably no worse property market in the world to be looking at than the Spanish market which has literally fallen to its knees over the last 12 months. Buyers have disappeared, tourists are staying away in droves, the national economy is under serious pressure and to cap it all the Spanish mortgage finance industry has literally dried up. Can you really get any worse?

However, for those looking longer term there are many interesting factors to consider with regard to the Spanish property market which include:-


Tourism has been the main sector of many Spanish resorts over the last 20 years or more, supporting local economies, attracting millions of people a year and encouraging a thriving and lucrative property market. While the more obvious food for the property market, i.e. tourists, have not been visiting the country in the same numbers in recent months they will at some point return and demand for both new resorts, rental accommodation and properties will also grow.

Those who can see the bigger picture and the fact that Spain has been and continues to be a central tourist destination for many, are the ones who may be able to pick up interesting property acquisitions in the current market conditions. It is easy to get tied up with a fact that tourist numbers are likely to fall this year and next but a long-term investment in the region could prove very lucrative.

Second homes

Even though some areas of the Spanish property market are literally dead at the moment there are still a small number of UK and other European residents looking for second homes and places where they can retire in later years. For many, in particular those in the UK, Spain is the obvious choice because of the sun, sand and a transport network which can see them back in the UK within a couple of hours. This accessibility and climate will not change although there is some concern about the level of property prices prior to the ongoing correction.

The weakness of the pound in particular is also of concern to the Spanish property market at the moment with more and more property investors unable to finance the properties of their choice. Hopefully, as the strength returns to sterling in due course, this will improve the attractions of the market for those in the UK especially.

Expat community

It is often easy to overlook the fact that many nationalities are now represented along the Spanish coastline with small communities of expats in each and every resort. This can often be a major benefit to those looking to move overseas, with the fact there is likely to be a ready-made network of friends and support in place.

The Spanish economy

When many people look towards Spain all they tend to see is the tourist industry, the seaside resorts and the massive interest in owning property in the region. It is easy to forget that Spain has the eighth largest economy in the world, the fifth largest in Europe and has an economy which grew by 3.8% in 2007 which was well above the European average. The strength of the overall economy is also reflected in the fact that Spain is the third largest worldwide investor with exposure to each and every corner of the globe. It can often be easy to underestimate the Spanish economy and focus on the vital tourist industry but investors must be aware there is more to Spain than just the tourist sector.

While the employment situation is different in many areas of Spain, the country was credited with creating more than half of the new employment positions in the European Union in the five years up to 2005. On the downside there has always been concern about the higher than normal rate of inflation in Spain which has been an ongoing situation for quite a few years now.

Transport links

There can be few countries in Europe and the world with such an extensive external transport network to rival that of Spain. The country is literally only a couple of hours away from the vast majority of European Union members something which has certainly assisted with the growth in the country’s property market. While many of the budget airlines around the world look to cut back on their many routes we have seen passenger numbers to Spain and flight numbers to the country increase over the last few years.

In countries such as the UK it can actually be quicker to fly to Spain than it would be to travel the length of the UK itself!

Property prices in Spain

While there is no doubting that many of the more sought after resorts in Spain have seen the value of properties increase dramatically over the years, with some now out of the reach of international property investors, this is not the case everywhere in the country.  Of late we have seen a number of new property hotspots appear along the coast and the inevitable development which has been a signature of the Spanish property revolution over the years will not be far behind.

There has also been a new trend towards moving into the centre of the country, and away from the seaside resorts, where many local property markets have remained relatively untouched. The country has an impressive internal transport network which in some cases can dictate the emergence of new and potentially lucrative property markets.

When will the Spanish property market recover?

In many ways this is the $6 million question and one which every single domestic and international property investor has an opinion on. The truth is that while many of the niche Spanish property markets have a very firm backbone to support them, some of the more recent introductions to the sector have yet to form a solid base.

There is no doubt that long-term demand for Spanish property is still there and many investors or potential investors are sitting on the sidelines at the moment. Quite what it will take to turn the market remains to be seen, it could be further interest-rate reductions, an improvement in the European Union economy as a whole or further movement in the currency exchanges. Long-term investors are already looking at certain areas of the Spanish tourist industry where many forced sellers are in effect “giving away” their properties.

For the majority of property investors it may be too soon to dive in, but for those able to negotiate a good price and willing to take a little more risk there is the potential for substantial long-term capital growth.

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