Of all the suffering PIIGS – Portugal, Ireland, Italy, Greece and Spain – it is arguably the last that has squealed the loudest over its real estate pains. Economists expect Spain’s economy will further erode in 2013 with up to 25% unemployment across the country, but the bad news may make for good homes sales, particularly to foreign buyers. The home sales that do occur, however, will likely be made to wealthy buyers who can afford to finance since Spain’s lending is still too restrictive for many would-be purchasers. A new theme park and favorable currency rates may also help make things a little brighter in the country’s housing market, although tough times are still ahead. For more on this continue reading the following article from Property Wire.
The last quarter of 2012 saw a positive end to the year with a flurry of British and other international buyers taking advantage of falling prices and a reduced VAT rate on new properties in Spain.
The higher end of the market also seems to have performed well and at the lower end of the market what are regarded as bargain prices are attracting buyers, especially those with cash as getting a mortgage in Spain is not easy.
Property expert who have been working in Spain for many years believe that there has been an increase in sales to overseas buyers. ‘When full year figures are available I expect them to be 20% up on 2011,’ said Barbara Wood of The Property Finders based in Andalucía.
She pointed out that in her area the overwhelming majority of overseas buyers in 2012 bought quality property in prime inland and coastal locations, leaving the lower end of the overseas market still in the doldrums.
‘I am in no doubt at all that these different sectors will perform very differently throughout 2013. There are still a good number of sellers who have not reduced their properties sufficiently but when they do, and they will have to, they will sell somewhere between 30% to 40% down. A real feature of 2012 was the increasing number of Spanish sellers finally coming out of denial and accepting offers they were previously turning down,’ she explained.
She believed that several factors will combine to squeeze the Spanish domestic market still further in 2013 including reduced salaries and 25% overall unemployment.
‘Much of the unsold stock will eventually be bought by domestic buyers but with unemployment predicted to remain at current levels or higher through 2014 it will be a long, slow process. The number of mortgages granted during 2012 was about 35% lower than 2011, falling for 30 straight months, although there is some growth visible in areas that attract the overseas market, such as Málaga,’ she added.
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Also mortgage tax relief has been abolished and VAT on new homes goes up to 10% on 01 January. The temporary reduction of VAT to 4% has boosted the number of overseas buyers, according to Chris Mercer, director of Murcia based Mercers, which led the firm to selling seven homes in December in what is usually a slow month in Spain for property sales.
‘The main issue is that bank funding will continue to be a problem in Spain. If a buyer wants more than 50% loan to value and the property is not bank owned, it really is a no-go situation. This will limit the market to wealthier cash rich buyers or steer people in the direction of, often less desirable, repossessed homes,’ he said.
‘The good news is that the majority of bank owned units in our area of Murcia have now been sold, so next year there will be less and less on the market and the banks can perhaps turn their attention once more to lending on the normal resale market without distraction,’ he added.
He too has found that foreign buyers have tended to dominate the market in 2012, mainly Belgian, French, Norwegian, Swedish, and a welcome resurgence of more British buyers over the last three months. Mercer is also seeing some more interest from the Germans and Dutch. The international interest is being aided by an influx of companies like PDR Property Solutions that help investors buy properties abroad.
‘Prices seem to be holding steady and offers are not as stupid as they have been. For example houses priced at €195,000 are selling for around €185,000, so sensible offers are being accepted but nothing insulting,’ explained Mercer.
‘It should be remembered however that, unlike most agents, Mercers do accurately and realistically value properties and will not put a house on the market unless we think it is priced for the market and we can sell it. Our asking prices are normally pretty close to the selling price and that is better for the seller, the buyer and us,’ he added.
Another good piece of news in this part of Spain is the new Paramount Theme Park with work due to start in January.
‘This can only increase the profile of Murcia and the action will really hot up. Our new Corvera International Airport is also due to open sometime between spring and autumn 2013,’ said Mercer.
Marbella based Spanish Hot Properties is also expected property sales to increase in 2013. Director Nick Stuart said that sales and turnover were up around 25% on 2011 and he predicts an increase of 50% in turnover for 2013 over 2012.
‘Marbella is still a very desirable area of choice for international buyers. There is even a shortage of the best homes in key parts of Marbella and Puerto Banús. Considering its perfect location, at the southernmost tip of Europe therefore squeezing more sunshine hours and higher temperatures out of the entire year than the French or Italian Riviera ever will, not to mention direct year round flight connections to Northern Europe, Russia, North Africa and North America, prices haven’t surged with such ferocity as they have on other elite coastlines,’ he explained.
‘This makes Marbella very appealing. Move further away from the centre and there are still fantastic deals to be had in secondary locations such as Estepona and Mijas Costa, which are only 25 and 30 km away from Marbella respectively, but half the price,’ he pointed out.
However, he also believes that the bank lending situation could get even worse in 2013 with a reluctance to give decent finance on homes that are not owned by the bank themselves. ‘We will find that cash buyers will be in a strong position to negotiate and will generally get discounts on properties up to the €300,000 mark,’ said Stuart.
He is expecting a big increase in sales to Norwegians and Swiss due to their currency being outside of the Eurozone. The Belgians, Dutch, Russians and Scandinavians currently regard Spanish properties as being good value for money.
‘Two bedroom apartments selling for €250,000 today were priced at half a million at their peak, genuinely many properties are half price, and I don’t think the Brits quite see that,’ explained Stuart.
‘They used to dominate the market, making 60 to 70% of foreign purchases, but were responsible for just 19% in 2011. Meanwhile purchases by Russians soared nearly 28% from 2010 to 2011 and Chinese purchases by 7%. Let’s hope the British buying public wakes up and returns to Marbella,’ he added.
And Wood pointed out that there are bright spots in the Spanish economy. Exports are growing, labour costs are falling and labour laws have been reformed, the bloated public sector is slimming down and Spain is a world leader in renewable technologies most notably in the solar sector. And even the banking sector is not all bad with the main Spanish clearing banks in relatively good health,’ she explained.
This article was republished with permission from Property Wire.