The Spanish housing market is now heavily dominated by transactions involving resale properties, as opposed to new homes. A recent article in the Spanish daily El Pais explains why.
Translation and adaptation of an article published in El Pais.
Of the 316,928 purchases made in 2014, 62.7 per cent (200,065 properties) were resale and barely 37.2 per cent (118,863 properties) were new builds, show statistics from the Property Registrars. According to the Spanish Statistical Institute (INE in Spanish), sales of resale properties increased by 18.4 per cent. On the other hand, sales of new builds fell sharply by 16.9 per cent
Everything points to resale properties continuing as the main show in transactions during 2015. That means the gap between resale and new builds is getting wider and wider. Why? The main reason is price, with resales being slightly cheaper for hard-pressed buyer. Resales are between 5 and 15 per cent cheaper, according to Manuel Gandarias, manager of the Research Department at Pisos.com. In euros, “the difference between an average resale property in Spain and a new build is around 400 euros per square meter,” estimates the valuation company Tinsa.
At the end of last year, resale properties end up costing an average of €1,624 per square metre (sqm), according to data from the General Council of Notaries. It is even possible to find resale properties for just over €1,021/sqm.” This undoubtedly appeals to potential buyers,” explains Chus de Miguel, Commercial Director at Casaktua.com, an real estate servicing company specialising in the sale of bank stocks.
Furthermore, resale properties offer more room for negotiation when they belong to private sellers, particularly over-valued properties bought during the boom years.
Another point in favour is that resales often attract lower taxes. New builds are subject to 10 per cent VAT (IVA in Spanish), while resale properties have to pay Property Transfer Tax (ITP in Spanish), whose rate ranges between 6 and 10 per cent. And with few exceptions, they’re in better locations, since there are very few new builds in city centres unless they’re refurbishments. “A large proportion of resale properties are in established central areas with more services,” Chus de Miguel points out.
However, a new property has a big advantage – “the easier financing offered by developers and banks who own properties,” says Jesús Duque, Vice-President of Alfa Inmobiliaria. New builds tend to have a developer’s mortgage that can be passed on to the potential buyer. And financial entities give better credit conditions to sell their stocks, whether for new builds or resales. In this respect private vendors are at a disadvantage.
The condition of the property is another factor now working in favour of resales. “Our clients prefer to buy a house in a good complex, modernize or refurbish it to their tastes, and pay 20 per cent less than they’d pay for a new build,” explains Fernando Sánchez, a Re/Max Urbe agent. “There don’t have to be problems if the property has a favourable structural survey (Inspección Técnica de Edificios in Spanish), good energy efficiency and insulation,” he adds.
Personal taste aside, is it worth paying more for a new build? “If we’re talking about the same area and the characteristics of the property are similar, I don’t think it’s worth paying 10 or 20 per cent more for a new build,” says Duque.
Before signing, experts recommend working out how much annual expenditure the purchase will involve, including monthly expenses. Keep in mind that new homes often have higher community fees (swimming pool, gardens, sports areas…) and that with resales you can find properties with central heating and water included in these fees,” explains an expert from Fotocasa, a property portal.
The fact that resale properties are driving the market’s recovery can also be explained by higher demand. And “because new builds sold by banks are also considered to resales,” explains an expert from Idealista.com. A large part of bank stock is classed as resale even though it has never been lived in because it’s property that has been absorbed as payment of debt by developers.
And while resale properties are gaining market share, new builds are decreasing and falling sharply because hardly any construction has taken place in Spain over the last few years. New home construction is now increasing again, albeit very slowly. Bankinter estimates that, after years of sharp falls caused by low demand and a standstill in development, new home sales will rise to nearly 100,000 units in 2016, of a total of 450,000 sales.
Spanish Property Insight adapts and translates selected articles from the local press for the benefit of non-Spanish speakers.
This translation is based on the following article (in Spanish): La vivienda usada convence al comprador