Perhaps my job means that I get to hear more about the agonies than the ecstasies of buying property in Spain. Even so, I’m concerned that serious problems affect more overseas buyers in Spain than the property programmes on the television would have your believe. But what exasperates me most is that 99% of problems are entirely avoidable (not including off-plan speculators, who are in the wrong market at the wrong time). If buyers took a more rigorous approach to due diligence before signing or paying any deposits, most of the common problems would never materialise. In the present buyer’s market a good place to start would by avoiding reservation deposits when buying from developers, proceeding instead to a private contract after appropriate due diligence with the help of an independent lawyer. Reservation contracts, which require you to pay anything between 3,000 and 6,000 Euros, are vague documents that do buyers no favours, and you are better off focusing your energies on quick progress to a watertight private contract. But even if you get the reservation contract wrong, you may be able to turn around the situation if you stand your ground.
The number of British people buying property in rural Spain has surged during the last 5 years. High prices and over-crowding on the Spanish coasts have driven property buyers inland, whilst EU-funded improvements in infrastructure have made rural areas more viable as destinations. However the road to buying rural property in Spain can be treacherous…read my rural spanish property guide.
SPANISH PROPERTY MARKET NEWS
Foreign demand for Spanish property down by 9%
Inmueble magazine reports that foreign demand for Spanish property has fallen by 9%, though prices in coastal areas where foreigners tend to buy have continued to rise by between 13% and 15%, and are forecasted to rise by between 7% and 9% in 2006.
Newly built costal property sales to fall by 3.3% this year
According to forecasts by the consultancy DBK, Spanish promoters will sell 175,000 newly built properties on Spain’s coasts this year, down by 3.3% from the 181,000 new coastal properties sold last year. DBK forecasts that sales will fall further to 170,000 properties in 2006.
97% of British living in Spain are owner-occupiers
El Mundo reports that 97% of retired Brits living on the Valencian coast own the property they live in, whilst at least 19.25% of them also own a property in the UK.
New report forecasts 2005 price increases of 11% in Andalusia and Murcia
A new report by the appraisal company Cohispania forecasts property prices increases of 11% this year in Andalusia and Murcia, with forecast increases of 10% and 9% respectively in 2006.
Euro Zone property price rises since 1999 highest in Spain
Euro Zone real property price increases since 1999 have been highest in Spain according to the latest quarterly report from the European Commission. The report reveals that Spanish property prices have increased by an average of 12% per year in real terms (adjusted for inflation) between 1999 and 2004.
Spanish property prices up by 13.9% in 12 months to the end of 2nd quarter
Quarterly figures for Spanish property price changes released by the government show that Spanish property prices have increased by 13.9% over 12 months to the end of June 2005. This rate of property price inflation is almost 4% lower than during the same period of 2004.
Average Spanish property now costs 144,642 Euro
Inmueble magazine reports that the average Spanish property has increased in value from 139,314 Euros in 2004 to 144,642 Euros in 2005. Average Spanish resale property prices rose from 133,837 last year to 142,341 Euros this year.
BBVA revises property price forecasts upwards
Having previously forecast Spanish property price increases of 10% this year and 5% next year, BBVA – one of Spain’s leading banks – has revised its property inflation forecasts to 12% this year and 8% in 2006. The reasons given for this more optimistic forecast are better than expected Spanish employment figures, interest rates that now look to remain low or even fall, increasing demand and the lack of alternatives in the rental market.
Meanwhile the European Central Bank has revised downwards its forecasts for economic growth in the Euro Zone (to 1.4%), due to the weak performance of the French and German economies. This suggests that Euro Zone interest rates could fall.
Foreign real estate experts alarmed by oversupply of property in Spain
Foreign real estate experts participating in the 5th International Financial Conference organised by Caja Madrid have voiced alarm at the potential oversupply of property in Spain.
One analyst described the 750,000 house starts in 2005 as “incredible and unsustainable”, and pointed out that Spain’s ratio of properties under construction to national housing stock is 4%, compared to a European average of 1%.
Participating in the conference, Nick Tyrrell – Vice President of the bank JP Morgan Fleming -pointed out that, “245,000 new households were created in Spain during 2004, according to the Institute of National Statistics (INE), whilst demand for second homes was around 200,000. The sum of these two figures represents real demand for property in Spain, and does not match the 750,000 house starts of last year. This mismatch between demand and new supply is a risk that does not exist in the UK”. According to JP Morgan Fleming’s figures, there were 150,000 house starts in the UK last year, and the UK’s population is 50% bigger than Spain’s.
The alarming number of new properties being built in Spain compared to other countries is highlighted in a new report by Euroconstruct, which reveals that almost a 3rd of the EU’s new housing starts are in Spain.
Spanish resale property prices up by 6.3% in first quarter of 2005
Spain’s notaries have released figures, based on 202,296 transactions in the first quarter of 2005, showing that average Spanish property prices increased by 3.82% in the period, with new build prices up 1.7% and resale properties up 6.3%.
Greenpeace denounces the over-development and pollution of the Spanish coast
In a new report entitled “Destrucción a Toda Costa”, Greenpeace has criticised what is sees as the greed-driven and unsustainable development of the Spanish coast. The report argues that construction on Spain’s Mediterranean coast has destroyed more than 25% of the coast’s natural resources (dunes, deltas, etc), in many cases despite nominal official protection. Greenpeace estimates that up to 90% of the Spanish coast is suffering some level of degeneration as a consequence.
Renting property in Spain more expensive than buying
Inmueble magazine reveals that the average Spanish family spends 25% of gross household income on mortgage payments, whilst average rental payments take up 30% of gross household income. This would help explain why so many Spaniards prefer buying over renting.
On the other hand Spain’s Minister for Housing – María Antonia Trujillo – has recently claimed that “renting is cheaper than buying” whilst making clear that one of her primary objectives is to ensure that “renting is an option, because at the moment it isn’t”.
Euribor touches historic lows
Euribor – the base rate used for calculating Spanish mortgage repayments – fell in June to 2.103%, the lowest level since June 2003 when it reached 2.014%. However provisional figures from the Bank of Spain indicate that Euribor has risen in July to around 2.16% (the definitive rate for July will be published in August). Despite the provisional increase, the absolute rate still remains near to historical lows, which means that mortgage borrowing is expected to continue increasing by 20% per annum.
Money-laundering artificially inflating Spanish property prices
Spain’s La Vanguardia newspaper reports that money-laundering operations in areas such as the Costa del Sol could be helping to artificially inflate Spanish property prices.
Rents up by 4.3% on average during last 12 months
Spanish rental prices have risen by an average of 4.3% over the last 12 months. The highest rises took place in Andalusia (5.6%), La Rioja (5%), Murcia (4.8%), Madrid (4.7%) and Catalonia (4.5%).
Spanish government to purchase land on the coast to prevent over development
Cristina Narbona – Spain’s Minister for the Environment – has announced that as from 2006 the Spanish government will start buying up coastal land to prevent over development and environmental degradation of Spain’s coast.
© Mark Stucklin (Spanish Property Insight)