More overseas buyers pick up property in Spain, bank figures reveal

Report by Ray Clancy on February 9, 2012 in the Propertycommunity.com

 

Foreign investment in Spanish property grew in 2011, claims report

Foreign investment in Spanish property grew in 2011 according to figures from the Bank of Spain.

After increasing by 27.8% through to the end of September compared with the same period in 2010 which experienced a mere 2.6% growth, overall transactions reached €3.6 billion.

The Bank of Spain reported that these investments exceeded €1 billion for three consecutive quarters, something not seen since 2008.

‘Foreign investment into Spain has been very changeable in recent years. It progressively declined between 2003 and 2006 only to increase in 2007 however, the upward trend was cut in 2008, during the economic crisis seeing foreign investment fall,’ said Marc Pritchard, sales and marketing manager of Spanish house builder Taylor Wimpey España.

‘However, the news that foreign investment in once again up is a sign that property market conditions are improving with property purchases in the third quarter of 2011 increasing by 19.2% over the same period of 2010, amounting to €1.1 billion,’ he explained.

‘The increase in Spanish property sales seen in the last quarter of 2011 has spilled over into 2012 as international bargain buyer’s hunt down the best Costa deals with Germany and Nordic countries outspending the Brits, who have been a little slow in spotting new opportunities,’ he added.

Currently the euro’s depreciation against the pound could mean that there will be numerous opportunities for Brits to buy in Spain, Pritchard believes.

‘As Spanish property seems more affordable in the eyes of British buyers there now seems to be a slow but sure increase in the demand for villas and apartments along the coasts,’ he said.

He pointed out that prices are reasonable, such as the new Lagunas del Sol development close to the heart of Ciudad Quesada /Rojales which has townhouses on two floors with two or three bedrooms, a garden, private parking and views towards the swimming pools and gardens which start at €114,920.

At the Calpesol development in Calpe on the Costa Blanca three bedroom houses with gardens, communal swimming pools, a roofed sun terrace and private parking start at €165,000.

If 2011 was the year in which property investors and homebuyers kept a closer eye on property prices in Spain they will spot even more encouraging trends for 2012 which are likely to generate more active buying.

These trends are likely to include better prices; better quality of new properties; encouraging rental market; more security to investors; more Government pressure on banks to balance their property books.

1. Better prices for buyers in 2012. Property prices dropped in 2011, an average of 6.85% according to the Ministry of Public Work. Prices level has reached 2005’s figures and the economic climate suggests that further falls will come.

2. The market is touching rock bottom. 2011 has probably been the worst year in terms of property prices and sales drop. If the price fall in 2010 was by 3% compared to 2009, the mentioned fall of 6.85% in 2011 compared to 2010 confirms that the market is reaching its lowest at the right speed.

3. Cash is king not only for particular vendors but also for banks and savings banks. Get your cash ready for upfront payments to guarantee juicy discounts from private sellers and financial institutions.

4. Buy-to-let is still the only short-term strategy for property investors. Unless you are a high-end investor with your clients’ portfolio, the economic situation in Spain still does not give hope for reselling in the short- and mid-terms.

5. Once again and probably forever: location, location, location and property specifications. Avoid subprime properties. Subprime tends to be easy to identify. Subprime properties in Spain are in poor locations and are bad-quality properties: poor building specifications, no lifts and frequently they need expensive refurbishment.

6. The best opportunities will come from those in need to sell. If a bank’s portfolio is the largest in the country, it’s probably because its stock is difficult to sell. Generally banks have the worst properties in Spain because the owners could not sell or rent them in order to repay the mortgage. There are good deals from private sellers who need cash and want to sell a good flat or house.

7. Timing. At this moment (the beginning of 2012), Spanish property bargains are most likely to be in the hands of private owners rather than in banks’ repossessed property portfolios.

8. Banks will still be driving the market in 2012 as they are not only holding the largest property portfolios, but also use their financial strength to tip the balance towards their own business. Banks are the easiest option but potentially not the best right now. It may change shortly if the economic climate still hitting private owners.

9. Banks’ mortgage restrictions are still tough and mortgage conditions are not improving despite the fact that Banks tend to mask bad mortgages with residual discounts: free arrangement fees, very low notary fees (the bank pays the notary bill), etc. You must shop around and find the best mortgage.

10. Buying tip of the year: As a starting point when dealing with a seller directly offer 30% of the asking price. That is the way to guarantee a bargain in the negotiation process.
 

• The original author, Spanish journalist Daniel Talavera of TheSpanishBrick.com