During the boom it seemed that the value of Spanish property could be limited only by one’s imagination, but then it all came crashing down – almost literally.
During the boom more properties were constructed in Spain than in France, Italy and Germany put together. But only after the boom did anyone (that mattered) realize that they had perhaps built too much. As demand plummeted Spain’s oversupply became a huge problem and property prices also plummeted.
Or did they? While agents would report drops of up to 20%, the government index would struggle to acknowledge that prices had fallen by anything more than 5%. In fact, at the end of 2011 the government house price index showed prices had fallen by 6.8% during the year leaving the total decline since the peak at 19%, meanwhile the Tinsa index found that prices had fallen by 10.8% during the year bringing the total decline to 30.4% since December 2007.
The question on everyone’s lips is whether or not Spanish property is still overvalued at present levels. For me there is no definitive answer to questions like this and in any case, if you wait till property is definitely not overvalued based on real evidence, you will have already missed the best investment opportunities.
For me, value is relative. If you look at a property in a built up area with tens of dozens of similar properties for sale around it and its price is down 20-30 per cent then it is probably overvalued. In fact, for it, and pretty much any un-unique properties in oversupplied areas you want to be looking for reductions of around 50-60%.
And if you can find a property in a well established resort with strong and verifiable tourist demand with prices down 50-60 per cent then the chances are you are getting your money’s worth or just a little bit more. And thanks to Spain’s none-too-secret repossession problems such deals are there for the taking.
Bank owned property in Spain comes in all shapes and for a time it was difficult for private individuals to find it, or certainly to find it quickly enough (before someone else has already bought it), but now there are sites like bankrepossessionspain.com where we can go and view a wide selection of bank owned resort property in Spain.
Murcia is particularly popular at the moment, because of the new Paramount theme park which is already under construction in the area, and will be accompanied by a new international airport opening this year. There is availability of bank owned properties at the aforementioned 50-60% discounts, and while it cannot be certain that they won’t lose value in the short term (although it is unlikely) it is almost certain that they will grow in value over the long term.