May 31, 2013 at 9:47 pm #57538
Allistair Elliott, the new head of the global property firm Knight Frank, did an interview with the Spanish financial daily Expansión, published yesterday, in which he said that “Now is the time for adventurous investors to get into Spain.”
“If I only had one house, I wouldn’t buy in Spain because other countries are a safer investment,” he said, no doubt to the horror of his team in Spain :). “But if I had eight homes and was looking for a more speculative investment, then I would buy in Spain.”
He then joked that the Spanish team of KF would tear up the news paper when they read his comments. I don’t doubt it. I can just imagine them cursing under their breath.
“Even though Spain might have one or two more difficult years, the economy will recover. It’s always difficult to get the timing on an investment right; you can go in too early and watch prices carry on falling, o too late when they are already recovering. In Spain, now is the time for more adventurous investors with an appetite for risk. When the situation stabilises the more cautious institutional investors will follow.” (I’m translating from Spanish, so the quote might not be exact, but you get the picture 😉 ).
He goes onto say that Asian buyers might change the dynamics of the market in Spain. “The Chinese are looking at the possibility of investing in the Spanish coast. That could transform the real estate market if it gains traction,” he said. “For two generations Spain has been a key holiday destination for Europe, and that’s not going to change. I don’t see why it can’t attract the Asian market.”
He finishes the interview with this point:
“All the wealthy in the world want a nice home, or a second or third home, plus something for investment. If you have a yacht the value goes down the first time you start the engine. But if you buy a house in a good location, the price might go down, but it will never collapse.”
So basically he says that house price might go down a bit more for a year or two but then will stage a recovery, so it’s still to early for risk-averse investors.
Firstly, I think he’s wrong about prime property prices in Spain. I’m pretty sure we are at the bottom when it comes to the best of Barcelona, Madrid, Palma, San Sebastian, Santander, Marbella, and other top-flight destinations in Spain. I can’t see prices going lower to any significant degree. Anyway, Spanish house prices are already much lower than the Knight Frank Global House Price Index would have us believe.
Secondly, I think he makes prime Spanish property out to be riskier than it really is.
Of course he is right to point out that recovery will come sooner or later. At that point the big, risk-averse institutions will start buying, he says. If he is right, then smaller, nimbler investors should be moving in now, always assuming they do their homework and identify the best opportunities.
What do you think?
June 1, 2013 at 10:19 am #117175
Property in Spain as an investment? Well maybe, but it will be over a longer period surely, although at least if you buy near the bottom it’s a one-way gamble (in that although prices may stagnate, it would take an absolute crisis to fall much further)?
Interesting that the Chinese are mentioned again. I know the number of millionaires is going up all the time in China (a million at the last count) and also that it must be tempting to have a second home in a democratic, western country.
On a larger scale – is the world’s population still rising? Obviously it is, and Europe may become the bolthole for millionaires wishing to escape the teeming masses of the third world.
But – guess where the governments are going to get their revenues of the future from? It won’t be from the likes of Google or Amazon. It will be property owners.
June 1, 2013 at 3:56 pm #117178
You’d have to be pretty adventurous, gung-ho like, have deep pockets or cash you could afford to either lose or do without for years, as well as the ability to pick the most discounted homes in the top locations in Spain, with well over 2 million and growing on the market an awful lot of choice and not all sound investments. I’ll try and research KF who I believe once made another faux pas on Spanish property, but then they are agents in the business of selling properties, whereas economists are not as far as I am aware 🙄 As for smaller ‘nimble’ investors, well loads of them were burnt in the last scramble and couldn’t nimble their way out, plus, the bigger investors ‘cherry picked’ the best, got the best discounts, and got out before those nimble fellas could
June 1, 2013 at 7:32 pm #117183
You would need proof though of 50-70% falls, why, because buying and future selling costs would gobble up 20% of any perceived discount, and Brits are still not getting a good exchange rate for buying (some 20-25% worse than it was) which accounts for a lot more of that discount from when they were those higher prices? 🙄 Exchange rates could flip round one day too and profit in Sterling terms could be wiped out if a necessary sale was needed. Anything less than 50% fall in value is probably still not worth it even as a speculative investment. 🙄
I do not understand for one minute why so many people don’t reckon with such high transaction costs abroad, not just in Spain, you don’t pay 12% on stocks and shares, gold, and many other investments when you wish to buy when prices are low, or high 🙄 Many property owners abroad are trapped because of the high transaction costs, plus the fall in price 🙄
You buy in your own currency wherever that is, and you’re not faced with exchange rate fluctuations 😉
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