Is 'now' the time to buy in Spain… is the wait finally over?

Month after month, week after week, news reports are published about how the property market is improving. The following news reports published over the past few weeks are evidence of it. Some say the market still has another 15-20% to fall, but I'm not so sure. Then again I am no expert but at least in Valencia I don't see the prices going down or going up, they are stagnant and talking to estate agents they all seem to agree that they can only go up. As for the the hundreds of thousands of proprties that haven't been sold, I think for many of the them there situation is that they are valueless, ie. they will never sell, as there will never be another property boom.

The problem with many of these properties is that they are built in areas where no one really wants to live, and even at rock bottom prices they aren't moving. The bubble bursting changed everyone's mentality and no one wants to buy or risk buying on an empty urbanisation. While the craze was on, everything sold, but as soon as it stopped, these more isolated cheaper developments have been abandonned and forgotten about. So if you remove these properties from the equation I think there is a strong argument to say that the property market is on its way up, especially in desirable areas, be it town, city or coast.

Do you agree?

Property values buoyant

HOME prices in Spain are at their highest in parts of Catalunya, Galicia and Mallorca and at their lowest in Almería and Zaragoza, recent sale figures show. This proves that although property values are the cheapest they have been in nearly a decade, bricks and mortar remain a great long-term investment in Spain as the housing market is gradually becoming more buoyant. Figures from the European Union statistics office, Eurostat, show that the average home in Spain had gone up 1.3% in value by the end of 2014, having reached their lowest price ever in the first half of the year. The climb in housing values continues to lag behind the rest of the Eurozone – rising at 0.3% in the third quarter of last year in Spain, compared with an increase of 0.5% in the other single-currency member States – but is heading in the right direction for investors and those who hope to sell their homes in the foreseeable future. Property prices vary greatly across the country, with a given type of home in one province costing a quarter of an identical house or apartment in another. As a result, careful scrutiny of the market reveals that everything from rock-bottom prices on spartan, no-frills homes which may need some cosmetic renovations through to luxury villas in élite, sought-after areas can be found depending upon where the buyer searches.

http://www.eyeonspain.com/blogs/spainnews/14481/property-values-buoyant-in-barcelona-but-bargains-reign-in-zaragoza.aspx

Banks 'more willing' to offer 100% mortgages this year

BANKS in Spain are at last relaxing their loan-to-value criteria and becoming more prepared to offer 100% mortgages, according to brokers. In the past few years, the few lenders which were willing to provide home loans would only offer between 50% and 60% of either the purchase price or the value of the property based upon their own surveys - whichever was the lower. Now, 80% mortgages are becoming more common and intermediaries predict that 100% loan-to-value (LTV) finance is set to become a regular feature over the course of this year. Whilst banks acknowledge that property prices have fallen, they recognise that buyers' salaries have also dropped, as has their take-home pay due to higher taxes, and that very few of them have any savings to enable them to put down deposits of between 20% and 50% of the home value to enable them to make a purchase. Those willing to lend the full purchase price will still, however, expect customers to pay the fees involved in cash - a figure typically reaching 10% of the market value.

http://www.eyeonspain.com/blogs/spainnews/14484/banks-more-willing-to-offer-100-mortgages-this-year.aspx

Brits on top in Spain homebuying stakes; Spanish nationals in third place

BRITISH homebuyers in Spain outstripped Spaniards in 2014, and the trend looks set to continue this year, according to new development promoters. And in fact, more buyers from the UK beat every other nationality for some estate agencies, but northern Europeans in general continue to be the most prolific purchasers. This is largely helped by the fact Spain is now in the top 10 in the developing world for the cheapest homes, according to figures from the OECD. Outside the Eurozone, exchange rates pay a major role in decisions to buy property in Spain, and with the pound sterling being at its strongest in nearly a decade - sitting at around €1.32 to the pound - British holiday home owners seeking to buy now are getting more for their money whilst expatriates living off retirement pensions paid in Britain are enjoying a better standard of living than in 2009, when the pound and the euro were nearly equal.

http://www.eyeonspain.com/blogs/spainnews/14415/brits-on-top-in-spain-homebuying-stakes-spanish-nationals-in-third-place.aspx

The only way is up' for Spanish house prices, says the FMI

SPAIN'S property price freefall is over and home values are likely to start going up, according to the International Monetary Fund (FMI). A report by the organisation presided by Christine Lagarde says the same is true for house prices in the UK, Ireland, The Netherlands and Denmark, all of which have also experienced a property value 'boom and bust' since the Millennium, and that collectively, the five countries have seen a fall averaging around 25%. But current analyses of the markets in all five EU member States suggest home values 'have either reached rock bottom or are about to', says the FMI. The report differentiates between the markets in each of the countries, saying the economic crisis, combined with over-building leading to excess supply caused the market to crash much more violently in Spain and the Republic of Ireland than anywhere else, bringing with it a sharper decline in employment and bringing the construction industry to a complete standstill. 

http://http://www.eyeonspain.com/blogs/spainnews/14365/the-only-way-is-up-for-spanish-house-prices-says-the-fmi.aspx

I definitely think now is as good a time as any to buy.

I know many may disagree but prices are at the bottom in many areas or even starting to rise in the more sought after ones and I can say this after searching the market locally for the last year. Certainly there is a glut of property around though and in some areas people are holding on to unrealistic valuations so sure in that respect some prices will drop considerably but for every overpriced house there are 3 of the same at a much lower cost. The time is now.

There are however plenty of caveats to the market and I would not recommend rushing into any purchases on a week long trip to Spain. Research and preparedness is essential as well as solid legal advice as it really isn't as easy as it should be to buy a house here unless everything is in order(it never is).

Some anecdotal numbers from me..

I have been looking in the Javea / Denia area, at both flats and houses for the last 2 months, and have spoken to many agents and put in many offers at well below asking price.  eg.

1. house price 300k, offered 240 (rejected), then 250(rejected).  They hinted 285k would seal deal.
2. flat price 250k, offered 195(rejected), then 205(rejected).
3. house price 275k, offered 220K(rejected). Hinted 250k would seal deal.
4. house price 280k, offered 240k(rejected)

The problem is that the market has hit the low point where people can't afford to go any lower.. they don't have enough equity in the property after the mortgage value amount to come out with their heads above water, never mind make money on the property.  It's not that they don't want to, it's just their bank won't let them.

For example, the 280K one above (4.) couldn't say yes or no to the offer.. they had to refer to the bank to make the decision, since they had literally zero equity in it.  It was the banks decision whether they wanted to take a loss on the mortgage, and guess what, they didn't.

On 1. above, it was a rich spanish families' second home, and they were happy to wait.. just told me to push off or offer asking price, or thereabouts.  So they just sit and wait for years if necessary.

So the market is split between people who can't afford to sell and those who can afford to wait.

In short, no great deals, but I did finally secure a 280k property for 245K, and I found a vendor who had a mortgage of 135K property on it, so she was left with 110K to find a flat, which was enough for her, and we have agreement. So, that's less than 15% off the asking price.

So from my experience, the days of walking away with 30-50% off are long gone.. perhaps others are better negotiators than me and could do much better, but I found 10-15% is the limit.  This is the % that regular people would expect to negotiate down to, then they will go no further.

I also know someone who has lived around here for 30 years, and they backup what I found above.

Also depends on if/when interest rates finally rise.. that will be a trigger for further big falls. But it seems that EU governments, just like vendors, can't afford that to happen, given the debt loads they are having to service.

So I agree with starfox's post... this is the limit of the pain (for now), unless mortgage rates go up, then all bets are off.. down the slippery slope we go again.

Its all a cycle and property in spain is very affordable to the ordinary man/woman in the street. Now is a great time to buy for us brits.

IMHO there is possibly room to negotiate as mentioned between 10-15% from the original asking price however except in desperate exceptional circumstances, I dont see the prices in general coming down too much more, in fact the values have remained the same for some time and in some cases are starting to rise again. There are still great bargains to be had as long as you do your homework. The difference now is that their is over supply and the demand is weak, hopefully this will change in the mid to long term but factors such as rate of exchange (for non euro countries) and mortgage and employment rates will play their own part in how the market responds.

It depends who's buying and who's selling.

Brits selling will want more euro's to cover their losses, but at least be optimistic that they will be able to sell if they have been trying for a while.

As I type this the news is the Eurozone is on the Brink as the Greeks fail to reach agreement with it's creditors.....

So if you are buying the Euro could strengthen between now when you are looking an completion in a few month's time and the timing could be just right.

But fools rush in (as may of us did 10yrs ago) and be aware that it will still be a buyer's market for the forseable future, and understand the pitfalls - no 'Off Plan', beware of the debts of owners selling up that you are liable for and also the hidden costs of taxes and the many other charges when you buy.

Now as ever 'Caveat Emptor' Buyer Beware.  

It depends who's buying and who's selling.

Brits selling will want more euro's to cover their losses, but at least be optimistic that they will be able to sell if they have been trying for a while.

As I type this the news is the Eurozone is on the Brink as the Greeks fail to reach agreement with it's creditors.....

So if you are buying the Euro could weaken against the pound between now when you are looking and completion in a few month's time. The timing could be just right.

But fools rush in (as may of us did 10yrs ago) and be aware that it will still be a buyer's market for the forseable future, and understand the pitfalls - no 'Off Plan', beware of the debts of owners selling up that you are liable for and also the hidden costs of taxes and the many other charges when you buy.

Now as ever 'Caveat Emptor' Buyer Beware.  

I think another point is that just because the price is good now it really depends on your motives for buying too. I mean it's a good time to buy if you are moving to Spain and plan to live in the property but if you are looking to invest and snap up cheap property and flip it then I doubt that is a good idea. Just because the market is showing some green shoots doesn't mean houses are selling en masse and you could be holding on to those properties for quite some time. Putting them on the long term rental market would be quite a gamble too and one could struggle to get the returns needed.

I would also question buying a holiday home unless you can pay cash for it and don't need to rent it out when you are not there. The holiday rental market is flooded, the returns would not be great and there is no guarantee you would be able to rent it out enough to cover the bills.

Of course there will be successes but overall I don't think the market has recovered enough yet.

Although interest rates could go up and push the prices down further, the other side of the coin is that Europe has just started doing QE.. printing money out of thin air.  Germany screamed they would never agree to it, and then just folded like a cheap suit, to keep the eurozone together.

And when they start the money printing machines, they won't stop.. the threat of inflation.  So people will take their money out the banks and put it into real things.. like property.  This could put a floor under current prices.

The agents I spoke to said that it used to be the case, during the peak, that it was brits, dutch, belgians, germans and swiss, and a few french buying.

Then they nearly all disappeared, and their biggest customers in the last year or two have been cash rich french eg. from the cote d'zur, and.. spaniards themselves, given their distrust of the banks.

And now since the swiss have dropped the EURCHF currency peg, they have lots of swiss enquiries for easter, and english too, given the exchange rate.

Although I got approx 15% off the asking price, I checked afterwards on average cost per m2 on sites like idealista, and I didn't really get a great bargain.. I just paid the average price for that location. Seller just overpriced it by that much and came down to market price.

So, more info to support the fact that we have hit the bottom, or very close to it, especially if you can snag a bargain at current prices.  This is why I bit the bullet and bought now.. because I think we're near the bottom.. but I don't have crystal ball.. anything can  happen if greece defaults and exits.

I believe the Spanish property market is broken and may never recover. There are many reasons why I come to that conclusion but many of them are down to government behaviour after the crisis came along which wrecked market confidence. The taxation and overhead costs on second homes are now so high I see little incentive for investment.

I read only this week the government is due to cave in to the hotel lobby and increase restrictions on private letting. That is already happening in some regions and Catalonia especially is issuing massive fines on property owners who let.

If it becomes difficult to cover overhead costs, coupled with the real prospect of zero capital growth for many years, owning a second home in Spain simply becomes a financial burden many rational people will do without. Of course I accept many people don’t really think it through in that way and do it for emotional reasons not business sense. However they are relatively small in number and don’t constitute a potential factor in market recovery.

The other principal reason the market will not recover is over supply and restricted bank lending imposed by the ECB after the crash. Add to that massive and structural unemployment problems in Spain. I know there are signs Spain is making a slow recovery but it is not likely to be sustained until global markets make significant upward advancement in growth.

The market can only really recover when Spanish people return to the market and feel confident enough to so do. The painful memories persist and I believe many potential purchasers will more likely invest in safer instruments than second homes that cost them so much to maintain year in year out. With capital tied up and the uncertainty of being able to sell it again at a time of their own choosing.

A couple we knew for 15 years (now sadly not with us) summed up Spanish property purchase perfectly. They had a small duplex front line beach front in Calahonda, they bought it in the 1970's for more than we paid for a detached property in 1976, situated a three minutes drive from the Peak District National Park, so it wasn't cheap.

This property always benefitted from bull markets, but never went down in value in bear markets, albeit that we have only noticed three for sale in the last 15 years. Just a few hundred meters away is the coast road, with a plethora of properties for sale up to, and now beyond the motorway. Position will always sell, whilst badly situated properties will be up for grabs at what programmes such as A Place In The Sun class as snip.

The Spanish government doesn't help, what with taxation on property purchase over and above the actual purchase price, the possibility of fines for renting out your own property, and I can envisage fines on properties not rented out at the Spanish revenue's assumed rental value, the Spanish Government appear to want to wreck the property market.

How long is a piece of string?

Whether or not the time is right to buy depends on who you are, why you are buying and what you are buying, and what you are planning to finance it with.

If you're seeking to invest cash in hand, I think now is an excellent time. Especially if you're talking about a property meeting the three L standard (location, location & location). Many of us (myself included) are not investing to make a quick buck or even hoping to get rich long term but buying because we want to own a house. The value of that is a personal and subjective decision, and where prices were 10 years ago or where they may be in 10 years time doesn't really matter here nor there. For people like me it's thus a good time, seeing properties that were beyond my reach some years ago are now firmly affordable, and observing the prices I long believed I would never actually get to own a property that was anything like the one I was dreaming of. The crises has changed that and indeed made it possible.

Disclaimer: I bought my property in mid 2013. That property has since slidden further if price tags on neighbouring properties are any indicator, but not by that much so overall I don't regret jumping in then, especially as it was in many ways an ideal property for us and we were pretty choosy and most of what we're seeing isn't really what we wanted And anyway, we have enjoyed and benefitted from that property in the interim 18 months. You can't express everything in money. I don't reget buying.

As stated on other posts it is, in my opinion all about individual circumstances.

Take mine, I have some cash in the UK and have decided to buy a bank repo with a small mortgage, then once I pay it off I then have an asset and meanwhile a decent holiday home for me and the family.

The property I am buying was a good price on the banks website and I put a cheeky offer in and it was accepted to my surprise, I am now just organising the paperwork.

One major point was the valuation, it came back showing the banks original asking price and not the price I am paying so even in this climate it does seem I have a bargain.

I have also been advised by the solicitor that I must take photographs of  "ALL THE DAMAGE" so if the Tax office come knocking for extra money they can fight my corner.

Now back in Blighty I could not have afforded a garage never mind a two bed property.

If we factor in the £1 = €1.35, the sun, cheaper beer and with  taxes, community fee's at less than a 3rd of my Council Tax then its pack your bags time and buy.

We always have a BOOM and a BUST and in my opinion we are in the bust period but the light is starting to shine.

Nick

It's always a mistake to compare the UK with Spain. Just because things are cheap in Spain by UK standards does not mean they represent good value. They are two seperate countries with very different economies and standards of living.

Ask a Spanirard on the minimum wage (and most people are)  if a €50k mortgage is affordable.  

Whilst 34% of Spanish workers are on minimum wage, it is not "most". It is a lot, but not most.

OK Marie ammend 'most' to 'many'. My point is still valid. I hear and read these silly comparisons of Spain with the UK so many times. If British people came and tried to make a living in Spain along with the Spanish people they would understand my meaning. 

Yes it is a lot but unfortunately that percentage doesn't take into account the amount of people who are working for next to nothing without social security cover, being paid cash-in-hand, still a big problem here and probably just as many people, who knows?...So it's almost impossible to know the real figures...but the sensation is that the majority are earning much much less than before and scraping by...which is to be expected given the past few years.

mickeyfinn

I hear and read these silly comparisons of Spain with the UK so many times. If British people came and tried to make a living in Spain along with the Spanish people they would understand my meaning. 

It may have escaped your attention but the vast majority of contributors to this site are British people either retiring here or looking for a holiday home. The comparisons of Spain and the UK are, therefore, not silly at all as most people want to know how far their pensions will stretch, what their lives will be like in Spain compared to UK and so on. Those who do come on asking about moving over to get jobs with no knowledge of the language, no healthcare, no offer of employment, expectations of earning as much here as UK and so on, are usually given quite short thrift and told not to do it. There aren't exactly that many who try to make a living in Spain along with the Spanish people.

And eos_ian. Yes, it is a high figure and people are feeling the pinch. But, at the risk of being accused of making silly comparisons, some 25% of jobs created in UK in the last 5 years have been on the minimum wage. So much so that there are now 5 million people in UK on tax credits despite the high tax ceiling introduced. Most analysts (and if you believe the Labour party it is much higher) reckon people are now £1600 a year worse off than they were 5 years ago. And I'd hate to think how many people in UK are also existing on the black economy whilst simultaneously taking state handouts.

The subject here is Spanish property and the state of the market. Making comparisons with the UK is as relevant to understanding this market as comparing apples with oranges is as an understanding of how an apple tastes.

I thought the subject was:Is 'now' the time to buy in Spain… is the wait finally over?

Now as I have said, for me the answer is yes because as I am still in the UK and working so my money will go that bit further in Spain.So I CAN compare SPAIN with the UK

So "Apples and oranges" and "silly comparisons" is priceless.

My comment quoted "in my opinion"

Nick