PROPERTY PRICES

What a difference a few weeks make, we were over  Sept/Oct and noticed a little uncertainty but nothing bordering on desparation. We have found through the internet a British agent who has properties on his books at 15% less than other agents already discounted properties, and he didn't tell us any lies.

He has been in regular contact with me and openly admits that market has taken a sudden turn for the worse. He offered me a 2 bed, two bath detached villa, with private pool, landscaped gardens, parking and security gates with an underbuild for conversion  at 250,000 euros. The property is situated in an area of the Northern Costa Blanca where a property of this type would have been circa 400,000 euros last year. However a £1.00 euro could be on its way very shortly, making a 250,000 euros purchase about the same as a 400,000 euros last year. 

The couple who are trying to sell have had a top offer of 230,000 euros, they have lived in the property for 15 years and have a 100,000 euros mortgage on it. They ran a successful business, using the villa's basement as their workshop until they ran out of customers, the property is now about to be repossessed. This is very sad, but I expect that if we were placed in a similar position in respect of our UK property that we would receive little sympathy from prospective buyers, its the way of the world.

We will wait until this time next year, we both feel that we are not of an age to take any unnecessary risks. We can ride out the recession because of savings and very little debt, so why should we throw ourselves into the unknown?

There's been a great deal of discussion about property prices since this"crisis" unfolded, and I think most of us can now see the blindingly obvious truth that property values (as opposed to prices) should have a direct correlation to rental rates.

Now it seems to me, that as interest rates plummet, property must surely become a more interesting investment proposition again. Even without any capital gain in the forseeable near future, a return of say 5% on capital invested is better than you will be able to get with your money in the bank. So, for example, a small apartment that you could rent out for €375 a month could be "worth" paying €90,000 for. Actually, less than that once you factor in expenses etc. But the problem is, there's such a lack of confidence, and property being a rather non-liquid investment, I can't see anybody being tempted back in to the market unless returns are at least double that - in other words, if the price is half that. In my neck of the woods, you'll be hard pushed to find a studio for less than €350-375 a month, but the cheapest dump I've seen advertised so far has been about €60,000. Would I buy at that price then? No way.

Of course, with lower interest rates and lower prices, it should also be more tempting for borrowers to take out a mortgage in order to buy now, but I think we're still a way off this side of the market getting moving again also, as the banks are so reluctant to lend at all. As more people become desperate to sell, or get repossessed, it can only mean one thing surely, and that's further falls in prices?

From what I am experiencing, most buyers if not all are looking to buy for own use. Luckily Im still pretty busy, more than I would have expected to be honest, and there are some buyers who are looking to buy just to place their money somewhere.

There are some good deals around but one has to be in the know and then has to move fast.

For 250,000 euros I have a beachside 230sqm built townhouse, 3 bed 2 bath with private garage in an enclosed urbanization.Needs a little updating but for a beachside proeprty not far from Banus, its good value.

And a couple of 2 bed 2 bath 90sqm apartment 500m from beach at Casares for 110,000 euros. These I think may go in the next few days mainly its the Spanish buying (some Finnish and a couple of English!)