This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
Mark Stücklin
Spain has always aspired to be the “Florida of Europe” so what can we learn from Florida’s spectacular housing market recovery, and are there any grounds for optimism?
Last week I joined a panel at the SIMA Madrid International Real Estate Exhibition comparing the holiday-home markets of Spain and Florida. I explained the situation in Spain, whilst Dean Asher, President of the Florida Realtors Association (www.floridarealtors.org) and Teresa Kinnery, CEO of the Miami Association of Realtors (www.miamire.com) enlightened us on the situation in Florida and Miami.
My presentation was a cheerless affair as I explained how almost every market metric was still heading in the wrong direction, whilst Dean and Teresa were all smiles as they explained how the property market in Florida has staged the most extraordinary recovery, with every single metric heading in the right direction.
Take Miami: After a savage crisis in 2008/2009, in which prices crashed and inventories bulged, they then went on to clock up record yearly sales in 2011 and 2012, and are on track for another record in 2013, with the highest level of sales in Miami’s 93 year history.
Today in Miami:
- House prices are rising fast (+24pc for single family and +17pc for condos), though they are still around where they were in 2003
- Sales prices are almost equal to asking prices
- Housing inventories have dropped dramatically (-75pc compared to August 2008)
- Time on the market is falling
- Sales volumes are up
- Cash sales are up
- International buyers are up dramatically
In Spain, on the other hand, all those housing market metrics except the last two are still going in the wrong direction.
So what is driving the property market recovery in Florida?
To start with, the US economy is doing better than Spain, and mortgage financing is easier and cheaper to come buy. But if I understood correctly, there are three specific drivers behind Florida’s recovery:
- Foreclosures and distressed sales quickly led to dramatically lower house prices that brought the market back to life.
- Institutional investors were big buyers in the early stages of the recovery, which helped build momentum and confidence.
- More than anything, it seems that increasingly diversified international demand is the biggest driver behind Florida’s recovery. International buyers from countries like Venezuela piled into Florida to get money out of Banana Republics and into hard assets. Now Canadians are also taking advantage of lower prices for lifestyle/investment reasons.
So what about Spain? Are there any signs of similar factors rescuing the coastal housing market?
DISTRESSED PRICES
It has taken a long time to get there, but lower prices in popular destinations like the Costa del Sol are bringing buyers out of the woodwork. It is now reasonably easy to find bargains, and international demand is responding, up 13% last year. I expect the trend to continue with prices under further pressure as banks, the Sareb, and vulture funds liquidate portfolios. Simply put, lower prices are stimulating international demand, like they did in Florida.
No doubt Spain would have been much better off with a faster adjustment and recovery like Florida, and it doesn’t help that the official figures still give the rest of the world the impression that Spanish house prices have barely declined in what everyone knows is one of the world’s biggest housing busts. But prices are getting interesting, and word is getting out.
Why has Spain taken so long?
It usually pays to cut your losses quickly, and Florida proves the point. So why have Spanish property prices taken so much longer to fall? Some say it’s because Spanish vendors are just obstinate, but I guess it’s more to do with the US financial system being better placed to absorb losses more quickly than the Spanish system. In the end it’s because the US is a much bigger, stronger economy that could cope with the hit.
INSTITUTIONAL INVESTORS
Vulture funds have been circling for years, now more than ever, but no big deal has been done; mainly because Spanish financial institutions were not willing or able to recognise the necessary losses a deal would entail (investors are looking for discounts of 70pc to 80pc), but also because Spain lacks professional property management companies that investors need to deal with big portfolios. Nevertheless, it’s reasonable to expect that deals will start being done, which might push down prices in the short term, as investors look to liquidate fast. Distress investors helped Florida recover, and they may yet help Spain too. The signs are promising.
DIVERSIFIED, INTERNATIONAL DEMAND
International buyers have been the main driver behind Florida’s recovery, and increasingly diversified and growing international demand is one of the few bright spots in the Spanish housing market. Foreign demand for Spanish property grew 12.7pc last year (whilst local demand fell 18.4pc), and foreign buyers now come from a bigger mix of countries. On the Costa Blanca, foreigners are now around 30pc of the market, as they were in Miami in 2011. That is all good news.
The trend is positive, and I expect lower prices to attract foreign investors in greater numbers, though Spain could do more to attract buyers from Latin America and Middle East. If the trend continues, then foreign buyers will help reduce inventories and stabilise prices in popular coastal areas in the next year or two. But unlike Florida, I don’t expect a rapid turn around.
Does Florida point the way?
Can we expect Spain to follow in Florida’s footsteps? Dean Asher of Florida Realtors certainly thinks so: “Don’t worry, it’ll happen here too,” he told me. I’ve come to the conclusion that there are cautious grounds for optimism, assuming that recent steps by the Spanish Government don’t snuff out international demand. I see house prices getting interesting, institutional investors getting interested, and foreigners from a greater mix of countries buying in increasing numbers. But, unless there is a dramatic increase in foreign buyers in the next two years, I don’t expect a spectacular rebound like Florida, more like a gradual recovery. But this stage, any sort of recovery will be welcome, and better late than never.
Chris Mercer MNAEA says:
This is very positive news and as an agent with 30 years experience I totally agree with your sentiments. The major difference between Spain and the USA is that the USA confronts it’s problems head on and address them with a positive “can do” attitude. The Spanish mentality (as in much of the EU) is to almost ignore what is going on and to hope that things will get better with time, which ultimately they will but if they approached the problems as in the USA, I believe we would see a quicker recovery.
Baring in mind the size of the property market in Spain and the massive potential, you would have thought that someone, somewhere, in government would take notice of this and look at what other countries have done to stimulate growth.
Spain could so easily be the Florida of Europe, it just requires a different mindset and a little mental tweaking.
Geoff Parker-Spanish Management says:
Hola!
We have been active in the property market in Axarquia(Andaucia) for many years and we have seen a dramatic uplift in enquiries and most notably from the British.We have in fact had the same no of enquiries in the first 6 months of 2013 than the last 3 years put together.So something IS happening and although the majority of clients are looking for property up to 200k euros once these lower priced properties have dwindled it is bound to filter through to the upper prices.
We for one are braced for the turn in fortunes and it WILL come-just give it time!
Totally agree that Spain requires a different mindset and a clearer vision on kick starting economic matters . Here,s to Spain being the next Florida of Europe!!
Viv Jones says:
Spain needs to improve it’s quality, not just of the build but the maintenance. I owned a property in Florida and the development was immaculate and beautifully maintained as were the surrounding areas. Spain is ramshackle, I look at our urbanization and wonder why it can’t be kept as well as the one in Florida, the standards in Spain are much lower and everything is far more inefficient and second rate.
Jane says:
Don’t agree with above comment. The urbanisation I have a house on (Costa Blanca) is very well maintained, the gardens are immaculate, roads kept clean and problems fixed very quickly. We have a fantastic committee who do a great job of running the urbanisation. I do understand that this isn’t universal but the comment that “Spain is ramshackle” is unfair.
Jim says:
Totally agree. The Spanish have been building property quick without any thought. The house and the area lack standard.
Ben Ward says:
The euro is the millstone hanging around the neck of the Spanish economy. Unless the country can devalue its currency, either within the existing fiscal structure or by leaving it, there is no chance of any ‘Florida Miracle’ happening on the Costas.
Andrew Davies says:
I have to agree with Ben. I’m keen to buy a family home in Spain. But all my money is currently in GBP. The banks only seem to want to lend 60% and then there’s the tax on top. So with the current exchange I would get slaughtered putting my GBP into Euro’s.
Mark James Webster says:
The Spanish attitude needs to change. Many individuals are careless, egocentric and greedy at times. Lets not forget that Spain had it easy for many years during the coastal property development boom of the 70´s, 80´s and 90´s, and this “quick buck” way of thinking is still ingrained in many mindsets. It has got so bad that the quality of just about everything has constantly gone downhill, from restaurant service to property construction. However, now the realisation is finally setting in and Manual the waiter is now wondering why he has no job anymore, and Carlos the builder is completely bankrupt. The next generation of Spaniards must resist this mindset and learn from the mistakes of their predecesors and do things better. Only then can Spain even contemplate being the next Florida of Europe.
Lenox says:
Florida is a good example to compare with Southern Spain. Not much industry, some agriculture and a relatively poor local working force. Northerners move there to retire, bringing money and creating jobs. The Northeners, in exchange for their monthly retirement-cheques, keep the smaller non-holiday towns open and wealthy the year round. Florida becomes wealthy but, with so many immigrants, the local people lose their power in the town halls. The difference – Spain allows all the Northern Europeans to come and live here, lets them bring their money, buy houses and create jobs… then (for some reason), declares the houses illegal (250,000 in Andalucía alone), encourages the foreigners to leave for other places (Florida sounds good) with the Wealth Asset Declaration, the rules about renting, huge catastral tax increases, the removal of residents cards (we now carry our passports), massive local mismanagement and corruption, apparently encouraged from all levels of the administration, and then moans when the unemployment (at least in Andalucía) goes up to 40%.
Malcolm says:
I agree with many others who applaud the US for letting the pain of the recession dig deep, but fast to get it over with. Many lost their homes, who trusted that those in government and who ran the banks had some idea as to what was going on. They have this in common ith the Spanish, Brits and many others. Property in the US became so cheap, that buyers started to snap up the bargains and now they are on a roll.
If only the Spanish would wake up to the fact that much of their housing is worthless. What is left is not worth anything like what owners think it is. It is a hard truth, however Europeans have become so reliant on government to think and act ‘on their behalf’ that they have forgotten some economic truths. Americans do not like big government, at least no larger than what it is. Perhaps Spaniards will be the same.
Andrew says:
I lived in puerto Banus for 10yrs from 1995 to 2005
I sold my villa in 2005 and moved back to Florida.
I have just spent 3 weeks on holiday there, and
Today my villa is still priced for more than what I sold it for in 2005
Marbella , Andalusia is still over priced ridiculously , and the game with the real estate companies still goes on , I have several friends all in the real estate business , it’s like some other comments say, they are all still stuck in a time warp of the good old days when making crazy amounts of money was so easy. And learn to speak Spanish or don’t move there you will regret it
Bob says:
Maybe Florida real estate agents are just better at hyperbole? The truth is you can still buy an absolute bargain property in Florida and in most areas prices have not recovered and there is nothing like a recovery in prospect. What _is_ true is that good areas in Florida are attracting interest now and prices have stabilised, even risen.
The Spanish property market first has to overcome the government, which seems intent on destroying any hope of a recovery. Then it has to address the mental attitude of vendors who still think the collapse only applies to other properties. Selling a house in Spain and relating it to what you would like to buy back in Britain is unrealistic but very common. Perhaps, long term residents have forgotten that they banked a load of cash from their sale in the UK 20 years ago when they bought their dream home. Expecting to sell for enough to move back is sadly half-baked.