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In my previous article
I said -
"Spanish real estate agents
are predicting a "soft landing" and, as far as they are
concerned, that is probably what will happen.
Spanish real estate long-term has been a solid, enjoyable
investment. Right now "long-term" is the only logical what
to look at it." |
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Real estate development first really got
underway in the '70, simultaneously in Costa del Sol and
Costa Blanca. I have been involved in Costa Blanca since the
beginning and for very approximate relative values values I
have tracked two properties since then -
North Finchley, London N12: End of
terrace, 3 beds, 1 bath with detached garage and largish
garden, built 1934. This was the last property I owned in
the UK and was sold in 1972 for £8,500.
5 - 10 minutes walk from London Underground and Railway
stations, good local bus services.
Views - neighbours gardens.
A middle-of-the-road property for a MoR sort of guy!
The current value is £349,000, refurbished in good
condition.
Club Moraira, Moraira, Costa Blanca:
Detached 3 beds/2 baths, 800 M2 plot with private swimming
pool and lean-to carport, built in 1971. 10 minutes walk
from Moraira, the beach and supermarkets (20 minutes walk
back uphill - but then everyone has a car).
Cost new was £5,500, currently 7,350 Euros.
Views - surrounding hillsides, covered with villas!
Not the best location but about average.
The current value is 350,000 Euros, refurbished in good
condition.
The significant thing is that the London
property has appreciated in value at an average 11.2%
annually and the Moraira property by 11.4%.
Also please note that the valuation is current (July 2007),
in 2004 it was perhaps worth 390,000 Euros.
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Now we are looking at average appreciation
and Moraira property has had its ups and downs - the same as
London and not a bad investment in either case.
Potential rental income has to be taken into account and
that is 5% gross for the London property but only 3% for
Moraira.The real bonus for the Spanish property owner is the sheer
satisfaction of owning a home in the sun and a lifetime of
wonderful holidays. |
An interesting point is that Moraira property
values started to fall in 2004 but this was caused by by
competition from new developing Spanish resorts. I would
imagine that the trend was the same in other established
resorts.
See
Property
Values and Tourist Rental Income,
which I wrote in 2004.
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In the short term there is little that can
be done.
The developers who cannot wait it out or reduce prices will face
foreclosure but the banks will protect their assets by
continuing with the developments and re-market them at
realistic prices.
Buyers who have bank guarantees need not worry as long as
they can tolerate a delay.
The resale market is already recovering is
certain areas.
In the more sought after areas sellers have been adjusting prices
for sometime already.
My
personal view is that estate agents have a professional duty
to advise sellers of proper values and current market trends.
Sometimes it is not a simple matter to persuade them that
their beautiful holiday home is not worth what they thought
and, even though it creates extra work, they should be
prepared to continually canvass sellers in order to revise listed prices.
Perhaps I am biased but there is not really
any other popular choice for northern and western Europeans.
Good accessibility is obviously important as well as
climate. There will always be a limited demand for France
and Italy and Bulgaria is currently popular but these areas
mostly don't have the same winter climate as the Spanish
Mediterranean.
The glut of new and resale properties has to
be sold off and that will take some time. As soon as buyers
realise that prices have fallen then the market will start
to pick up. Once they realise that Spain is not so corrupt
the improvement will quickly get under way.
That won't happen overnight because the leopard needs a gene
alteration to change its spots. Perhaps "inter-breeding"
local councillors with immigrant Europeans will do the
trick!
It will take much longer in newly
developed areas.
North Costa Blanca, Almeria and Costa del Sol (for example) are
long-established popular resorts with a strong resale market
and relatively few new developments. There is probably
nothing more negative for potential buyers than the sight of
redundant tower cranes, half-completed properties and weedy
vacant building plots.
The Spanish Tourism Crisis also has to be considered
as this was also caused by over-supply.
After the 90's crash, both construction and
tourism took around 5 years to start recovery. My bet is that the
timescale will be similar - as long as the UK economy holds
up.
Positive elements to consider -
Immigration is creating a demand for housing.
Meanwhile there are between 3 and 4 million unoccupied
properties, mainly in the cities. The Spanish government is
already addressing the problem of making affordable
properties available, both to buy or rent, to satisfy the demand for
cheaper housing.
During the 90's there was an influx of
package-tourists from eastern Europe, which may well happen
again. This will help fill the cheaper accommodation and
provide rental income.
The Spanish authorities are already taking
steps to slow down new development by restricting land for
new projects.
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Decide or the geographical location, even
before you start your research.
Inland properties are generally cheaper.
If you are not the type to integrate yourself into small
village society and learn the language you may well find
yourself bored to tears after a few weeks.
Life in some costal resorts is not much
different from home, except for the sunshine, but you
might not take to that either.
If you are not sure then have a
holiday there before you even think about buying!
Research as many properties as you can.
The Internet is the best medium. Use
your favourite search engine to search "property for sale
(town)".
Plan your search properly and start as
you intend to proceed. A good tip is to use "Favourites" to
establish a short list.
Check out all the estate agents
in the area. Just because they are
No.1 on Google does not mean that they are honest and
reliable - but they certainly have good SEO!
If they are honest and straightforward they will provide a
company name and you have the web address as well.
Do a
search on these to see what the Internet community thinks.
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Buying a Property in Spain?
10 Points You Should Consider
By Cristina Sanchez
"If you want to purchase property
in Spain in an easy and hassle free way, then take a
look at the 10 points below . . ."
"1. How much money do you wish to spend? . . . "
"2. Mortgages in Spain . . . "
"3. Costs for Property Purchase .
. ."
"4. What kind of a property
do you want? . . ."
"5. What do you want the property for? . . ."
"6. Where do you want the property
to be? . . ."
"7. What legal requirements are
necessary for foreigners? . . ."
8. Taxes and Insurance? . . ."
9. What else is important? . . ."
10. Buy a home that includes
Comprehensive Title Insurance . . ."
Cristina Sanchez is a specialist in
Spanish real estate. She is the Customer Relations
Manager of
1Casa.com, a real estate agency that helps
clients buy property.
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Generate a
"short list" of properties, select just 2 or 3 estate agents in the
area to visit and establish your credibility as a serious buyer.
For what it is worth I can say that
there are 2 categories of buyer -
- Those who go from one shop widow to another
comparing prices (like buying second-hand cars!).
- There are the serious buyers, who come by appointment,
and get much better
attention.
Make contact even before you travel to
the resort. Correspond with them about your requirements.
Get to know them.
Make it clear that you will be there for
x-days and will be making appointments with other estate
agents.
Don't accept an inspection flight offer
if you are tied to just one company - never, not ever!
Lots of estate agents will assist with your travel
arrangements. If they are prepared to include car hire
then that is a sign of their good intentions.
Make sure that you don't pay over the
odds.
Obviously property prices are
falling but they have almost bottomed out -
especially resale properties in sort-after areas, these
have been falling for 3 years already
read Property Values and Tourist Rental Income - 2004
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Research prices for the area.
The Keyro House-Price Index is a good guide except
that it only lists average offer prices i.e. not the
selling prices. I don't know why more estate agents don't publish
movers and shakers lists which show
properties reduced and sold - perhaps they don't want
the buyers to know!
Always make an offer and expect the
estate agent to convey the same to the seller - that is
his job. |
Arrange you finance before you start.
Convince the seller that you are not messing around and
can complete in (say) two months and your offer is more
likely to be accepted.
If you are looking for a quick profit
then forget it - Spanish property is not for you. The best
that you can expect, long term, is 5% - 7%. Legal fees
and capital gains tax will wipe this out for the short
term.
Think of it as though you were buying a
home in your own country. You would pay a little more for
the right place because it would be your intention to live
there for many years.
If you are buying to let don't trust
your own judgement, get an opinion from a rental agent and
don't listen to the estate agent. Every town has areas
that are more popular for tourists than others.
There is a lot more advice that I should
be offering to buyers of Spanish property, especially
concerning legal issues, but that is not within the scope of
this article.
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© Mike King July 2007
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