Property Focus Life in Spain Buying Property

Fri 22 Aug 2014

Over the past twelve months we have had various reports that housing prices in Spain have almost bottomed out and even more so along the Costa’s and that in 2015 prices will start to rise by 2% for that year, as an average. Obviously these statements deal with the overall data which
are also broken down into the most successful regions and leading the way is the Valencia region with 13,436 properties sold to foreigners during the last quarter of 2013. That equates to a third of all property sales in Spain!

On a year to year comparison there were 16,619 properties sold to foreigners during 2013 compared to 13,793 properties sold in 2012. This
equates to a 17% increase. In addition the total sales figures increased for the same period by 11% to 1.7 billion euros. That’s 102,292 average sales price per property.

In 2013 Alicante province achieved the majority of sales with 13,736 properties sold to foreigners. That’s a whopping 83% of the total regional market. The rest were divided by 11.7% for Valencia and 5.3% for
Castellon. Nationally resale properties were more popular than new build
properties. The British lead the market acquiring 13% of all sales. It was 40% back in 2008!

Russian sales have been increasing each month and Scandinavian, Algerian and Belgian buyers have also taken a substantial slice of property purchases. All this sounds like good news and yes sales have been good and everyone likes to talk it up, however, this kind of news also gives false hope and raises expectations of where the market is actually going.

Sure there is more confidence but there is a problem that seems to be
unreported and that is the bulk of purchases made have been at the bottom end of the market, mostly under 350,000 euros. So much so, the spike in sales, especially in Moraira & Javea, has absorbed pretty much all of the property stock that had been hanging around for years which stood a chance of a sale. This increase in sales is because those vendors have had to negotiate way beyond their comfort level, in most cases, in response to the bulk of budgets buyers have had. This then leaves a growing problem which all agents are experiencing to one degree or another right now. And that is where do they find the property stock to fill the hole created by the recent spike in sales. How do we manage the expectations of the seller with all this so called good news and false hope?

Due to this false hope, some vendors are seemingly increasing their prices or standing firm on negotiations on properties that by large were overpriced for the market to begin with, hence still not sold. The phrase “shoot yourself
in the foot” comes to mind and this could potentially throw the market backwards if this becomes common practice.

Unless we see a massive increase in budgets soon, the reality is that the problem still remains the same. And that is the bulk of buyers do not have a budget over 350,000 and many of these have under 200,000 hence the recovery at the bottom end which the statistics prove. Added to this the 13% cost to purchase and then cost to modernise the mostly dated condition of properties at these price levels, it becomes too expensive for most.

Budgets may or may not improve over the coming years but when they do it may only be marginally as it’s an ageing market and most do not want debt or big villas to maintain. Rather they downsize at home and keep some capital back for an easy maintained property/life in Spain. Consequently the vastly overpriced middle bit, typically anything over 500,000, will remain a difficult price band, unless it’s amazing, whilst the top end with at least some wow factor always seems to tick along. So unless the bulk of the middle market has a significant price drop or budgets increase accordingly, it’s going to continue to be very difficult to manage the expectations of foreign buyers. For all the positive news we read about, if there is little stock that can satisfy the bulk of demand or budgets can’t be increased to a level that’s acceptable, it could be stalemate for an unknown period of time.

Comments are closed for this post