April 7, 2009 at 7:58 pm #54888
The “which bank” thread has taken an interesting turn to address the question of timing for anyone contemplating buying in Spain. This seems to me too interesting a topic for both potential buyers and would-be sellers to languish on the end of an unrelated thread, so, with apologies to El Anciano for hijacking his post, here is where the topic rested:-
When to buy is a difficult thing to assess. But, my experience has been that timing is not everything. Some properties are already massively discounted, whereas others are still at peak, and with some sellers will stay there.
Some feel that the next few months will be a good time, especially if the property is properly discounted. However, the economic data in Spain does make me wonder if we have a lot further to fall. (We still have rising unemployment for a start).
IMHO even the heavily discounted stuff is just getting back to what I consider sensible value, but really (in this economic climate) they should be still better value at the moment.
First a bit of disclosure – I posted a few times as “CostaCraver” but couldn’t get my password to work, so gave up and this is my reincarnation. Back in October I was commenting that there was a part of the market where it might pay to move earlier, (as a purchaser) than it would in others – specifically quality traditional villas in areas fully developed at a sixties or seventies intensity many years ago – close to the sea (not Ley de Costas close!!) and within walking distance of quality shops, restaurants etc.
So, I was interested in the comment that “some properties are still at peak, and with some sellers will stay there”.
I am visiting the Costa Brava, where I want to purchase, again in August and I’m interested in collecting views. There are some factors in that market which ought to mean bargains are harder to find, mainly associated with the wide range of nationalities purchasing there. Both the decline in the British property market and the weakness of sterling should have less effect. However, Catalonia regularly shows up as one of the most affected provinces.
So, getting to the reason for my topic title.
Prices – will advertised prices continue at peak level? If so how do you assess the real price? Of course in theory it’s what someone’s prepared to pay, but what an opaque market! Many of the owners and buyers in the area were Russian and Irish – presumably they are now as constrained as the British? What about the strong French influence? Does that mean owners, having profited from very un-French gains on the way up will now be hoping for some French style stability at the peak level?
Currency – for most purchasers there is an element of “what can I afford?” in the purchasing decision – certainly there is for me! So, my expectation of what I can afford (perhaps unrealistic of course) is driven as much by exchange rates as local prices. I did my calculations at E1.35 (as I didn’t think 1.45 was sustainable – right but not right enough!) so a price drop of about 25% is needed for me to perceive “break even”. But what will happen if the Euro falls back against the pound – on which I’d bet as confidence in the Dollar as the world’s reserve currency recovers?
Time – this is going to be all about timing. I could be breathtakingly lucky. A fall in vendors’ expectations on price could coincide with a fall back in the Euro against Sterling leading to a golden buying opportunity. Oh and banks might be desperate to stoke up profits by starting lending again at low interest rates. But that’s not going to happen is it? Of if it does I’ll probably be making a cup of tea at the time and miss it.
So, since I’d guess virtually every serious potential purchaser must be pondering all these variables, what do folk here who’ve been through one or two turns of the property cycle think? (Or is that the point, has Spain never been in this place before, so nobody knows??) No philosophical tips about the possibility of knowing the future, thanks, but all other comments welcome!
April 22, 2009 at 1:28 pm #91716
I don’t think I can be of much help, but as much as any other had replay to you I will give you my personal picture (I am not an Economist) :
•The Euro currency has becoming one of the winners of the actual crisis, as a reserve currency.–> Euro up.
•The currencies that at this moment have a very low interest rates with huge public deficits (Dollar, Sterling pound,..)… will need in a sort time (few years) to correct those interest rates to a higher rate.(To strong moves down will follow strong moves up)…So that will go back to the historical gap between interest rates in UK and Euro-zone about 1%.up –>Sterling up.
•With both effects we will have a final picture. –> I think that Euro will fall back against the Sterling…but not as much as to recover the historic exchange rates.
•About the prices: I have read a lot in the forum about what is happening in Las Vegas,. Or where ever!!! I believe that in USA if you don’t pay your mortgage you lose your house and that’s all,.. so if people see that the house prices go down below his mortgages debts…the rational move is to give the keys to the bank. That make strong prices moves to the property market…In Spain you must take in consideration that if you don’t pay the mortgage to the Bank. The bank will try to recover all your debt, if is not enough with the house you will pay with others assets. That makes a more rigid price market to the down movements.
Taking in consideration that the world economy will recover from the actual crisis, with not another petrol crisis or war, that’s my personal picture.
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