The Property Finders spanish property market report 2008

This report on the Spanish property market is written by The Property Finders. The Property Finders are buying agents who represent the buyer, not the vendor. For contact details see The Property Finders.

MARKET REPORT INDEX

ANDALUCIA
+ Andalucia summary
+ Antequera and Central Andalucia property 
+ Property in Andalucia’s cities: Seville, Jerez, Cordoba 
+ Property on the Andalucian coast 
+ Costa del Sol property 
+ Costa de la Luz property 
+ Property in Eastern Andalucia 
+ Inland Andalucia property
+ Marbella property 
+ Property in Western Andalucia

MALLORCA
+ Mallorca summary
+ Property on Mallorca’s coast
+ North east and inland property in Mallorca
+ Property in north west Mallorca
+ Palma de Mallorca property
+ Property in south west Mallorca


Andalucia Property Market Summary

Finally, in 2007 everyone seems to have accepted that market conditions in Andalucía have changed.

In fact, they started changing some 18 – 24 months ago but it has taken a while for the message to be taken seriously.

Developers, estate agents and property sellers now know that the buyer is king, at least for the time being.

No tears will be shed for the estimated 3,000 estate agents who have gone out of business in Málaga province alone in 2007; most of those had no property background, limited or no Spanish, but just climbed on the bandwagon.  They were dangerous and bad for the market.

The professional, long-established agents will survive, just as they survived the last downturn in the early 1990s.

Nor will the short-term speculators be missed.  Why so many people thought that they could purchase small, cookie-cutter apartments off-plan in a high-density complex and then sell them for double what they paid during construction is beyond me, but thousands did and are now desperate to unload.

Demand for quality property in Andalucia still firm

However, in my opinion, much of the media comment during 2007, the banner headlines predicting doom, gloom and disaster, is wide of the mark and misleading because it concentrated almost exclusively on new-build property development.  Overall, the property market in Andalucía is not facing meltdown.

Certainly, there is significant oversupply of certain types of property in some areas but demand for well-located, quality property remains firm.

The problem is that the majority of unsold property is in high-density developments of 100s of identical units, often in undesirable locations, that the discerning buyer does not want.

And in the resale sector over-optimistic sellers have continued to increase their asking prices year-on-year, in spite of the fact that all the evidence shows that property prices in Andalucía peaked in 2004 and, although they have continued to rise, it has been as a much slower rate.

So as 2007 ended, there was indeed a huge overhang of unsold property in Andalucía; a lot of it not very nice or overpriced, and often, both!  But there is also a significant amount of top-quality, well-located property for sale, and all the signs are that serious sellers are taking substantial reductions on the asking price.

Andalusian Property Prices in 2007

Although the 4th quarter figures are still to be published, comparing 3rd quarter 2007 with the same period in 2006 shows that across Andalucía property prices rose 6.7% on average, against a national average of 5.3%.

Within Andalucía, the best growth was in the province of Granada, at 9.7%, the worst Málaga, with 4.2%.

But, for several reasons, official figures in Spain can be somewhat inaccurate and are best seen as indicators of trends; all the indications are that property price inflation is slowing, although not necessarily as the same rate across all sectors of the market.

For example, while I would expect to negotiate ±25% off asking prices on the coasts of Andalucía, I might only manage 10% in the centre of Seville and even less in some of the prime country areas where demand for certain types of property may still outstrip supply.

In a country as large and diverse as Spain national averages ignore big regional variations and it is no different at the provincial level.

Andalucía is Spain’s largest autonomous region, covering nearly 20% of the Spanish mainland and is bigger, in fact, than several E.U. countries.  So it should come as no surprise to find differences in the property markets in the eight provinces that make up Andalucía, ranging as they do from the affluent coasts of Málaga province to the less well-off rural interiors of Jaén and Huelva.  In effect, there a several property markets across the region and it makes more sense, therefore, to look at the different sectors separately.

Mallorca Property Market Summary

Demand for property in Mallorca continued unabated throughout 2007, and UK buyers were at the top of the list for overseas buyers.

If you are thinking of buying property in Mallorca, you would be joining just over 54,000 EU residents (of which 19,623 are British) now living here permanently, together with an estimated 60,000 second home owners from UK.

Mallorca’s permanent foreign community of 16.8% is the largest of any province in Spain with significant numbers coming from Germany, France, Italy and South America.

The population of Mallorca stands at 791,000, with that of the Balearics in general at just over a million, an increase of 31% in the last ten years.

The general objective of offering the visitor quality and variety year round has been embraced by all sectors of the island’s tourism industry.  The overall number of hotel establishments has been reduced, whilst the number of 4 and 5 star hotels has almost tripled since the early 90s.

Foreign tourism in 2007 was more lucrative in the Balearics than any other area of Spain. Between January and September, it accounted for 20.2 per cent of the total spent in Spain by overseas visitors and we now welcome more than 9 million visitors annually.

All the low cost airlines have increased routes and flight frequency to the island, and on certain days in the peak season the airport handles more aircraft movements than London’s Heathrow.

In March 2007, Ryanair announced new routes into Palma from Liverpool and London Stansted, bringing the total number of airlines featuring Palma to 17 from 24 airports around the UK . Over the year, the airport handled a record 23.3 million passengers, four percent up on last year.

In general, most property professionals agree that business has been healthy, with steady requests for the blueprint two bed, two bath apartment, preferably with sea view.

The top end of the market has been flying high with the best gems being snapped up before even making photograph stage, let alone to agency websites.  Changes were seen however, in the long term rental market, which has picked up more mid range property from vendors who have tired of waiting for the right buyer.

Mallorca property market forecasts for 2008

If you have kept up with any reports in the overseas property press, the general picture for Spain as a whole is of a slow but steady fall in property price inflation, which suggests a soft landing for the Spanish property market after a decade-long boom.

However, there are local differences and unlike parts of mainland Spain, Mallorca has not not suffered from an over-supply of speculative builds, therefore demand, especially for quality apartments, is in balance with or exceeding supply.

Coupled with the lack of good plots (particularly in the south west) and restrictions on licences, prices for quality property in sought after locations are still likely to rise 7-10%, depending on area.

Quarterly statistics released by the Spanish Ministry of Housing bear out this trend.  Furthermore, although housing starts throughout Spain had fallen generally by 33-37% in the 2nd quarter of 2007 (and by as much as 64% in Andalusia), planning approvals in the Balearics actually rose by 21% in the same period.

Front line property will remain an excellent investment, even more so if there is direct sea access, as coastal authorities are tightening up. They are not introducing new laws, simply implementing existing ones.  Quality builds and properties in prime locations will continue to be in demand.

Developers will be looking at other areas of the island.  Some have likened the wide, natural bay of Porto Colom in the south east to Puerto Andratx, and it provides a natural extension to the protected cruising grounds further south of Cala Mondrago.  Port authorities there have been given the go ahead to increase the number of moorings from 52 to 130, the dredgers have moved in and the first chic eateries have appeared on the harbour side.  This is one area already targeted for new apartment communities.

In the north, the world famous Richard Rogers was one of several architectural firms to put themselves forward to lead the planned conversion of the Alcudia power station into an Arts and Science Museum.  The front line site, adjacent to the Port of Alcudia and at the entrance to the sought after Alcanada residential area, has been an abandoned eyesore for years and this will provide a major boost to the town.

2008 will be the year of the train and the Ministry of Transport has allocated half its annual budget to extend the rail network link from Palma via Inca and Manacor to Arta.  Unlike Pollensa or Cala D’Or, which are popular with UK tour operators and villa rental companies, the north east of the island around Arta is not well known amongst UK buyers.  Prices are still 10-15% cheaper than elsewhere, but not for long.

In light of increases in Euribor pushing up the cost of financing, some agencies may feel the pinch this year in the lower price sector and vendors in the middle sector will have to be more patient than usual.  The wheels of the second home market will be grinding a littler slower in Mallorca albeit with some oiling from top end buyers.

Property in Mallorca is not cheap – the type of investors attracted to the island is driven mainly by lifestyle changes rather than for short term profit.   Together with all the benefits of buying in Spain in general – short flight times from European destinations, an outdoor lifestyle, a safe child and family friendly culture – Mallorca offers that bit more.  Its microclimate, sophisticated leisure choices, superlative healthcare and the fact that you are never more than 25 minutes from any part of the coast make up a highly attractive package.

 

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.