SPANISH MARKET REPORT OPINION
Time to buy off -plan again in Spain?
Is this a good time to invest off -plan in Spain? Some people would consider even asking the question a sign of madness reports Mark Stucklin (
spanishpropertyinsight.com)
E
veryone knows that Spain has a monumental housing glut, with something like 650,000 newly-built homes languishing on the
market. So why start building more new homes when they can’t even sell the old ones? T e problem with this argument is it fails to take account of the quality and location of the Spanish housing glut, much of which was badly-built far from the coast with local, not foreign, buyers in mind. Boom-era housing that infl ated the surfeit was built at a time when standards plunged and prices exploded as a speculative real estate
fever gripped the land. Homes were built in the wrong place and/or with unattractive designs, dismal landscaping, pokey interiors, cheap fi xtures and fi ttings, all thrown together by Moroccan brickies in a hurry. Many of these homes are still for sale, but they are neither new nor attractive, and won’t appeal to foreign buyers looking for quality and value for money, not just something cheap.
“Today’s off -plan buyers get a much better deal than those who bought in the boom.”
To make matters worse, the lion’s share of the glut is now in the hands of Spanish banks, who are probably the least competent property sales organisations on the planet, and not much better at banking. So if you don’t want something just cheap and nasty, with yesterday’s designs, and the hassle of refurbishment doesn’t appeal, then buying off -plan might not be such a bad option. Buying off -plan also has some of its own advantages. T e product on off er today is far superior to boom-time housing. Off -plan buyers today are king, and developers pamper them with open-plan distributions, spacious layouts, contemporary designs, designer kitchens and bathrooms, the latest fi xtures and fi ttings, and fantastic value for money. Today’s off -plan buyers get a much better deal than those who bought in the boom. T ere is also an investment argument for buying off -plan today. Since boom turned to bust the Spanish home building industry has imploded, and planning approvals are down 95 per cent from the peak. As a result the pipeline of new homes under construction is almost bone dry, just when there are signs that demand is picking up in some popular coastal areas. T anks to long lead-times in the building industry there could soon be an acute shortage of the kind of homes that people actually want to buy, in the places they want live. T row in some of the lowest house
prices in Western Europe, plus increasing mortgage credit aſt er a seven-year drought, and you have propitious conditions for rising prices in some local market segments looking a year or two out.
Counter-intuitively, this is also perhaps the safest stage of the property market cycle to buy off -plan. Cowboy developers are out of the picture for now, and those builders who are still on their feet are likely to be survivors with sustainable fi nancing (with the exception of a few zombie developers being propped up by banks).
I believe it is on the whole safer to buy today, when the worst is behind us but everyone is on their guard and still thinks it’s risky, than during the boom, when everyone was buying with gay abandon unaware that a housing-bust lay lurking just around the corner. Call it the ‘off -plan paradox’ if you like. T e market context is also starting to look more promising for off -plan investors. T e overall market appears to have bottomed out around 20,000 home sales a month, and sales have been picking up in recent months. In some local market hotspots like the Costa del Sol, sales have boomed this summer according to the latest fi gures (Property Register).
None of which means we are out of the woods yet, nor does it mean that buying off -plan is now as safe as houses. You still have to do your homework, and be suffi ciently carefully about who you buy from. But if done right, I suspect that buying off -plan today is a better idea than most people realise. §
Barcelona-based Mark Stucklin runs the property info website spanishpropertyinsight. com helping house-hunters and professional investors make sense of the Spanish market.
info@spanishpropertyinsight.com Twitter: @mstucklin
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