INTERNATIONAL
the savaging of spain Meanwhile, Spain has been savaged by the downturn. Nearly a quarter of all construction companies have folded in the last two years, according to a research report from the Fundacion Colegio Libre, and planning approvals have collapsed. Property prices have dived, and the banks are now the biggest owners of new-built properties after developers went to the wall. But with some agents calling Spanish property a
bargain, is it time for the market to recover? Martin Dell of property portal Kyero says there
are signs of a resurgence. “In terms of selling advertising, we saw that bottom out in October last year, and since then it’s come back with a vengeance. We’re now the highest we’ve been for about 18 months.” Figures from Primelocation show searches for
now somewhere between 400,000 and 500,00 a year, so that would take at least two years, at current levels, to mop up. Martin Dell believes some of the speculative
€100-150,000 end, on the coast.”
back, but they’re buying at the cheaper end of the market – the
Our clients are seeing British buyers coming
Spanish property up 151 per cent in the year to June 2010, nearly a third of overall searches. Spain was the single most searched-for market (Portugal was fourth, behind France and the US, ahead of Italy). But as in Portugal, it’s not the Brits who are leading the market.
martin Dell Kyero
developments being built at the top of the market will never find buyers – they are white elephants. They could be repurposed to social housing, if they are well located; otherwise, he thinks, they could well be bulldozed as the banks would prefer to liberate the land value rather than sit on unsellable property. “I don’t expect them all to be sold,” he says. Agents have retrenched drastically. Dell says
Kyero lost 40 per cent of its advertisers between 2008 and the end of 2009, which is probably indicative of the rate of attrition in the market as a whole. Kyero too had to retrench, having just got new offices and doubled in size a few months before the crisis hit. “It was a bitter pill to swallow,” Dell says, “but it’s paid off; we’re the most profitable now we’ve ever been.”
Those agents who trimmed their costs and kept marketing hard
However, there’s one big difference – it’s the French who are leading the charge back into Spain, Dell says, with the Germans, Dutch and Scandinavians following, at least as far as enquiries are concerned. “Our clients are seeing British buyers coming back,” says Dell,
“but they’re buying at the cheaper end of the market, the €100- 150,000 end, and they’re buying on the coast.” That’s not the best news for agents, as although volumes are rising, the commission they’re getting on each property is lower than it would have been. Still, deals can be done; HomeEspana in Murcia is doing ‘a deal a day’ at about €120,000 average, according to Dell.
two years of mopping up However, although enquiries are increasing, there’s still a huge overhang of development property to shift. Credit ratings agency Fitch reckons there are one million homes still available, while others say two million. That compares to one million transactions a year at the top of the boom, and
SPAIN
Below: Nerja, a very well know beach resort. Inset: Nueva Andalucia.
should now benefit from their increased operational gearing and see profits rise on even slightly higher sales. But that doesn’t mean the glory days of 2005-7 will be coming back. And it certainly doesn’t mean the return of the investor, as in Portugal, it’s largely lifestyle purchasers who are driving the market. Although bargain prices are a key motivator – one third of all Kyero’s searches are for property in Alicante, where prices have fallen the most – few buyers are looking to make a short term investment return. Rui Pereira at Fitch expects the Spanish property downturn to
continue to 2012, with no short term appreciation, “Spanish house prices need to decline further to improve affordability dynamics”; Fitch expects prices to drop 30 per cent from the peak. At the top of the market, house prices stood at 7.7 times annual Spanish household income, up from just under four years in the late 1990s. Fitch believes the house price to income ratio needs to fall to at most five before the market will stabilise.
Cleaning up the image Spain also has a major image problem, and addressing that is vital to any recovery. Martin Dell says the government needs to act to address international investors’ lack of confidence. The
Valencian land grab law, the coastal property law, and planning issues have all damaged the appeal of Spanish property; only decisive government action can improve the
situation, but that hasn’t been forthcoming. “The government doesn’t seem worried,” Dell says. “But with
construction and property accounting for a huge slice of the economy, it’s costing them money.” Spain and Portugal remain two very different markets. But they
do appear to have one thing in common; no-one’s going to get rich quick by investing in them. On the other hand, agents who have taken the pain are seeing the markets gradually return at least to a level where they can make a living, so it does seem the worst of the decline may be over.
www.propertydrum.com/articles/spainandportugal Do you have any views on this market? Log on and add your comments.
36 NOVEMBER 2010 PROPERTYdrum
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