The real state of the CDS property market

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This topic contains 25 replies, has 12 voices, and was last updated by Profile photo of katy katy 10 years, 4 months ago.

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  • #52011
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi

    I have looked around and seen many posts on uncompleted/undercompleted developments. I have also heard, anecdotally (from my spanish lawyer) that the market is slowing, sales are taking longer and some promoters cannot sell their properties. I also have read the economists predicting a house price slump as spain is building more houses than france, england and germany combined (i might have got that last “fact” wrong)

    My question relates to my visit last week. I saw no slowing in new developments being promoted, I saw many building sites starting up and lots of cranes busying away and more building trucks than cars.

    Just what is the situation? I cannot square the views i hear and read with the building starts i see. Surely if there was a slowdown building starts would decline/stop/slow down as well, development parcels of land would not sell etc.

    Is it the facts or my eyes which are deceiving me. Thanks for any enlightenment.

  • #63775
    Profile photo of katy
    katy
    Spectator

    It does seem incredible that there are so may new developments starting up. A development nearby still has units for sale after being completed over 2 years ago. there are massive developments as you drive along the toll road, all a long way from the sea or any other facilities. Perhaps there is still a money laundering connection?

    I would say there is definately a downturn, I live about 8 mins drive from the centre of marbella and all the houses for sale enroute have been on the market for at least a year. Also have noticed a lot of estate agents have quietly closed up. I know of at least three friends have had their property on the market over a year and none of them are overpriced in comparison to others. Time for buyers to step in with lower offers? Will be some distress sales soon.

  • #63975
    Profile photo of katy
    katy
    Spectator

    It does seem incredible that there are so may new developments starting up. A development nearby still has units for sale after being completed over 2 years ago. there are massive developments as you drive along the toll road, all a long way from the sea or any other facilities. Perhaps there is still a money laundering connection?

    I would say there is definately a downturn, I live about 8 mins drive from the centre of marbella and all the houses for sale enroute have been on the market for at least a year. Also have noticed a lot of estate agents have quietly closed up. I know of at least three friends have had their property on the market over a year and none of them are overpriced in comparison to others. Time for buyers to step in with lower offers? Will be some distress sales soon.

  • #63776
    Profile photo of Anonymous
    Anonymous
    Participant

    So why are so many developments starting up. I can envisage only two reasons:

    1. Economic/business stupidity – unlikely as i imagine banks are involved in at least part of the financing and off-plan buyers (presumably, based on my first para above, declining rapidly) the balance.

    OR

    2. The difference between the building costs per sq metre and the selling price per Sq metre is so VERY large that it makes sense to build even if only 20% of the development is sold within 2 or 3 years. That sounds more plausible as the method of construction does not appear expensive.

    Any more ideas welcome – especially from builders or promoters.

  • #63976
    Profile photo of Anonymous
    Anonymous
    Participant

    So why are so many developments starting up. I can envisage only two reasons:

    1. Economic/business stupidity – unlikely as i imagine banks are involved in at least part of the financing and off-plan buyers (presumably, based on my first para above, declining rapidly) the balance.

    OR

    2. The difference between the building costs per sq metre and the selling price per Sq metre is so VERY large that it makes sense to build even if only 20% of the development is sold within 2 or 3 years. That sounds more plausible as the method of construction does not appear expensive.

    Any more ideas welcome – especially from builders or promoters.

  • #63778
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    Anonymous
    Participant

    The market is a speculative bubble, plain and simple. Rental yields are minuscule, prices are falling and cognitive dissonance reigns amongst vendors unable to process the evidence, that the market has turned. It usually takes some time for realisation to dawn. In a market where many owners are seldom at the property critical mass may take longer.

  • #63978
    Profile photo of Anonymous
    Anonymous
    Participant

    The market is a speculative bubble, plain and simple. Rental yields are minuscule, prices are falling and cognitive dissonance reigns amongst vendors unable to process the evidence, that the market has turned. It usually takes some time for realisation to dawn. In a market where many owners are seldom at the property critical mass may take longer.

  • #63789
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    Anonymous
    Participant

    So…. Could someone please advise me, as a complete idiot thinking of buying – What is the best policy for buying at this moment?

  • #63989
    Profile photo of Anonymous
    Anonymous
    Participant

    So…. Could someone please advise me, as a complete idiot thinking of buying – What is the best policy for buying at this moment?

  • #63792
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    Anonymous
    Participant

    If you say what do you want the property for, Holiday home, permanent residence or investment?

    Someone I’m sure will have an opinion

  • #63992
    Profile photo of Anonymous
    Anonymous
    Participant

    If you say what do you want the property for, Holiday home, permanent residence or investment?

    Someone I’m sure will have an opinion

  • #63796
    Profile photo of Anonymous
    Anonymous
    Participant

    My theory is that there is a time lag of several years between the developer buying the land and the development starting so many of the developments being built today were probably first planned 3+ years ago. That’s why the opposite happens in an early boom as it takes time to find land and all the planning etc so there is a shortage which fuels demand and then we are back to where we started

  • #63996
    Profile photo of Anonymous
    Anonymous
    Participant

    My theory is that there is a time lag of several years between the developer buying the land and the development starting so many of the developments being built today were probably first planned 3+ years ago. That’s why the opposite happens in an early boom as it takes time to find land and all the planning etc so there is a shortage which fuels demand and then we are back to where we started

  • #63797
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Maximus

    the best policy for buying is to make sure you buy low. Check out prices of similar properties locally and find out how much similar proeprties have sold for (not what they are on the market for as this ca be very different)

    Make an offer 30-40% below the asking price. If the owner accepts it great if not walk away and find another property or negotiate closer to a price you are happy with.

    Keep looking and you will find someone willing to sell at a great discount because they are desperate to sell. The market is very much a buyers market and the art of selling a property at a profit is to buy it at the lowest price possible. This applies whether the market is good or bad, whether you are buying ofr a holiday home, a place to live or a rental property.

    If you are buying a property for rental then you need to think about other factors. Firstly how much are your costs. Rental yields in Spain rarely rise above 5% if you are really lucky Depending on where you are there is likely to be lots of competition. In the first year you are likely to get between 6 – 10 weeks rental, but buying now you can forget that as the seasonis already underway.

    So if you are expecting a yield of 5% then a mortgage on 100,000 will cost you 6000 per year, plus your expenses of say 1000 for advertising, this is 7,000 euros. At 5% this means you need to buy a property at less than 140,000. Better still if the value of the property you buy is 100-110,000.

    Good luck in your purchase

    Vince

  • #63997
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Maximus

    the best policy for buying is to make sure you buy low. Check out prices of similar properties locally and find out how much similar proeprties have sold for (not what they are on the market for as this ca be very different)

    Make an offer 30-40% below the asking price. If the owner accepts it great if not walk away and find another property or negotiate closer to a price you are happy with.

    Keep looking and you will find someone willing to sell at a great discount because they are desperate to sell. The market is very much a buyers market and the art of selling a property at a profit is to buy it at the lowest price possible. This applies whether the market is good or bad, whether you are buying ofr a holiday home, a place to live or a rental property.

    If you are buying a property for rental then you need to think about other factors. Firstly how much are your costs. Rental yields in Spain rarely rise above 5% if you are really lucky Depending on where you are there is likely to be lots of competition. In the first year you are likely to get between 6 – 10 weeks rental, but buying now you can forget that as the seasonis already underway.

    So if you are expecting a yield of 5% then a mortgage on 100,000 will cost you 6000 per year, plus your expenses of say 1000 for advertising, this is 7,000 euros. At 5% this means you need to buy a property at less than 140,000. Better still if the value of the property you buy is 100-110,000.

    Good luck in your purchase

    Vince

  • #63799
    Profile photo of Anonymous
    Anonymous
    Participant

    I agree with Vince. In the current market its a question of finding sellers who are willing to negotiate. You should have a clear understanding of what property you want, the holding costs, and the income it will generate. To get best value you have to make multiple offers (at a price you know stacks up) until you find motivated vendors willing to sell.

    This approach may seem harsh, but this is how markets work.

    PJA

    You have just described what property economists call the ‘Development Cycle’

  • #63999
    Profile photo of Anonymous
    Anonymous
    Participant

    I agree with Vince. In the current market its a question of finding sellers who are willing to negotiate. You should have a clear understanding of what property you want, the holding costs, and the income it will generate. To get best value you have to make multiple offers (at a price you know stacks up) until you find motivated vendors willing to sell.

    This approach may seem harsh, but this is how markets work.

    PJA

    You have just described what property economists call the ‘Development Cycle’

  • #64019
    Profile photo of Anonymous
    Anonymous
    Participant

    Thanks folks. Some really sound and useful advice.

  • #63836
    Profile photo of Anonymous
    Anonymous
    Participant

    Thanks folks. Some really sound and useful advice.

  • #64021
    Profile photo of Anonymous
    Anonymous
    Participant

    Ok, so now we’re telling people they can start making 30-40% below market price offers. Can this Forum sometimes be the Ministry of Disinformation or what?

    There’s a perfectly reformed little Marbella beach villa only 50m from the sand and walking distance to everything…been on the market with a tiny little German agency we know at €495k for 48 hours and there’s 4 clients hot to trot. If anyone came in at 30-40% below then they’d get a good slap (and lose a fabulous property to boot).

    “Remember that the moment you walk into a property is also the moment when you may have to think about its potential to sell in the future.” Location location location at the right price will always pay dividends.

    Oh, and ps, many building sites close for July/August as its just too damned hot to work. Hence it may seem that a developer has gone bust/massive slowdown in construction when is not the case.

  • #64027
    Profile photo of Paul
    Paul
    Participant

    Thought it interesting that the market being overblown in Spain and some agents moving into new markets that Foxtons in London are on a huge advertising campaign for their new Spanish property sales which I think will be massively overpriced. They seem to be starting where others leave off and with their tarnished reputation in the UK should probably be well avoided in Spain.

  • #64028
    Profile photo of Anonymous
    Anonymous
    Participant

    @sdodgson wrote:

    Ok, so now we’re telling people they can start making 30-40% below market price offers. Can this Forum sometimes be the Ministry of Disinformation or what?

    There’s a perfectly reformed little Marbella beach villa only 50m from the sand and walking distance to everything…been on the market with a tiny little German agency we know at €495k for 48 hours and there’s 4 clients hot to trot. If anyone came in at 30-40% below then they’d get a good slap (and lose a fabulous property to boot).

    “Remember that the moment you walk into a property is also the moment when you may have to think about its potential to sell in the future.” Location location location at the right price will always pay dividends.

    Oh, and ps, many building sites close for July/August as its just too damned hot to work. Hence it may seem that a developer has gone bust/massive slowdown in construction when is not the case.

    As you are an agent could you tell me what net yield is achievable on a modern two bedroom apartment in your patch.

  • #64057
    Profile photo of Anonymous
    Anonymous
    Participant

    I just caught the back end of a news bulletin on the radio here in Spain yesterday but it did make concerning hearing. The Bank Of Spain estimates that property here is over valued by about 30% and a settling period is forecasted over the next 18 months.

    This is likely to make selling a property more difficult unless the seller can accept the official line.

    Spain is still a great place to own a property but only if entered in to with the traditional outlook of self use and enjoyment, as opposed to using it as a leading edge investment vehicle.

  • #64063
    Profile photo of Melosine
    Melosine
    Participant

    Quite agree marbellaman.
    Speculating on property just hikes up and inflates prices for everyone. A vicious circle with few winners ( apart from developers of course)

  • #64064
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    Anonymous
    Participant
  • #64092
    Profile photo of katy
    katy
    Spectator

    When they say that property in spain in 30% overvalued they reach this figure by using several economic pointers but at the end of the day it is supply and demand that decides. If you look at the UK prices seem overvalued but there are more buyers than sellers so the market is healthy. In spain, particularly on the costas the massive building projects has led to a large oversupply and still new projects are starting. Less people are wanting to buy here. Just because the Banks etc give a figure doesn’t mean that sellers will come down to that figure.

    A friend has had her villa (marbella) on the market for about a year. Valuation was 750000 euros. They asked 725000 and later reduced it to 675000, only had a few viewings this year. Its a fantastic house with large pool and beautiful views and they have said this is the lowest they will go as they would rather not sell, so unless its a distress sale there won’t be masses of bargains.

    If you compare with houses in the UK what would you get there for this money in an upmarket area within walking distance to a lovely beach? Probably a house one third of the size, no pool, no large garden and one bathrooom (en-suite if you’re lucky) instead of 3.

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