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When I was in Medina Sidonia the general feeling was that the Costa Del Sol was overbuilt and ruined and the prices there will surely fall but that it won’t happen there, in Medina.
I don’t know whether prices have held there but I would be amazed if they have. But am I wrong? Have prices held up there or in other similar towns inland but within easy driving distance from any coast?
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I do not believe prices are holding on CDS.
I am looking regularly on fotocasa or segundamano. 6 months ago there were very few 1 bedroom apts. for less than 100K Euros. Now there is plenty of them, even some 2 bedroom apts. can be had for that price.
One thing is true though: Costa Blanca falls much-much faster. So I think CDS would still hold value better than other Costas.
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I don’t think prices are holding on the CDS. Didn’t make myself clear. Just that if you read the glossy mags/agents brochures around here they appear to be holding. Some of the really cheap properties are impossible to know if they are a bargain until you view them (many don’t exist or are in blocks many would not consider living in).
We can never get a clear picture as we don’t know how much less sellers have settled for. Agents either say prices are holding or crashing depends on the flavour of the week 😉
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Spanish property prices were driven into bubble-land by the credit boom. Credit is now scarce, and de-leveraging is underway with alarming consequences, as we have seen in the financial markets these past few days. We are all going to have to get used to a new, more austere economic order.
Spain is going into recession, which will only make things worse.
Reality is biting, and average Spanish property prices will have to come down to their long term average in relation to incomes, which means they have some way to fall.
Furthermore, thanks to all the speculative over-build in Spain, there is now a property glut in most areas, which may drive prices below the long term affordability ratios. Holiday homes are set to do worst of all.
Vendors are still in denial, but there is a limit to how long they can hold out. At some point, prices will start falling, everywhere. From what I can tell, they already have been for some time in many places.
Some places will do better than others – if they are attractive and not overwhelmed with grim new developments – and some types of property will do better than others. Generally speaking though, prices are going to have to fall now that the credit party is over.
Mark
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There are two predominant schools of thought about how low prices will eventually go to. Some feel that prices will go down to the typical ‘pre boom’ affordability levels. Thats great news for future buyers, but would wipe out a lot of the equity that more mature investors have seen accumulate. Of course that would put a lot of recent investors into negative equity. However the market will take a few more years of slow sales to fullly recognise how far prices need to fall. To achieve this prices would fall by around 50% from todays levels. Or to think of it another way, imagine buying power in spain going back to where it was in the late 1990’s. Value seemed excellent and many took advantage.
Then there is the extreme view that prices will have to drop to comparative levels that are much LOWER than the pre-boom days. The reasoning here is that the glut of unsold properties (some say 2 million) will have a disastrous impact on the market, more so than many dare think about, and that will be coupled with banks that will be more reluctant to lend money than at any time since WW2. In this scenario, prices will be even cheaper than they seemed when the ‘lucky ones’ bought just before the pricing boom from 1998 onwards. To achieve this, prices would come down by a (perhaps difficult to accept) 70%. If this seems severe then remember that the people left holding the unsold developments will want to see some cash and will get desperate eventually. There is one extreme remedy that has been mentioned in the USA, and that involves demolition of all excess properties, but no government could sanction that in these times of austerity.
In summary, I think that there will be attractive property prices again in spain. But unlike most, I think that the point of maximum doom is still further away than we think Not 2-3 years, maybe 6-7 years. People will happily have their properties on sale for years rather than drop the asking price to the level that the market will pay. These are the ‘discretional’ sellers that would like to sell but don’t have to sell. When those that HAVE to sell start trying they will be doing so at prices much lower than they would care to entertain right now.
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According to The Ministry for Housing who has just published the latest sales data for Málaga, house sales are down 24% on last year but despite a much slower market, prices have not fallen to any large extent. This relates to the second quarter of this year compared to last and were supplied by the Ministry for Housing.
quote:
“From January to June 14,513 real estate deals were signed in the province this year, compared to the nearly 22,000 last year, but price had hardly changed at an average of 209,000 €, just 1,000 € lower than last year.
One area where there has been an almost complete slowdown is in the number of properties in the province being purchased by foreign non-residents. In the second quarter this year only 360 such deals were done”.
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I think it is impossible to predict what is going to happen to prices – nobody knows. This is more than jut an economic downturn, but a shift of power from the West to the ‘New Developing Countries’ such as India and China. Although the American Government talk about bailing out bad debt, the reality of this is a huge burden on tax payers as this money has to be found somewhere. So, in other words, the tax payer picks up the tab, whereas the share holders of those institutions benefit from increase share valuations. This cannot be right? The British government is paralysed with indecision. Cutting interest rates will only make things worse; after all interest rates got us into this trouble in the first place.
Prices will continue to dive until they get to a level where investors jump back in. Where this level will be is anyone’s guess.
And, don’t forget build quality. Too many Spanish properties are really poor builds that without constant maintenance quickly look tired with damp, subsidence etc. Why pay money for a bit of shoddy air-space? The smart money won’t be looking at Spain. I think a lot of owners will simply walk away from their liabilities over the next 10 years.
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the first stage of a property recession is always the same….sales drop to record low levels as people try to get prices that the market will not pay. This period probably has another few years to go and will most estate agents go out of business.
Following this period, those that must sell will do so ….but only at prices they previously did not want to see.
Following this period, another couple of years later, the general population follows the trend and either take their property off the market and stay put OR bite the bullet and sell at the going rate. Remember that the next house you are buying will be (hopefully) also priced at bargain levels, so pro-rata there is a small amount of justice. But the problem comes for those wanting to move back to the UK ….and of course the more mature investors lose a lot (if not all) the equity they accrued in the boom years. -
“Or to think of it another way, imagine buying power in spain going back to where it was in the late 1990’s. Value seemed excellent and many took advantage. “
What was the “value” in the late 1990’s? Was it more that a year salary for a 1 bedroom apartment?
Are building before late 1990’s better built than after 2000?
Anybody knows some information about price evolution in say Malaga, Granada or Alicante areas in the period 1996-2008?
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Just personal experience. In 1995 we bought 2 bank repo’s. Market was at the bottom after about 5 years flat. Banks having held on to a lot, were just starting to release their foreclosures.
I am quoting in GBP to make sense:
The houses we bought were 65,000 each. According to court papers the mortgage owed was 98,000. The houses were new, never lived in and had been completed 6 years previously. (I can only assume as prices had crashed the owners just walked away). In 1997 the market was picking up and we sold one for 89,000GBP. The second one we sold towards the end of 2000 for 192,000.
I do remember in 1995 there were very few Agents and not many properties on the market (withdrawn?). Sur in English carried only a half page of sale ads’.
A friend also bought a 2 bed apartment in 1995 for 28,000. It is now on sale with a bank valuation of 235,000E. Anyone who bought in the 80’s woud have done well even with a huge fall. However, if not already done the property would now need total reform so may reduce the price.
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Katy, thank you very much for your postig. It is the first time I see some relevant information about price evolution in Spain.
“In 1995 we bought 2 bank repo’s. Market was at the bottom after about 5 years flat. Banks having held on to a lot, were just starting to release their foreclosures.”
Did you need to know the bank manager in order to have access to that kind of properties or anyone could have accessed those deals?
“The houses we bought were 65,000 each. “
How many bedrooms? Were they still in good shape after 6 years of not being used?
“In 1997 the market was picking up and we sold one for 89,000GBP. The second one we sold towards the end of 2000 for 192,000. “
Did the area have many improvements (new roads, shopping malls, parks) between 1995 and 2000?
“A friend also bought a 2 bed apartment in 1995 for 28,000. It is now on sale with a bank valuation of 235,000E. Anyone who bought in the 80’s woud have done well even with a huge fall. However, if not already done the property would now need total reform so may reduce the price.”
Is the total reform of the order of tens of thousands Euros or less? Was the 28K apartment a foreclosures?
Again, thank you for your very detailed explanations.
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The houses were 3/bed 3/bath and 190M2. We had to have the marble floors re-polished as there was lots of dust which had settled (and some dead birds from the fireplace). Even all the new appliances were there, dishwasher etc. We had just hired a Lawyer and said we were looking for a property and he told us about private Bank that had some. (banco Urjijo). No improvements when we sold just the community gardens (there was a drought when we bought).
My Friend bought 28,000GBP apartment from a Man who they met in a bar 😯 Just the thing they tell you not to do 😆
We did eventually buy an 80’s villa and what we thought was mainly cosmetic, new kitchen etc. turned out to be a costly reform…re-wire, plumbing, new floors etc. more reason to have a survey first. Still, at least it’s legal 😉
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flosmichael, I have never seen an official graph of spanish selling prices year-by-year. But this website shows what has happened with UK pricing.
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