The Spanish property market in 2008 and beyond

First and foremost, before I go any further I just want to wish all my readers a Felices Fiestas! Hope you have had a very merry Christmas and here’s to a great new years.
Ok now for the boring stuff. Below I’m going to review how the property market has been and what we can expect from 2009.

First a review on 2008

It’s been an interesting year. Not only have we seen the failure and/or closure of some of the largest (or at least best known) ‘international’ estate agents we have also seen several of the largest national agencies such as Don Piso get into trouble. And let us not forget the myriad of small agencies that opened during the boom years and have not been able to survive the market downturn.

At the start of the year we were also starting to see many vendors start to price their properties more realistically. Actually we have seen vendors willing to listen more to the agency in terms of pricing. Whether the agency in question was giving them the right advice is another matter! In our case the more competitive pricing lead to more interest from prospective buyers which lead to more sales. So early 2008 started in a positive light even though there were fewer buyers around.

Of course there were fewer buyers around as many who had bought in the last few years were ‘investors’. Or were at least sold properties as investments. Which, like all types of investments, are risky propositions where a few win and many lose. The investment market was always a false market, in my opinion, as many were convinced to buy not on the merit of the property and area, but on the fact that everyone else was doing it and you would be able to sell it on before completion at X profit. Or if you wanted a home in the sun, why not buy 3, sell 2 before completion and pay for the third! As you can imaging, it worked better in theory than in practice.

But anyway as I was saying, even though there were fewer buyers around, the huge decrease in estate agents on the Costa del Sol meant that we only noticed as slight decrease in the volume of trade. Many buyers were not only looking at second homes but also at primary homes as many had finally made the decision to move to the Costa del sol, whether they were Spaniards or foreigners.
In regards to budgets though there was a slight shift. Many British buyers were starting to be more cautious as the pound lost ground to the euro and many Europeans were wary of the rising euribor (in case of mortgage).

Then came the credit crunch/crisis/end of days!
Suddenly no-one was lending money. Many a large developer, Martinsa-Fadesa and Habitat for example, went into administration. Throngs of builders became unemployed. Many more companies who were either directly or indirectly reliant on the promoters suddenly went bust as well. This has caused unemployment to rise higher. Furthermore, with the banks unwilling to lend, mortgages are suddenly harder to come by. Or better said, with the higher euribor and the uncertain state of the economy, buyers are unable to get the necessary mortgages to buy properties at the existing prices.
British buyers have also been in the situation where the constant weakening of the pound and the UK property crash have made the dream of a holiday home in Spain into just that a dream.

So has there been an upside to this year? For some yes.
First of all the British. A weak pound means that for those Brits who bought several years ago (at a far better exchange rate than today) can now make heavy reductions and still make a nice profit when changing the proceeds back to sterling.

Second, many vendors realising the state of the market are willing to price their properties more competitively and are more open to offers as buyers are few and far between.

Third, with the economic crisis affecting many countries, we have seen a flight of money to the Costa del Sol. Interestingly the main group have been the Irish. In most cases the buyers have stated that they felt now was the time to buy on the Costa del Sol as they could find the property they wanted at the price the wanted. To a lesser degree with have also seen more French, Germans, etc… making enquiries as well.

What can we expect from 2009?

Well who could have predicted what happened in 2008??? What I can say is this. The whole property investment binge that we have seen in the recent past is dead or at least in a coma. Prices in some areas are going to continue to fall until they reach a more realistic level. We have already started to see this in areas like Calahonda where we have recently sold a 2 bedroom holiday apartment some 5 minutes walk from the beach for 120.000 euros. You can find 2 bedroom apartments in Fuengirola now for 160/180.000 euros as well.
Niche properties (frontline/exclusive locations/etc…) are holding their prices better. With the most recent sale being a 2 bedroom 90m2 apartment on the sea-front of Fuengirola (central) selling for 360.000€.
I am also seeing more people investing in their properties to bring the standards up, not to increase the sales price, but to increase the likelihood of a sale.

What could be a danger for some buyers is that now with the lowering of rates in the euro-area, many potential sellers are going to have to pay less each month to the bank. If vendors are not feeling the pinch as much they are likely to hold of selling if possible.

I can’t say by how much or when prices are going to stabilise as even those that make economic forecasts can’t seem to agree. Will it be 10% in 2009 or 25%? Or 35% by 2011? Personally I find such information irrelevant as national statistics are worth about as much as the paper they are written on! Good properties in good locations hold their value.

What you the buyer/seller need to decide is what gives value? What makes this property more valuable than the one next door? It also comes down to your priorities. If the property is solely an investment and you are looking at making a quick buck, then read what I wrote nearer the top. The successful investment is over the longer term. If on the other hand you are looking at a holiday home or living here, you need to look for the right property for you and family and try and get it at the price you want!

What else? Oh yes newly built properties. The good news, at least for the property market, if not for the builders, is that in 2009 the number of housing starts looks set to go the way of the pound (sorry!). Developers forecast just 150,000 housing starts next year, compared to 250,000 this year. And with fewer properties being added to the market each year, the oversupply of properties should start to decrease.

In summary, and after a lot of waffling, I just want to end this on an important note. Whether you are looking to buy or sell, 3 simple words will decide how much it will sell for. Location, location, location.

Regards
Andrew Bellés

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