Posts tagged with "property crisis spain"

Spainish Property Update Nov 2013

Statistics released by the Central Government Public Works on property purchase during the second quarter indicate a resurgence of interest in buying property in Spain. Figures demonstrated an increase in sales in five of Spain’s 18 autonomous regions. The province of Alicante saw a total of 3,543 properties purchased making it the most popular province.

Interestingly, 54% of buyers in the province of Alicante came from abroad compared to a national average of 17% across Spain. The British are the principal buyers, mainly retirees, followed by Belgian, French and Russian purchasers. Furthermore, according to figures from the National Council of Notaries up to June 2013, 70% of the homes purchased in Spain were paid for without mortgages, whereas, prior to the economic crisis only 37% of Spanish homes were bought with no loan. One reason for this adjustment can be attributed to the lower prices of property since the economic crisis. Indeed, a study conducted by the Pompeu Fabra University revealed some areas of Spain have seen price reductions of up to 50%. These price corrections have stimulated investors to consider property as a viable option when planning their financial future. You will see that this graph clearly indicates what has been happening since the property crisis in Spain. Spanish Property Sales graph 2006-2012

There has been a change in the financial tide and as the banks lose both trust and credibility, investors are beginning to modify their attitude and behavior towards their investments. In addition, the precarious state of stocks and shares has left investors facing the challenge to find the foundation for a more resilient investment. Furthermore, the ridiculously low interest rates currently offered to savers leaves no doubt that a more constructive approach to investment is required. In short, the lost rapport, damaged trust and jaded attitude towards traditional avenues of saving and investing has resulted in a revolution as individuals search for a healthier return on their money.

The emerging savvy investor is recognising the value of a tangible investment. For example, in Moraira and Javea you can purchase a stunning 5-6 bedroom villa in a prime rental location for around 483,000 to 647,000 euros including the 12.5% purchase cost. The historical income of a property of this nature is around 40,000-50,000 euros gross, per annum. Or perhaps you could consider a property with four bedrooms offering an income of 25,000-30,000 euros annually for a purchase price of circa 400,000 euros.

The highly desirable areas of Moraira and Javea offer unspoilt resorts with beautiful coastline backed by spectacular mountain ranges. The wealth of charm and tradition is maintained by strict conservation rules ensuring the area remains unblemished. Attracted by the sun-soaked, fun-filled promises of the Northern Costa Blanca area visitors are also treated to surprisingly stunning countryside with dramatic landscapes, green vineyards, almond groves and orange orchards. A short drive from the coastal towns leads you to between craggy mountains dotted with traditional white-washed villages. Follow the narrow mountain passes and head high to be rewarded with breath-taking views. As you ascend you may be lucky enough to discover, nestling on the mountain side, traditional family run restaurants offering simple delicious food and wine menus to satisfy the hungry traveller. These unique experiences along with one of the best climates in the world offering 300 days of sunshine each year ensure visitors repeatedly return to the unspoilt area of North Costa Blanca.

In order to maintain a healthy return on your investment you will need to consider how to manage the property. Some owners choose to hire a property management company who offer a complete package acting as the lynchpin between property owners and rental guests. They take responsibility for advertising, bookings, maintenance, cleaning and pool care. A reputable company will offer good service resulting in repeat bookings. A letting agent of this nature typically charge 30-40% for their service. On a property costing 438,000 as mentioned above, this offers you an income of around 24,000-28,000 euros, a return on investment of 5-6%. Alternatively, you could maximise your return on investment, increasing it to 7-8% by choosing to orchestrate bookings and advertising yourself. There are many small businesses in the area that you could arrange to take care of the changeover and pool care.

The chances of capital growth in the highly desirable Javea and Moraira area is very realistic. Prices have now stabilised and inflation alone will guarantee growth in your investment. Furthermore, vendors are pricing their properties realistically and are willing to negotiate. Javea, Moraira and the Bennisa Coast have sustained reasonable property sales throughout the crisis. The outlook is positive for this beautiful area of the Northern Costa Blanca.

If you are considering a purchase there are a number of elements to consider. For example, a north facing villa may rent well but if in the future you wish to sell it, you risk excluding Northern European buyers as they crave sunshine all year round. Engaging the services of a professional property investment advisor will ensure all gems of information are brought to light. By covering the complete market of properties available they will be able offer you the much needed insight and reveal the excellent opportunities available.

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Posted by on 11/16/2013 18:51:00

The Spanish Property Crisis 2013

During the final boom year of 2006, over one million
properties were sold in Spain which on reflection, was quiet remarkable. Those
were the days of easy lending, which fuelled demand and inflated property
prices.

Since the end of 2007 to 2011 the property market had suffered a price correction, which has resulted in a 25 – 30% price reduction across
the board. Many properties were sold during that period regardless and 2011 was a very good year for property sales
by comparison to the previous four.  2012 was slightly down
on 2011 but there were still three hundred and twenty thousand properties sold
in Spain during 2012.  It may be a third
from the heights of 2006 but still far from dead, which the media would have
you believe.

In contrast to the doom & gloom reports, the region of
Valencia has seen excellent property sales for 2012 and Javea/Moraira in
particular has continued to attract many northern Europeans.  Property sales so far in 2013 have been
exceptional as more people seem to be reducing their financial exposure to the
banks as well as other non performing financial institutions. It will be
interesting to see the official figures at the end of the year but the message
we hear daily from prospective purchasers, is loud and clear, they all have a
mistrust of the banking system, especially when the EU can request a nation
like Cyprus to rob from personal savings. That is a very unsettling thought for
savers, regardless of where you live in Europe.

Throughout the crisis, we have seen an annual reduction in
property prices and this reduction varies significantly subject to location.
For example in Torrevieja Costa Blanca South, we have seen prices fall by as
much as 70% on some of the mass developments built for a given price but the
more bespoke properties in that area have not suffered anything like this, circa
40% at most.

Many of those mass developments still remain empty, even
though you can buy a relatively new three bed villa for 65,000 euros and
less.  This dire situation basically
makes news headlines and by association gives the property market, for the whole
of Spain, the doom & gloom people read about.

Many of the “new unsold” properties you get to
read about which the government/banks are trying to off load are in  areas like this, all the way down to the
Costa del Sol. This kind of news, drives uncertainty and fear into any
prospective buyer. Consequently today’s buyers are cautious because property is evidently not
the investment it used to be. This whole mind set takes time to come to terms
with as most of us have historically been conditioned to the contrary. The fact
is, we all have to adjust and mange our expectations better. Ultimately this
means big reductions if you want to sell now. It’s no different for me writing
this stuff and it’s a bitter pill to swallow.

Not too bad if you buy again in Spain but if you are going
back to the UK, most have to scale down considerably from their Spanish villa
in the sun.

The northern Costa Blanca, specifically Moraira & Javea
has suffered a 25-30% correction in prices since the boom year of 2006. This
has meant some excellent bargains for the buyers living within the euro zone.

For the Brits, whom have historically been the major buyers
of Spanish property, they have not really seen a significant price reduction in
real terms, due to the loss of value in GBP Vs Euro.

GBP has lost circa 30% since 2006 against the Euro.
Consequently the demand from the other euro zone nations has increased
dramatically. Regardless of the price corrections, euro zone buyers still want
substantial price reductions, especially on anything that needs updating, which
is common place.

Providing the accommodation, location, orientation and plot
is desirable, quality is still in demand and sells quickly. Like most property
agents in Moraira & Javea, we are inundated with buyers looking for quality property for sale in Javea  and properties for sale in moraira at a reasonable price, unfortunately properties like that are few and far between. Consequently,
property that is dated tends to either hang around for months or vendors
eventually decide to accept a low offer to sell it, usually on a reluctant
“needs must basis.”  In many
cases this price erosion process takes three years or more. During which
time  fair offers often get rejected
only to be reduced even lower than this a year later but still behind the
reality of price reductions as other sellers have also become more realistic
with pricing relative to the actual demand.

Moraira & Javea Villas for sale.

For the majority of buyers around, regardless of
nationality, their expectations often exceed the available property stock
within their budget range. In many cases, middle ground can be found but this
means compromises for both buyer & seller. The properties that are
realistically priced amongst all others keep selling and are always in big
demand.    Good affordable property
stock is very hard to find, as most of the properties for sale are still vastly
overpriced for the condition and location they are in.

In our experience a lot of villas priced at 295-395,000 euros tend to be 50 – 100,000 over priced compared to some of the better quality ones available at this price level. So unless a property has been completely renovated to a high standard and situated in a good
location, many are still too expensive for today’s prudent buyer. Many have had price reductions but unfortunately do not reflect what’s happened to the market.

The price reality gap between buyer and seller is still
significant but not as bad as it has been in the past for this area.  That said, prices still need to come down on
many properties for them to stand a chance of selling. For those that really
want to sell its easy to find buyers, providing they have a desirable property
that falls within the affordability band of up to say 300,000 euros and are
seriously prepared to negotiate subject to the condition, location etc… Above
this, what would seem to be a “falling price band,” buyers get
significantly fewer. Speaking with many agents, they report that circa 90% of buyers are within
this 300k euro price band. If you add on the 11% purchase cost it’s still too much
for most.

Regardless of price reductions there are those properties
that can be very difficult to sell.

For example, if you have too many steps to get in and out of
your property, it’s getting very difficult to find buyers that will compromise
because the average buying age has risen to 50 years of age and is creeping even
higher.  This age group and beyond have
basically accrued some wealth over the years and have “real
money”  which is just as well
because banks don’t want the risk any more, other than for dumping their own
unsold poor quality repossessed stock.

For the moment the Moraira & Javea property market is
busy with many buyers looking for a deal. So if you have a property for sale and it’s not selling, there
is usually good reason as there are many buyers around and villas being sold. The longer you leave it
and hope a buyer will come along, the higher the risk you have in not
getting the bottom line price you have
in mind. If you really must sell, speak with your estate agent and get them to
give you a realistic price that will make it desirable to the buyers around
today.

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Posted by on 04/11/2013 09:35:00