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Segments are the key to understanding today’s property market

You often hear people talking about the Spanish property market as if it were one homogeneous thing, and I confess I’m as guilty as anyone. In reality Spain has lots of different markets, so sweeping statements can be misleading if segments are going in different directions, as they are now. It’s time to start talking more about specific segments and less about the overall market.

Obviously, you can look at markets geographically, for example Andalucia > Malaga > Costa del Sol > Marbella > beach front > Golden Mile. Depending upon what you want to do it can also be useful to segment by other variables like budgets, type (villa, flat), age, use, and buyer types. But along with location, I believe in segmenting the market by quality grades like ultra-prime, prime, A, B, and C to know what’s really going on.

Ultra-prime Spanish property

Ultra-prime is really just a bit of fun. It’s nice to talk about, but it’s so rare there’s not really a market for it. It is made up of totally extraordinary and unique properties like the private island of Espalmador, between Ibiza and Formentera, or Sa Fortalesa, a private headland off Formentor in Mallorca , and just a handful of other properties around Spain.

Espalmador, ultra-prime
Espalmador, ultra-prime

Prime Spanish property

Prime is all about location. It’s a place on a map, always upmarket and exclusive, for example Barcelona’s Paseo de Gracia, Madrid’s Calle Serrano, Marbella’s Golden Mile, Mallorca’s Puerto Andratx, and, to some extent, swanky urbanisations like Sotogrande, La Zagaleta, Son Vida (Mallorca), and La Moraleja (Madrid). Prime doesn’t necessarily mean great design or good condition. There are plenty of ghastly properties in prime locations, but they are still prime. It would take a major blunder in design and build to downgrade a property in a prime location.

Prime almost always sells well, whatever the market. There is only a short period in the whole economic cycle, during the recession, when you can’t shift prime property, even for a reasonable price. It never lasts long. Why? Because everyone wants prime property, if they can afford it, and there’s never enough of it. Elementary, really.

Prime on Barcelona's Paseo de Gracia
Prime on Barcelona's Paseo de Gracia

A, B, and C grade Spanish property

Then there are what I call A, B, and C grade property.

A is good locations around Spain, for example beachfront, in a nice town or village, and certain rural locations. A is attractive, desirable property, and it should sell well at the right price.

Prime and A grade combined are only 20% of the market, perhaps less.

Then comes B grade. Okay locations, reasonable features, something you might be perfectly happy with, but it’s really about price.

And finally, C grade, or sub-prime, which is only about price. Undesirable locations, poor quality design and build, that sort of thing. Much of the C grade property built in recent years might never sell at any price. A lot of off-plan investors bought into this grade without knowing what they were doing.

So much for the property grades I use. I’m sure you want to know what’s happening on the ground. In the next article I’ll look at Mallorca, and the window of opportunity opening up for prime and A grade buyers.

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