Spanish Property Insight › Forums › Spanish Property Forums › Spanish Real Estate Chatter › Spanish property market 2008: soft landing or train wreck? › Reply To: Spanish property market 2008: soft landing or train wreck?
I think we must be realistic as to the cause of the current property market decline here in Spain.
We can cite many reasons that contribute to the present situation from exchange rates to rogue builders/agents etc. However there is one factor IMO which no-one has really touched on in depth and for me it is the largest factor in the cause of the decline.
During the boom years of 1999 to 2004, the average property price in Spain (with few exceptions) were about half of their UK counterparts. Since the boom, prices have become much more aligned on both sides resulting in potential buyers looking for new emerging markets such as Bulgaria, Morocco, Turkey and Cyprus etc. No longer is it possible to sell your 3 bed semi in Leicester and buy similar in Spain and leave the difference in the bank or buy a little business here in Spain.
Also in the intervening years, mortgage rates have gone from circa 2.75% to 5.5% here in Spain, along with equal increases in the UK.
Another factor is over-supply, it was very difficult in the boom years to find enough property due to there being far less new-build in construction (CDS excepted)and few resales worth having.
Gordon Browns u turn on SIPP´s certainly killed off what was left of the small to medium size investor markets.
Now we have a world financial recession to weather for a few years or so there will be little or no speculative or 2nd-home-buying happening to measure.
However, there will still be those who wish to move to Spain for a new life abroad. They are more savvy now and generally concerned about the horror stories in recent times, but, the abismal exchange rate at present adds about 15,000GBP to an average 200,000 euro property purchase causing exceptional increases in cancellations for new and resale properties.
All in all, there has been a slow down in the last 4 years. Having sold property in Spain for 8 years from 1999, the year 2005 was the first year when our sales units not only stopped increasing, but actually declined, they have done so steadilly since. My sales are 92% less than they were in summer 2004. I would say those figures are quite a good litmus test as many of my collegues in the industry are showing similar declines.
I see nothing generally that will change things for the better in the coming few years, so we all have to cut our cloth accordingly and be grateful we experienced the good times.
To sum up, I would say it´s been a 4 year soft landing, however, those that never had the tools to measure it – such as declining sales figures- seem to have been caught by suprise!