Quarterly Market Report – Spring 2019 – Part II

The Overall Market –

  • As stated in Section I of this Report, which deals with the overall market and influences, the optimism of the first quarter of the year has faded, with many agents reporting fewer interests and sales. Of course, each agency has only a small slice of the market and relatively few clients, so it doesn’t take much of a drop in numbers for their %’s to be affected.
  • However, at the end of June and, as we are late with publishing this section, scraping into July, there does appear to be an uplift. Interestingly, this is contributed to by an increase in Spanish buyers, especially from the large cities looking for a second home on the coast, supporting the overall economy stats that indicate business is doing just fine without an effective political Government.
  • Despite the Spanish Government’s problems, the functionaries are still in their offices, and the Regional, Provincial and Municipal Governments are in place, so there is no escape from the rules and regulations, which appear to change or be enforced with varying degrees of enthusiasm from place to place and on day to day.

Statistics – average difference between the Asking Price and Actual Selling Price

We keep a record of these along with our valuations. Though the number is small, they give a good indication of the general strength of the market. Also our statistics cover the geographical range of building surveys and valuation surveys, this quarter ranging from Isla Canela on the border with Portugal to an apartment in the city of Barcelona, plus inspections on Tenerife and Divorce Court valuations on Mallorca.

Previous Quarter – January to March 2019 – 7.61%

This Quarter – April to June – 10.69%

Interestingly, this mirrors the impression from agents and news that the pressure of buyers has dropped off a little and thus sellers are prepared to negotiate more. Having said that, the discounts can range from 0% (where the buyer pays the Asking Price, either due to enthusiasm or because the seller may have offered it at a ‘below market level’ price) to 20+%, (where the seller is desperate to sell, it’s been a historically high price or, as often happens, we carry out a building survey and the costs of the defects found are deducted from the price. It’s at times like these that our survey fee is repaid many times over). Prices can also be ‘unreliable’ in that investigation can show an earlier bar meeting exchange under the table or an unreasonably high amount paid for ‘seen better days’ Ikea furniture. One reason for the apparent slow down of buyers, could be that so many are buying ‘off-plan’ and these sales are not recorded until the property is built.

The market in individual Municipalities and Areas – Reports from agents and valuers.

(Note that within these areas there are many variations in general value, even down to the level of neighbouring urbanisations, frontline golf or beach, etc)

The highest value was just below 5,000€ euro/sq m for a villa in Benahavis; and the lowest was 1,043€ euro/sq m for a townhouse in Benalmádena.

  • San Roque (Sotogrande, etc). (Thanks for his assistance to Charles Gubbins of Noll & Partners)
    • The average property size was 380 sq m and rate per sq m of 1,869€ euro.
    • The market has continued to grow after the crisis more than 10 years ago. Yes, it dropped about 30%, but it’s been increasing since the turn round in 2014. There was a drop in the early part of the year, with expectation of Brexit at the end of March and again we may see a slowdown in advance of the holidays and the end of October.
    • High level buyers have been less affected, but they are conscious that investment into property is slow to liquidate, and so they can be cautious.
    • Gibraltarians are affected by the need to prove for tax that they are domiciled in Gibraltar and some have been selling their Sotogrande home, to buy in Gibraltar.
    • The loss of the gaming companies, or at least slow down, has affected the top end rental market nearby in Spain, so that some villas may lie empty and be being offered for sale, expanding the already significant supply.
    • That is to be further increased by at least 6 new developments in the area, so that it’s becoming a buyer’s market. That’s good for second home buyers from cities in Spain and all over Northern Europe, especially as the introduction of fibre-optic internet connections has meant that it’s easier to work in Sotogrande and commute, than it is to live in the stress of a city.
    • Overall, it’s busy, though likely to slow down towards the end of October, as all nationalities wait to see if Brexit will really happen and what its effects will be.
  • Casares and Gaucín.
    • The average property size was 580 sq m and rate per sq m of 2,434€ euro.
    • Always popular for those wanting to get away from the coastal strip. Both municipalities have steady enquiries, and especially summer interest in ‘pueblo’ townhouses, which look their best at this season.
    • The larger country villas are still slow to sell, unless they have spectacular views, as many have. Ready to live in versus ‘doer uppers’ attract buyers, but all the paperwork must be correct if a good price and speedy sale is to be achieved.
    • Agents in the area continue to be busy, but can be jealous of the apparent easy sales and especially much higher prices achieved on the coast. It’s not a market for ‘rooky’ agents, as every property has it’s own particularities physically, with permissions and often, neighbours.
  • Manilva(includingDuquesa and Sabinillas)
    • The average property size was 230 sq m and rate per sq m of 1,682€ euro.
    • Agents here are very busy and the despite the amount of property that has overhung the market since the crisis, there is more being built.
    • Sabinillas and Duquesa are the prime centres, with Manilva town, up from the coast, still being the typical Spanish pueblo, with an increasing concentration in the surrounding land of vines for wines.
    • There is demand from many markets as it has been seen as the lower value neighbour for Estepona and the ‘end of the line’ before heading into Cadiz and the Sotogrande market. Over the last few years it has developed a thriving commercial area and these facilities undoubtedly add to its attraction.
    • However, it has a substantial British population and thus may be affected by Brexit disruption
  • Estepona
    • The average property size was 206 sq m and rate per sq m of 1,869€ euro
    • The Ayuntamiento is spending some of the considerable licence fees that they have received, on improving the look of the town and it’s sports and cultural facilities, which will make it more of a strong secondary coastal challenge to the dominance of Marbella, though it will never have its history or cache of the address.
    • As before, there is steady demand here from many nationalities, with a significant number of Scandinavian estate agencies opening in the town. Even so it is unlikely to keep pace with the irresponsible amount of construction that is being carried out in all directions.
    • Between Cancelada and Selwo, including La Resina, more than 30 cranes have been counted, each indicating a major housing block, plus there are many villas, both individual and small groups.
    • There are not the natural, social or administrative facilities required to attract and service the populations that are anticipated. Despite promotors stating that they have adequate numbers of sales to justify the construction, many of these must be speculative investors, hoping for a quick resale profit or steady income from tenants. We predict disappointment levels will be high.
    • A number of developments have reached the Fin de Obras stage and it will be interesting to see the occupation and immediate resale levels after the First Occupation Licences are issued.
  • Benahavis
    • The average property size was 654 sq m and rate per sq m of 3,939€ euro.
    • Like Estepona, Benahavís has been the recipient of considerable developmentinvestment, often as ‘second best option’, due to the difficulty of obtaining permissions in Marbella. However, its location is very different, and the two towns complement each other.
    • The ‘weight’ of investment money available has driven development more than a surplus of demand. Although it is one of the few Municipalities in the area without a coastline, there are many attractive areas on the south facing slopes of the mountains that rise behind the coast.
    • Many individual plots are being bought where impressive modern style villas are being constructed, many on a speculative basis. Unfortunately, there are many traditional villas for sale in all areas and so the buyer has a large choice. Some older villas in prime locations are being completely remodelled down to the shell, and reborn as modern style ‘new’ villas.
  • Marbella
    • The average property size was 254 sq m and rate per sq m of 3,150€ euro.
    • Still the major ‘magnet’ on the coast, and there is activity and even competition for most sites where a permission can be activated quickly, perhaps due to there being an out of date one where the authorities accept that it is still valid.
    • In the best locations, such as Sierra Blanca, Rio Real, etc, there are many individual houses and developments close to completion or already on the market. Many have been sold ‘off plan’ and these properties are being taken up. The spread of prices of the early resales by purchasers is interesting, in that some appear to be being offered at prices being charged for the not yet built next phase of the property, others at or close to the lower price that they paid when they bought off plan, and others at even lower prices, who perhaps must sell due to financial difficulties.
    • Agents report that their sales for the first half of the year are matching last year and they have plenty in the pipeline, but they are finding difficulty in selling the larger, traditional style properties. Again, this is probably due to the current overwhelming new development architecture, making the traditional style appear outdated. However, fashions change, and when leaking flat roofs or just a wish for change, comes upon the developers/buyers, then perhaps we will go back to the tried and tested Andalucían style
    • (However, the building condition surveyor in me hopes that they put their money into supervision of construction and paying attention to detail, rather than adding new demotic geegaws just for the sake of doing so. Designing for the 8 months when there is rain, incorporate guttering, better damp-proofing, etc, rather than just the 4 months of summer heat, would also help.)
  • Mijas,
    • The average property size was 182 sq m and rate per sq m of 1,836 € euro.
    • Some areas, such as Cerros de Aguilas, are seeing a rapid take up of property and increased values, whilst others on the hillside near the town are taking much longer to sell.
    • There are substantial leisure based developments proposed for both the Mijas racecourse area and Entrerrios, inland from Mijas Costa, and it will be interesting to see if they proceed and the effects they will have on the market in the area.
  • Fuengirola, Benalmádena and Torremolinos
    • The average property size was 146 sq m and rate per sq m of 1,660€ euro.
    • There is always a steady market in these spreading towns, with their busy commercial centres and high levels of tourist facilities.
    • Another huge commercial and leisure centre is proposed for Torremolinos, that has been pending, as far as I am aware, since the early 1990’s, but maybe it will be built in this boom time.
  • Costa del Sol East and ‘Inland Spain’.
    • As last quarter, there is always a supply of potential buyers, especially due to the scenic beauty around Lake Viñuela. However, it’s also the place where our building surveys report the most problems due to poor site conditions caused by inadequate foundation design.
    • There is still comparatively little new build for the expat market, compared to the Western Costa del Sol.
    • Poor permissions have made life difficult for many potential sellers, but the changes proposed by the Junta de Andalucia, in simplifying the Regularisation of as much property as practical, should ease the burden of their property for many and make ‘living the dream’ and not nightmare, possible for potential buyers.
  • Almería
    • The average property size was 194 sq m and rate per sq m of 2,400€ euro.
    • Our loyal valuer there, states
    • Temperatures rising, prices falling! It’s all a question of supply and demand. Where there is an oversupply, it’s more noticeable e.g. Torrevieja and surrounds. Where there is an under supply e.g. Mojácar, so far it’s been little noticed, although price rises slowing. Brexit uncertainty starting to bite where Brits are majority buyers and of course the lowering of the exchange rate not helping the market – at 1.11€ euro to the Pound with purchase costs, Brits are currently paying 1€ euro to 1 Pound.
  • Murcia and Alicante South
    • The average property size was 206 sq m and rate per sq m of 1,461€ euro.
    • As stated above, there is chronic over supply in many areas, made worse by a heavy reliance on the UK market and aging retirees wanting to sell and go ‘home’.
    • In other parts, that are international and perhaps catering more for the expanding Spanish market, there are many cranes.
    • The new properties will have a higher value, but still the little practical logic inland developments, with lower the average for the area.
    • We noted the recent sale of the overall ownership and management of the Mar Menor development company, so it will be interesting to see if there is to be increased activity there. It’s perhaps a bold move, remembering a few years ago when the Spanish Environment Minister declared he wouldn’t buy there because of rising sea levels.
  • Costa Blanca North
    • The average property size was 198 sq m and rate per sq m of 1,693€ euro.
    • Our Valuer there states
    • To understand how is the housing market is reacting to the instability of the global political and economic situation, one has to realise that the real estate market in the area of the Costa Blanca has different ‘faces’ The British market is increasing the sales, especially in cases of older owners, who are afraid of losing their healthcare in Spain after a Brexit with no deal. Other markets, such as the Russian, Asia and Eastern Europe, are occupying the space of the British buyers. These markets are more focused on buy properties as investments, perhaps linked to getting Resident Visas. New developments are focused in the luxury market, still in an expansive period and with its own market rules. Small real state agencies have been closing and only bigger agencies, which are developers of luxury properties, maintain their business. Prices have been influenced by an increasing demand in the last 4 years, raising to not affordable levels for the medium Spanish and even central European market.
    • Changes in the law that rules the mortgages in Spain, has pushed a number of operations to be concluded, especially in medium priced resale properties.
    • The recovery of other tourist destinations outside of Spain may lead to a weakness in the local market, forcing an adjustment in prices.
  • Balearics – Mallorca
    • The average property size was 144 sq m and rate per sq m of 3,168€ euro.
    • Always popular though the demand has slowed over the last quarter.
    • Perhaps more seasonal than the mainland, due to the weather not being as good as that on the Sothern Mainland.
    • Given the strength of the traditional British and German buyers, it is expected that there could be downturn as a result of Brexit.
  • Tenerife
    • The average property size was 62 sq m and rate per sq m of 2,573€ euro.
    • The small size indicates the number of holiday apartments that there are on the island.
    • It was an increase in values over the last few quarters, but that may be slowing now.
  • General
  • Snagging – An essential inspection for the new buyer.
    • With all the new properties being completed, we are being asked to inspect many before they are accepted by the prudent buyer. The building contractor or site agent will have inspected them, but that will be as part of the general relationship with the builder.
    • Then the promotor will employ somebody, perhaps their selling estate agent, to look round the properties and note defects. They will be racing round the many apartments in an urbanisation, wanting to get the job done quickly to get paid, and with that likely to be a small payment per apartment.
    • Then a buyer will ask us to look at his or her apartment only and we list all the uncompleted items, defects and variations from specification that we find. So often, well always actually, we find examples of each of these and wonder why the promotor or developer said they were complete when they obviously were not. Our list is given to them in English and Spanish, as that’s what the tradesmen will likely require; and then either our client can check the progress of completion works or we can revisit, but we only do so when told in writing by the promoter or their representative that all is complete. That way, if it’s not, our client can demand compensation for any further inspections we have to make. It’s happened and developers/agents have paid.
  • Portfolios and High Rent Increases
    • There’s continuing news of huge portfolios of property and property related debts being exchanged between banks and fund investors, with many of the properties being in the Costa areas. Perhaps they’ve been attracted by the news that the rise in property rent levels in Málaga has apparently been the third highest of the cities in Spain, after only Madrid and Barcelona.
  • Good news for Estate Agents
    • Cheery news for Estate Agents comes from the Supreme Court in that ‘Exclusive Agent’ Contracts are not unfair and are enforceable if a seller should do a private deal and try to avoid paying the commission. Note that the agent has to be able to show that they have worked diligently on marketing the property, but the eventual buyer does not need to have been introduced by them.
  • Currency Volatility
    • Brexit gets ever closer and we expect considerable volatility of all markets and currencies, as there is increasing concern at the uncertainty of the effects of Brexit, for both the UK and the EU as a whole, but most just have to carry on, hoping that they’ll be able to deal with what is finally decided.
  • Borrower can choose his mortgage valuer
    • Remember that when you take out a mortgage, the recent law change states that you, the borrower choses the valuer the bank has to use. It seems strange as the bank is the valuer’s client, but I suppose it reflects that the borrower is still responsible for the payment of the valuation fee.
  • Next Report and Brexit
    • By the time the next report is issued, all the elections mentioned at the start will have been held and, who knows, even Brexit could have been completed or abandoned, all of which will undoubtedly affect the property market.
  • Climate Crisis –
    • Rising seas, storms and frontline property
      • Also, inexorably, the sea water is rising with the climate crisis. All property owners and everyone associated with them, has a duty to reduce energy usage, carbon creation and use of plastics. On the latter, do what you can, don’t litter and collect rubbish lying around when you go on walks. You’re to blame too if you just walk by.
    • Smokers and Filters
      • And especially smokers remember, the filters on cigarettes are made of cellulose acetate, a form of plastic that is very slow to degrade in the environment. A typical cigarette butt can take anywhere from 18 months to 10 years to decompose, depending on conditions. So, don’t just flick them away, especially in the dry fire risk season, put them in an ashtray or tin you carry round for that purpose. Looking at that will help you to stop smoking too!
    • Tourism and Carbon
      • Just a thought to end on – The UK Parliament’s environmental audit committee says global tourism is responsible for 5% of greenhouse gas emissions, while cheaper flights and zero tax on aviation fuel mean the holiday business has grown rapidly to account for more than 10% of global GDP.

* This article has been written by a third party not owned or controlled by Spanish Property Insight (SPI).
SPI disclaims any responsibility or liability related to your access to or use of any third party content.

About Survey Spain

Ethically and professionally governed by RICS* in London and Brussels; qualified and experienced; English and Spanish speaking; independent, conscientious surveyors working with integrity only for you. No conflicting loyalty to banks, developers, contractors, owners, estate agents, lawyers or town halls! All Building Survey and Valuation reports are reviewed by a second surveyor. HQ in Costa del Sol, our Building Surveyors and Valuers live and work throughout the Iberian Peninsula, from the Algarve in Portugal; all the Costas (Costa Blanca, Costa Brava, etc) and inland around Spain up to the French border, plus the Balearic (Mallorca, etc) and the Canary (Tenerife, etc) islands; and Gibraltar.

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