WITH average house prices across Spain now close to the same level they were a decade ago, the jury is still out on whether the property market is still suffering or slowly recovering.
According to Spain’s Ministry of Public Works, house prices nationwide have fallen by 29% from their all-time high, making today’s average per-square-metre price for homes, currently around 1.500€/m2, about the same as back in 2004. Other sources estimate the drop to be as much as 50% since the bubble burst in 2008, leading many to wonder how much lower they can go.
Some experts are now cautiously expressing optimism 2014 may be the year that Spain’s real-estate market starts to turn around. While national demand remains stymied by the difficulty in obtaining finance, uncertain economic prospects, and the fact that average prices are still beyond many Spaniards’ reach, foreign buyers – both on an individual and institutional level – are making up a growing share of sales.
Over the last year, overseas investment funds snapped up the real-estate divisions of some of Spain’s biggest banks, such as Banco Santander, La Caixa, and Bankia, and now plan to sell their portfolios by ensuring prices are as competitive as possible. At the same time, foreigners accounted for more than 15% of all sales nationwide in the third quarter of 2013, a jump of four percentage points over 2012.
A report released by Bankinter, the country’s tenth-largest bank, in December forecast that, after a particularly bad year in 2013, sales should start to pick up in 2014 and 2015, although prices could still fluctuate. Premium areas, like Madrid, Barcelona, and the Costa del Sol that have limited supply and attract affluent cash buyers will likely be among the first to recover.
In the areas we cover, like Marbella, Estepona and Sotogrande, we have started to see signs of a recovery, at least in terms of activity. Viewings and transactions by foreign buyers are up and some vendors, especially in sought-after areas, are becoming more confident about achieving their asking price. As the sales cycle of a second-home market is slow, it will take at least another 12 months to see if this constitutes a real trend.
Spain’s fortunes have never been a reliable barometer of property values or of the market in prime locations, especially Marbella. Most of our clients hail from Northern Europe and many are not dependent upon a mortgage to buy a home in the sun. They are looking for properties that offer the kind of lifestyle they want, whatever happens with Spain’s economy – which, according to the government, grew by 0.3% in the last quarter of 2013, for the first time in six years.
If the market in the Costa del Sol continues its current trend, we may look back in a couple of years’ time and see 2013 as when the bottom was reached. Without the help of a crystal ball, however, we shall just have to wait and see.