If there is one country which epitomises the ongoing problems within Europe it has to be Spain with record unemployment, property prices in freefall, banks looking to offload their unwanted properties at any price and a future which at best looks difficult. Against this background you may be surprised to hear that interest in the Spanish property market is starting to pick up pace with a number of property search engines suggesting that investors are now looking to “bottom fish”.
News of renewed interest in Spanish property may seem a little early, because on the surface the situation still looks dire, or do we need to look at the long term picture?
Spanish property prices
The average price of property in Spain has fallen by 50% since 2007 and by 12.8% in the first three months of 2013. Indeed some investment experts believe there is potentially a further 8% fall in Spanish property prices before they bottom-out which may seem to suggest there is no rush for investors to pick up property?
Quote from PropertyForum.com : “The Spanish property crisis and lack of liquidity has increased the amount of properties on offer related to holiday rental businesses such as rural houses for short lets and hostels, it is claimed.”
On the plus side for those looking to invest, prices are being forced down due to Spanish banks looking to offload unwanted properties acquired when customers reneged on their mortgage payments. This short, sharp, shock situation has caused real concern within the property market hence the recent price reductions of around 12.8% during 2013. In reality there is never a perfect time to buy property, because nobody can tell what the future is, but at this moment in time a number of property experts in Spain are starting to suggest that it may be time to take a closer look.
Location, location, location
When you bear in mind you can buy a two bedroom apartment in Costa Blanca for less than £50,000 this is beginning to alert the investment intuition of many. The fact that property prices are expected to fall by a further 8% will mean that, while nothing is ever guaranteed, some investors will now be looking to cherry pick the better properties as we approach the expected “bottom of the market”.
One thing which local estate agents in Spain are warning of is that many of the properties held in banking portfolios, which will be sold at any reasonable price, are often part of larger developments which may be empty. Indeed many of these developments have very limited infrastructure and therefore while on the surface the current prices may look attractive, it may take some time to make any return.
Know your market
While promotional leaflets, general comment about the Spanish property market and attractive prices are turning the heads of many investors, you need to visit the area to see exactly what is going on. It is imperative that you are aware of the regional economy, the local property market and the position of your potential property purchase in relation to local amenities. Many expats and overseas investors fall into the trap of acquiring “attractive properties” on the strength of local estate agent comments and Internet feedback.
Even though many experts believe there is significant value in the Spanish property market, specific property potential will still be fairly closely linked to the location of the property or properties in question. When the Spanish economy does turn, which it eventually will, all properties will benefit to a certain extent but the rate of recovery in prices will be varied across the board.
In many ways investment opportunities emerge during the “darkest of days” and when you look at the Spanish situation, record unemployment, economic downturn, massive debts and problems between the politicians and the voting public, does it get any worse? The country is currently being supported by the European Union, it may or may not be over the worst, but historically all investment markets seem to overreact on the upside and the downside in times of uncertainty.
We are unlikely to see a major short-term boost in property prices but once the market “bottoms out ” there is then the opportunity for the country as a whole to build again and create a solid foundation for the future. The property market will play a central role within any future economic recovery which will be reflected in the general price of property and the level of demand.