Interview: Alex Vaughan, Partner, Lucas Fox International

Lucas Fox International recently opened new offices in Madrid, Valencia and Seville, sending a clear signal that the estate agency is ready to grow its investment in the Spain property rebound. The Barcelona-based agency now has a total of 10 offices in Spain, primarily targeting international investors interested in the mid- and high-end of the market.

“We want to be present in the main cities when the national market reactivates,” says Lucas Fox partner Alex Vaughan.

In an e-mail interview with Spanish Property Insight, Mr. Vaughan discusses the state of the market, the latest trends, the impact of the “Golden Visa” and his agency’s expansion strategy.

What is happening to property prices?

Good question! I think it is important to distinguish between the prices that owners and developers are asking and the prices that properties are actually getting sold at. Government statistics or those statistics taken from property portals are normally based on asking prices and not actual sales prices. Prices across Spain peaked in 2006/2007 and compared to that point properties are now selling at 20 per cent to 50 per cent lower depending on the area. Asking prices have gradually been coming down in line with sales prices but in some cases still need to adjust more. We predict that sales and asking prices will now remain stable for at least a couple of years, in our experience there is no evidence of sales prices going up as some agencies have been suggesting.

Alex Vaughan, partner, Lucas Fox
Alex Vaughan, partner, Lucas Fox
How you describe the supply situation?

It varies from area to area but in general the lack of development over the last seven years means there is a lack of quality new build housing on the market.

What kind of new housing is needed, if any?

Higher end apartments and villas in prime areas for the international market and entry level property in the main population areas for the national market.

What property is selling today?

As in any property market, well located, decent quality property at market price will sell quickest. As a company we are seeing the strongest international demand in Barcelona city and surroundings, Costa Brava, Ibiza and Marbella.

Who is buying?

There are national buyers but they tend to be buying at the lower end of the market, mainly from the banks. There is a lot of international confidence in the Spanish market which has led to many private investors looking at the market not all of whom have realistic expectations. The majority of international buyers are still buying property to use themselves and the number of non European buyers is rapidly increasing vs the traditional buyer markets of the UK and Northern Europe.

Can buyers get mortgages?

It is still not easy for national or international clients to get finance although there are now signs that Spanish banks are becoming more willing to lend. Those banks that are lending prefer to lend against their own property and only to very low risk profile clients.

What impact has the “Golden Visa” had on the market?

The impact of the Golden Visa on the market has been minimal so far with the highest proportion of serious interest from the Middle East. We believe that the Spanish Government will need to modify the law to allow Spain to compete with other countries which have similar schemes.

Have you noticed the impact of international funds on the market?

So far they have mainly been buying sub-prime properties from the banks so they haven’t really had an impact on the market as a whole apart from adding to the feeling of confidence. Increasingly funds are looking to become developers in their own right or enter into JVs with developers so this should add to the supply of new development property in the coming years.

Have the banks still got anything interesting to offer?

Most of the good new developments they had have now been sold. Every now again something interesting comes up for sale but there is a definite feeling in the market that the best properties never make it onto the open market.

Will moves to regulate tourist rentals affect the market?

This mainly applies to Barcelona where a six month ban on the granting of new tourist licences has just been implemented. I don’t think these moves will have any serious impact on the market, only a small proportion of buyers buy with the idea of renting professionally to tourists and if this is their intention it is better that the sector is properly regulated.

What is your short term forecast for the market?

Sales prices will remain stable and asking prices will continue to drop in line with properties’ market value.

What is the biggest obstacle to recovery?

Lack of bank finance and the property sector trying to hype the market instead of allowing it to recover naturally.

You’re opening new offices. What’s the strategy?

Our aim is to have a national presence throughout Spain and to become one of the main estate agencies dealing with mid to high end property sales. We are busy consolidating our position as the only independent agency specialized in international clients active in all of the prime areas of the market. We want to be present in the main cities when the national market reactivates, hence the recent opening of offices in Madrid and Valencia (to add to the existing ones in Barcelona, Maresme, Sitges, Costa Brava, Ibiza, Mallorca, and Marbella) and our new concept of Property Lounges.