Lisa Tilley delivers some home-truths about the Spanish property market and advice for those who want out
SPAIN’S long and lucrative property boom has made many a quick million and pulled a few peasants out of poverty – but, six months ago, the Spanish and UK press announced to us all that the upsurge was over, and would inevitably be followed by boom’s ugly sister: bust.
The rampant developers are to blame, they said, those who built without limit leaving Spain with three million vacant dwellings – last year, Spain built more new homes than both France and Germany combined. And the price tags are inflated: Spain’s property, say analysts, is up to 30 per cent overvalued. House prices are now so high compared with local incomes that the ratio of property prices to earnings now exceeds even the UK.
Mark Stucklin, the Sunday Times’ Spanish Property Doctor (www.spanishpropertyinsight.com), thinks we should be worried: “Prices of properties on the southern mainland coast and the Canary Islands have been stagnating for a couple of years or even falling – but either way, in real terms prices have been falling,” he explained to the Olive Press.
Graham Govier from InlandAndalucía.com agrees that the worst of the pain is being felt on the coast: “I think the crisis is a Costa del Sol crisis, as far as new-builds are concerned; developers have built far too much in the wrong locations and asked too much for it.”
But, says Govier, the inland market is also not without its woes: “Inland has had tremendous growth – and this is the year when that growth is not sustainable.”
Mark Stucklin is a little more optimistic about the antique, inland properties which he insists make up a “completely different market to the new builds.” With a finite supply, old houses are not so affected by over-building problems but, he says, it is difficult to tell whether these houses are going up or down in price. “The inland market is not very transparent – on the costas you have very similar properties which are comparable, but inland is harder to study scientifically.”
He also suggests that the upper end of the market has not been reached by the property crisis: “Very high-end and unique properties are not falling – they are not booming either, but quality is holding its value.”
Govier tends to agree: “Properties with a lot of outside space, a large garden or some rural land, will always have its own market.”
Rob Matthews from Special Spain thinks it is a buyers’ market: “There is a glut of beautifully finished properties for sale that have had money and love poured into them by their owners.” However, Graham thinks that these property owners are “crazy” to think their houses are worth what they are generally asking for them: “The prices are not going to continue on the same trajectory of the past few years, life just is not like that.”
Many people, however, are happy to watch the speculator and the developer walk away into the sunset: Mark Stucklin certainly thinks that the end of the boom is no bad thing for Spain. He explains that the rapid growth of property prices caused developers to work at “break-neck speed,” as a whirl of investors rushed in to buy property. “Prices rose above reasonable levels” he explains, “and people made easy money without working hard, which encourages low standards.”
Many are hoping that the downturn will ultimately mean the concrete will stop spreading. And many believe the estate agents who set up with the boom will pack up and leave the market.
Reasons to be cheerful
Of course the price of property is dictated greatly by supply and demand, and demand is driven by a number of factors which are not likely to change in the short term. People demand property because it is undoubtedly a good investment for spare capita. Every investment is a risk but “even in the worst-case scenario of drastic price collapse you still have a tangible asset whereas shares can leave you with absolutely nothing” explains Stucklin.
More and more Spaniards are buying property, partly because the divorce rate is increasing and young people are leaving home earlier than in the past, but also because interest rates remain low and lenders are becoming more competitive and granting longer term mortgages, which cost less in the short term.
In addition, foreigners will continue to buy property in Spain for as long as the sun continues to shine more here than it does in northern Europe; and with more flight lines being continually added, the prospect becomes ever more attractive. Rising crime, social problems, unreachable property prices and that ubiquitous climate are driving not only retirees, but also young families away from northern Europe. There is no escaping the fact that families can buy a much bigger house for their money in Spain than in the UK, and their children grow up bilingual to boot.
Are people really heading back to Blighty in their droves?
There is, says Mark Stucklin, definitely two-way traffic: “A good way to take the pulse of this is through the transactions of currency brokers and from these it is evident that there is steady traffic in both directions.” According to the UK’s National Statistics Office, 58,000 Brits moved to Spain during 2006. But currency expert Rajesh Agrawal from Rational FX estimates that 17 per cent of the traffic between the two countries is heading back from Spain. This means a possible 12,000 Brits moved back from Spain to the UK last year.
There is a multitude of reasons for people to return to the motherland and many leave for personal rather than economic reasons; changes in family circumstances and encroaching old age can cause people to sell up and leave. But, says Stucklin, many people arrive in Spain with dreams and expectations which are simply unrealistic. Graham Govier agrees with him: “Some people buy into a dream and, in the end, it just does not suit them.”
Advice for those wishing to sell up and return
Rob Matthews of Special Spain thinks that sellers should use as much creativity as possible: “Traditional estate agents can provide a very good service but we suggest that sellers try alternatives such as SpecialSpain.net through which you can sell your property directly, saving thousands on agents’ fees.”
Mark Stucklin also does not see the harm in putting a ‘se vende’ sign up or sending an email out with a well-written description of your house to everyone on your contacts list. However, estate agents are there partly to screen buyers, and therefore will not let any old scam artist into your home, so proceed with caution if attempting to sell independently.
But above all, Stucklin advises those who want to sell-up quickly to do their homework first: “Do your research, find out what other properties are selling for, and go a little lower,” he says. “Go in with a realistic asking price – price it to sell in other words. You do not have to give it away, but people nowadays are much more switched on”.
Lisa from Artigi Fincas in Alhama de Granada agrees that vendors should get their selling price right: “If your property is too much no-one will even look at it, yet if it is too low it is like giving it away.”
She suggests finding out what similar properties have recently sold for to establish a more realistic market value, perhaps leaving a small margin for negotiation, as most foreign buyers usually try to bargain.
She also advises that, if using more than one agent, sellers should ensure that each one lists their house at the same price to avoid confusion and mistrust amongst potential buyers. Also, passing trade should be generated by a ‘se vende’ sign – so encourage your estate agent to do this.
You should also ensure that the property is always available for viewing at short notice, either by leaving a key with the estate agent or with a neighbour. Lisa has lost count of the number of cancelled viewings due to AWOL owners: “You would not believe the number of potential buyers who decide to look at properties on the last day of their holiday!”
Ten steps to a faster property sale:
- Go with a realistic asking price: it is a buyers’ market with a lot of competition, so nobody will even view your property if it is too expensive
- Make sure your estate agent has a good, up-to-date website with plenty of images for the international market
- Try online alternatives such as SpecialSpain.net as well as traditional estate agents
- Make sure your property is available for viewing at short notice: this will undoubtedly give you the edge over other sellers with rushed, international buyers
- Put up a ‘se vende’ sign to attract passers-by
- Send out a circular email with images and a good description
- Advertise independently in the classified section of your local paper
- If you use more than one estate agent, ensure they all list your property for the same price
- Make sure your property is as clean, presentable and bright as possible
- Have all the paperwork in order: if you do get a buyer they could quickly be driven elsewhere if they think there might be problems with the escritura