By Barbara Wood of The Property Finders
In all property market downturns there is a lot of sitting on fences as prospective buyers try to gauge where the bottom is before committing themselves but there always comes a moment when price reductions get so interesting they get down off the fence. There is evidence coming through that we may have reached that moment in Andalucía if transactions reported during December and in the first few days of January are anything to go by; it looks like 45% off last year’s listed price is the magic figure and this is good enough even to tempt some British buyers off the sidelines. Although the £/€ exchange rate is still pretty dire the capital growth potential in the long term means it matters much less.
Firstly, in December a developer with just six units remaining in a small project of 35 apartments located beachfront near Puerto Banús and San Pedro de Alcántara announced that he would consider offers over €370,000 for penthouse duplexes with two bedrooms and two bathrooms which had previously been listed from €700,000. As his regular two bedroom units had sold between €500,000 and €650,000 it is hardly surprising that in the following week four of the units were reserved.
Secondly, just this week another developer in the same area, this time with 19 unsold units in a development second line to the beach, is offering two bedroom, two bathroom apartments from €250,000 and already six deposits have been taken; again this represents a 45% discount off the list price.
What makes this news so interesting is that both these developments are in a prime location; this begs the question about all those boxy apartments in the not-so-good locations, the developments of hundreds of units with no infrastructure. What value do they have and what reductions will have to be offered to tempt buyers back? I would suggest it will have to be even more as in any fall, secondary locations always see steeper falls and slower recovery.
Then, in general, developers have been very slow to come through with reductions; they have stayed in denial mode longer than many individual sellers but now some have decided to accept the inevitable it will be much harder for the others to avoid similar reductions. It seems likely that more will come through but these examples show that the good stuff will get snapped up quickly with this level of discounting.
As to how long it might take today’s buyers to see prices recover to the pre-discount level? If the last severe downturn in Spain, in the 1990s, is anything to go by (during which average prices fell 40%) then 3-5 years was sufficient to recover all of that, with quality property in prime locations recovering the quickest.
The Property Finders (Andalucia)
INTERNATIONAL PROPERTY SEARCH & ACQUISITION SERVICES IN THE UK, SPAIN