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These comments were sent into me by email. They are from someone who I can vouch knows the market better than anyone.
- -Anyone who bought off-plan since 2002, with the sole intention of selling at profit prior to completion allowed themselves to believe what they wanted to hear. Fools are easily parted from their money.
-An estate agent works for the SELLER, they never have the best interests of the buyer in mind.
-An off-plan purchase is still fine, providing the buyer is not going to need rental income to cover mortgage repayments and intends holding the property for at least 5 years.
-Anyone who signs a contract without having any intention of proceeding to completion and who hopes to sell in for ‘cash’ is probably guilty of fraud. If it doesn’t work out then how can they expect their money back?
-Why are people so keen to call themselves ‘investors’ when they are just gamblers. Genuine investors in property, irrespective of the location, expect to hold for substantial amounts of time, short term being 3-5 years, medium term 5-10 and long term 10-20 and on this basis there really is no one who has not made significant capital gain in Spain in the last 20 years.
-However, if you buy right it has still been possible to make a short term profit. For example, for a variety of reasons, 3 of my 2003 clients have needed to sell within a year and without exception, have sold quickly and at a profit; one made about 10%, another 22% and one 30%.
-2004 and 2005 have been extremely good years in which to make an investment in Spanish property but there is much more to the property market than off-plan coastal developments and 2006 will also be excellent.
-Knowing the prices that these speculators have been paying they could have bought an entire house in many parts of Spain, in areas were demand is still outstripping supply. For example, spending €300.000 in Seville at the start of 2004, would have secured a 2 bedroom apartment and capital growth of 27%, with another 15% being added in 2005. Such a property could have been bought on exactly the same terms as off-plan, i.e. 30% deposit with 70% non-resident mortgage.
-I am finding it increasingly difficult to even locate what our clients want in certain areas and far from being saturated, vendors can hold out for their price.
-In anything other than the saturated 2 bed apartment market, 2005 has been an excellent rental market. For example, one of my clients has only had 5 vacant nights between May and Oct, but then he has a top of the range house.Food for thought.
Mark
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There are areas of Madrid where prices have fallen down from 4% to 37% during 2005. There is the possibility that this fall could spill to other areas of Spain, since people who can sell their property won´t be able to buy another one. Some builders area also running into cash problems.
I have the money in the bank and I won´t be buying for a few years, so I am very happy renting (rents in Spain are very reasonable since people have been counting on rise in prices to do their numbers). I advice you to do the same unless you enjoy losing money in one of the biggest bubbles I´ve ever seen. If you absolutely have to buy offer from 30 to 40% less without even blinking. Of course the first poster is not going to agree with me.
Here is the link to the drop of prices in some areas of Madrid. As I said it´s not general but this type of thing tend to start this way before they snowball.
http://www.elconfidencial.com/noticias/noticia.asp?id=8112&edicion=22/11/2005&pass=#
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Just to add to the “guests” point about falling prices –
I have seen asking prices fall by 20% over the last 18 months in Sotogrande. I still don’t see much shifting even with these reductions, but the prices were plain crazy to start with -London was cheaper.
However the prices of newbuild apartments remain beyond belief. I think that when the ECB hikes interest rates, as Trichet said they would last week, the speculators holding up this market are going to get squeezed… -
Guest,
If you mean Almoradi, near Orihuela and Torrevieja, then I see no GOOD reason to invest there. That’s not to say there isn’t one, just that I’m not aware of one. I should add that I’m not a big fan of southern Alicante. They’ve gone mad with the new construction, and quality is probably the worst in all Spain.
I just had a look at a satellite image of the town. Looks like they are doubling the size of the town with new construction to the north and west.
Regards the other comments, I’m seeing the same sort of thing, the first signs of price declines. However I’m also seeing big differences in regional performance, and performance by price segment.
I read the other day in the British press that prices in the UK are up by something like 16% over 12 months in Northern Ireland, and down by 2% in the South West. The same happens in Spain – significant regional and segment variations – so no one should expect the whole Spanish property market, from Port Bou to Tarifa to Finisterre, to move exactly the same way. Which means that the ‘average’ price for property in Spain will disguise big differences between regions. But for what it’s worth, the average price is still up by 13.4% over the last 12 months.
Mark
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No way would most people take 30/40% reduction unless its a distress sale. Many put up their property with the intention of reducing it a bit thats all. One near me has been on sale two years and they have put up the price during this time. Most don’t care if they sell unless its at a good price, they are testing the market and can afford to wait out a downturn. If you want a bargain target someone who is desperate to go back to the UK or like my neighbour in his eighties to Sweden.
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I agree the market is dead, just saying that many people (I included) would rather not sell than reduce. It will only be the desperate such as those who have bought off-plan and now need to complete. the rest will just withdraw from the market it happened during the last recession. If they do reduce by 40% I will buy a couple myself and make a packet after a few years, I did it last time. Therefore my villa for sale on this forum will not be reduced by much, its lovely and I’m not planning to move far its just too big for 2. JACKY
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Hi,
I have purchased a 2 bed apartment in Orihuela costa about 5kms outside Torrvieja. I paid E214,000 fully furnished. Excellent service from start to finish, very professional company. It is in an urbanisation, the company I dealt with organise everything from water to electricity, give you a list of solicitors from which you make your own choice. I went to have a look in June, the property was half built at that stage. It was handed over to me in October. They ask what do you want snagged, they sort it. They have customer service on site for a year after you purchase. So far I can’t fault anything but then I bought for a lifestyle investment to use for our family and please God hold on to the property for at least 5 to 10 years. I don’t think any of us even the best economist can predict prices in the future, hopefully they will go up somewhat. You have to think what benefits you are going to get from the property and what suits you personally, budget, location to airport, approximity to shops/restaurants.
Angela 😀
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Something i have noticed locally
In Oliva everyone is wanting out of the Old town because it isnt attractive and it has narrow streets – which means now that there are twice as many cars driving around it is dangerous to walk – they even park right in front of your door making it impossible to get out of your house.
However the outlying villages (Piles and Miramar) have been very active recently – I know of 9 houses that have sold in PIles this past two weeks – doesnt sound much but there are 25 houses for sale in the whole town (of a total population of 1600 people)
Property is relatively cheap – in Oliva a town house of decent size will cost about €180,000 but the same property (bigger and in wider streets) in Piles will cost you about €130000 – and this only 2kms from Oliva (and the locals are so much more friendly here). In time I am sure it will even out as more people try to move out of Oliva the prices will drop. As more people want to move into Piles the prices will rise.
This is probably a macro market but it is an anomaly – something akin to the North South divide in UK but ona much smaller scale.
There still appears to be a market for cheap good value property but overpriced property in a buyers market will only sell when the market catches up.
In any market you can sell a property if the price is right – it is only when you ask too much you can’t sell. So if you dont need to sell – hang on because one day the market will return – even in Oliva.
Regards
Vince
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The mentioned price development in Madrid might feel alarming to some readers. Indeed in some areas near the center of Madrid prices have dropped a lot but other areas are still increasing and even emerging as very interesting investment opportunities. For instance in some rural zones at no more than 60 kilometers from the city, with excellent (and still improving) communication it’s still possible to acquire a property with a nice plot for almost half of what you pay in Madrid. At the same level as a nearly decent apartment (starting from 250.000 euros) you can still buy a nice family chalet with an impressive garden, often with swimming pool. We are talking about areas that by the Madrileños once have been chosen for their holiday houses. Nature is very beautiful and under protection, which will avoid that in the future, having bought a very quiet and relaxing property, you will find yourself in a crowded urbanizacion.
Before making any judgement based on pricing I think a more careful study of the real estate market in the Comunidad de Madrid is necesary and you might find it even attractive to make an investment there. Personally I’m very surprised this area still seems to be rather undiscovered. -
The mentioned price development in Madrid might feel alarming to some readers. Indeed in some areas near the center of Madrid prices have dropped a lot but other areas are still increasing and even emerging as very interesting investment opportunities. For instance in some rural zones at no more than 60 kilometers from the city, with excellent (and still improving) communication it’s still possible to acquire a property with a nice plot for almost half of what you pay in Madrid. At the same level as a nearly decent apartment (starting from 250.000 euros) you can still buy a nice family chalet with an impressive garden, often with swimming pool. We are talking about areas that by the Madrileños once have been chosen for their holiday houses. Nature is very beautiful and under protection, which will avoid that in the future, having bought a very quiet and relaxing property, you will find yourself in a crowded urbanizacion.
Before making any judgement based on pricing I think a more careful study of the real estate market in the Comunidad de Madrid is necesary and you might find it even attractive to make an investment there. Personally I’m very surprised this area still seems to be rather undiscovered. -
We brought a 2 bed apartment in the Costa Del Sol, Manilva area, partly off-plan in Dec 03, for personal use/ long term investment. We have decided that the apartment no longer meets our requirements and intend to buy something a bit bigger in the same area. I know we must be mad after the hassle we have been through with the first purchase, but we feel we have learned from our mistakes.
We are currently in the process of selling and should hopefully complete in the next few weeks. I am amazed in the difference in prices in our area, the apartment next door to us, same size, view etc is on the market for 35000.00 euros more than ours was. But there is the consideration that we have sold, they haven’t. If you look at new develpoments near to us, but further from the coast they are asking for at least 70000 euros more than ours for the same size 2 bed 2 bath apartment. I am completely flabergasted that they are managing to sell at these prices.
The reason for this post is, I wanted to point out that even though we have made just over a 30% profit, with all of the selling/Buying/furnishing costs we will just about break even.
Please take into account that any property you buy, you will need to at least expect a 30% increase before you start to make any gains and then you will be taxed at 35% if you are a non resident. The only people who have made any profit in our purchase/sale are the estate agents.
I totally agree with Mark, if you are not looking at a long term/ personal use purchase don’t buy.
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We brought a 2 bed apartment in the Costa Del Sol, Manilva area, partly off-plan in Dec 03, for personal use/ long term investment. We have decided that the apartment no longer meets our requirements and intend to buy something a bit bigger in the same area. I know we must be mad after the hassle we have been through with the first purchase, but we feel we have learned from our mistakes.
We are currently in the process of selling and should hopefully complete in the next few weeks. I am amazed in the difference in prices in our area, the apartment next door to us, same size, view etc is on the market for 35000.00 euros more than ours was. But there is the consideration that we have sold, they haven’t. If you look at new develpoments near to us, but further from the coast they are asking for at least 70000 euros more than ours for the same size 2 bed 2 bath apartment. I am completely flabergasted that they are managing to sell at these prices.
The reason for this post is, I wanted to point out that even though we have made just over a 30% profit, with all of the selling/Buying/furnishing costs we will just about break even.
Please take into account that any property you buy, you will need to at least expect a 30% increase before you start to make any gains and then you will be taxed at 35% if you are a non resident. The only people who have made any profit in our purchase/sale are the estate agents.
I totally agree with Mark, if you are not looking at a long term/ personal use purchase don’t buy.
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Jackie – at last someone with some sense!
A property is only worth what someone is willing to pay.
Did you price your property, or was it “valued” by an agent?
With regards to tax, a good gestoria can limit the liability, but don’t forget that your purchasers only paid you 95% of your asking price, as the law of retention kicks in. So make sure ALL your costs (including purchasing costs) are taken into consideration when calculating your capital gain liability.
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We had it valued by a couple agents who basically asked us what we wanted to receive! After a year of non interest we sat down with a calculator and worked out how much we could afford to sell it for and priced it ourselves. The apartment then received an offer within weeks. However it is taking a long time to complete, but we are hopeful that it will be witin the next 2 weeks.
We have a good local gestoria, who seems to be on very good terms with the local notary. He has maaged to offset most of our purchasing costs and we will be in a position of needing to reclaim most of the retention tax back.
The latter is something else to take into account, as we have been told it can take up to 6 months to claim this back!
We will not be purchasing until we have all of our money in the bank. At the moment we are keeping a close eye on the property prices in the area and hope to find a private sale.
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Tax Retention – we have been waiting for 17 months now for our repayment!!!!!!!!!! 🙁 Apparently the tax office in Malaga is very understaffed and when our lawyer speaks to them they say payment should be soon!!!!!! We even sent a letter (got it translated into Spanish) to chase what is rightfully ours. We remain ever hopeful!!!!! If anyone out there knows what else we can do (apart from camping on the doorstep) please let me know.
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