JUNE 2012 |
www.opp.org.uk WORDS | Peter Esders Solving Spain
Reports coming out on Spain’s property market are as volumous as they are confusing. One minute prices are up, next they are down…what is the real story? Chebsy & Co.’s Peter Esders takes a look at one of the industry’s most turbulent and important markets.
I
dread going to social events at the moment. Inevitably the question of “what is going on in Spain?” will
come up.
There is no easy answer to this – things change so fast at the moment. One minute reports come out that house prices are down and the next minute they are slightly up. Statistics say sales are massively down but some reports put sales up.
In the days leading up this article being written we have seen the Spanish Government putting pressure on the banks to put aside funds as provisions against toxic property assets. We have seen Bankia taken into public ownership and 16 Spanish banks downgraded by ratings agency Moody’s. During the same time I have read reports that some agents are hitting a three-year high on sales.
Undoubtedly the general economic situation is not good, despite the scattered reports of improved sales and increased prices in some areas. There is massive unemployment, the banking sector is in crisis and Spain is being seen as ‘Greece II’, with talk of exiting the Euro.
So what does this mean to the property sector – and what is happening on the ground?
The domestic market is not moving.
Very few Spaniards are buying properties, so it seems to be mainly foreigners who are buying. Certainly foreign buyers are not purchasing in any way like the numbers that they were in the past, but it does appear that there is a slight increase. Being just one fi rm, it is diffi cult to tell whether that increase is as a result of the market itself improving or as a result of our own marketing working better but my feeling, having spoken to clients about this, is that the market is starting to change.
Those who are buying are generally falling into two camps – either at the very cheap end of the market (I am currently helping several people buy properties for less than €50,000) or properties above €300,000. You would expect the two types of buyers to be very different. In many ways they are but there are also some striking similarities between them.
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Firstly, they generally do not need a mortgage. Very few clients of mine are buying using a mortgage at the moment. Those who are taking one out are generally buying repossessed properties directly from the bank or are buying distressed properties and agreeing to take over the mortgage from the existing owner.
“Some clients need reminding that ‘cheap’ doesn’t necessarily equate to ‘bargain’.”
It is diffi cult to get a mortgage unless you are buying a property from the bank. One of my clients who is taking out a mortgage but not buying from a bank started off speaking to the bank about a 80% mortgage. Talk then moved to a 70% mortgage and current discussions revolve around a 60% mortgage despite his circumstances not changing. Secondly, they are all paying low
prices. Yes, prices may drop more over the next year but they have already dropped considerably and there are some real bargains out there – providing that you buy the right property in the right area. Some clients, however, need reminding that ‘cheap’ doesn’t necessarily equate to a bargain. Most are happy about the move in the Sterling Euro exchange rate. The recent shifts have meant that there is a golden combination of low prices and an improving exchange rate, meaning that the purchase price is even lower. Many people are simply fed up of
waiting. They have been wanting to buy in Spain for the last couple of years and feel that now is the time.
They have had enough of delaying to see how far the prices will come down and to fi nd out what is going to happen to the Euro.
If they think long term, providing that they are happy with the price that they pay now, they are not too worried about what will happen over the next fi ve to 10 years.
They are sensible enough to realise
that prices may go down more in the near future – but they are already getting good value for money and in the long term are likely to do well. People are now commonly buying for personal use rather than investment. The days of investors buying now and selling on six months later for a profi t are long gone.
Buyers now are looking for properties for their own holiday use with a view to retirement in the future. They may wish to rent out when they are not using it but primarily the purchase is for personal reasons. The market has returned to the way
that it was when I fi rst started this sort of work. The buyers are ‘lifestyle buyers’ who are thinking in long terms and (going back to an earlier observation) are buying using their savings rather than using a mortgage to fund the purchase. If the purchase turns out to be a good
long-term investment then that is almost a bonus.
Of course, all of this could change again next week, depending on what happens in the economy...
BUSINESS
SPANISH OUTLOOK | 19
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