Andalucian Coastal Property
Andalucía has 900 kms of coastline, 600 of which face the Mediterranean and 300 on the Atlantic side.
Some coasts are very densely developed, others are barely touched.
In most coastal areas there are two distinct sectors in the property market; firstly, the high density new-build developments, secondly, the quality resale sector and in my view they will perform very differently in 2008.
New Developments on the Andalusian Coast
The new-build developments first.
There are too many of them! And although the number of applications for planning approval is already declining building completions are still rising. So, even if demand in this sector stays firm, with the number of properties for sale increasing the back-log just gets bigger.
But the evidence is that demand is falling, mainly due to higher mortgage interest rates and reduced credit availability.
This is a big factor; one of the main driving forces behind the extraordinary surge in demand for new-build properties in the last five years, from both Spanish and overseas buyers, has been the availability of relatively cheap finance.
In addition, property price inflation in the U.K. and Irish domestic markets, both key players in the Andalucían markets, has allowed property buyers to release equity to fund the deposit, the balance by a Spanish mortgage.
In effect, many buyers have been taking 100% mortgages. When interest rates started to rise many looked to the rental market to service the increasing costs, only to discover that the assurances previously given to them by over-excited estate agents, i.e. that they would have no trouble achieving sufficient rental income to cover the mortgage, was, in fact, a myth!
So 2008 in the new-build sector is not looking good for sellers and even for buyers, I would urge caution.
As developments currently under construction come to completion, and there are a lot out there, there will be more unsold properties available and unless you are able to negotiate a very substantial discount then it may be advisable to hold off until at least 2009. I am aware of recent transactions in which the seller has accepted an offer somewhat below the price they paid two years previously.
However, we have had similar building booms in Andalucía in the past and buyers can be certain that the overhang will get mopped up, stability will return and prices will rise again but any buyer of a new-build property in 2008 must be absolutely convinced that the price is right, that the building licence and bank guarantees are verified by an independent lawyer and that they can finance the purchase without depending on rental income.
Resale properties on the Andalusian Coast
Now, as for the resale sector, one thing that is always immediately evident in a market downturn is that there is a flight to quality and in this respect one needs to recognize that the coasts of Andalucía are not all the same; prices are much higher in some areas for very good reasons and in today’s market conditions buyers need to focus on the prime areas; in secondary areas you can expect prices to fall further and recover more slowly.