IS THE BOTTOM IN SIGHT FOR SPAIN'S PROPERTY MARKET?

This article has just been published in the Overseas Property Professional website and its interesting to read what the professionals are saying about our properties, obviously they are having a hard time, but some of what they are saying makes sense and should signal some return to normality sooner rather than later.
 
Despite a glut of unsold property hanging heavy over the Spanish property market, a rising number in the industry believe that the bottom of the market could soon be in sight as discounts start to attract buyers.

Agencies such as Andalucian Dream Homes (ADH), Atlas International and GEM Established are just some of the latest companies to offer their database price cuts of at least 30%.

“We do feel that the market is bottoming out now as customers are attracted by the large discounts on offer,” said ADH’s David Honeyman.

GEM’s MD, Andy Welland, added: “There are now around one million new unsold homes in Spain. Just as this stock needs shifting, the credit crunch has stifled mortgage applications thus reducing consumer demand - meanwhile the same credit crunch has forced banks to put pressure on developers to sell their unsold properties. All of this points to some incredible price reductions.”

While discounts are not enough to attract buyers alone, some data suggests that an end could be in sight to the plummeting property prices in Spain.

Planning approvals for new build projects were down 58% in 2008, standing at 253,000 and are predicted to fall to less than 150,000 this year according to developers’ associations. On top of this, demand for new housing still runs at an estimated 400,000 units per year, meaning that discounts and natural demand should eventually remove all but the worst unsold stock.

“I believe that there will be enough volume of sales this year that people will start to wake up and think that they better get in now before prices rise any further and the bottom of the market is reached,” said Chris Clover, founder of Marbella-based agency Panorama. “This means that the beginning of a recovery can commence, with total recovery happening within three to four years.”

Clover believes there is still lots of money out there that buyers are sitting on while waiting for prices to fall further, but with more agencies and developers offering price cuts of between 30% - 50%, the bottom could be reached this year once the public recognize the growing levels of sales.

Spanish property analyst Mark Stucklin agreed with Clover’s point of view, adding: “I think that the bottom is in sight for the quality segment of the market, but not where there is a big glut of unsold properties. Prices in certain areas will stablise, particularly where there is quality stock that is discounted. This is not to say that prices will fall further for the bad quality units, just that there won’t be any buyers for them.”

Discounts attract different buyers
Victor Sague, sales and marketing director for Taylor Woodrow de Espana, believes the bottom is fast approaching in the markets of Marbella and parts of the Balearics, but prices need to fall further in some areas before the beginning of the end is reached nationwide. “We have been offering good discounts across a selection of our developments and as a result sold the same number of units in 2008 as 2007, despite the increasingly tough economic situation,” he said.

While large discounts are attracting small numbers of credit-crunch weary Brits, Scandinavian buyers, which are not as affected by the Euro exchange rate, are making the most of these substantial discounts. A spokesperson for estate agency Spanish Hot Properties said it was fielding strong levels of calls from Nordic buyers, with marketing and operations manager Susana Suspenda adding: “We have always known that investors were going to come into the market in 2009, but our best guess was around September time. Now it seems that a few groups want to make sure they get the best properties and plan to move in very soon, with one group looking to buy as many as 200 units at the best price. This will be a positive move for Costa del Sol as a whole with around 2.8m in stamp duty alone helping the economy in such depressed times.”

Estate agency Masa International also said it has recorded strong levels of enquiries via its Scandinavian offices for discounted property. To reach out further to the UK market, Masa has partnered with UK estate agency group Countrywide which is promoting a selection of Masa’s properties throughout its offices across Britain. This, according to marketing manager Simon Morris, is producing results.

“If the property is at the right price, there are Brits out there that will buy, it just has to be attractive,” said Morris. “The leads have gone through the roof since we started running this promotion with Countrywide, we just need to convert these into sales now. A lot of people have a fair amount of cash available in the UK and if they can see value, they will buy. Although sales are not fantastic, I think that with global buyers taking advantage of price reductions that the bottom is approaching.”

While cash rich international buyers are finding the discounts attractive, the domestic market is still a long way from recovery according to domestic-facing developer Hercesa International. “Yes we are making sales, but the only problem is that the banks aren’t offering credit,” said UK manager Miguel Janin. “We have adjusted our prices and there are investors willing to purchase as there are products that are near the bottom, but prices probably need to fall by another 10% before a full recovery can take place.”

The recovery in the economic recession EU and worldwide will dictate when the bottom is reached and recovery starts

No one can predict the bottom until after it has happened!

There is a lot of marketing hype about but the market ticks over slowly and life style buyers are able to pick up very good buys

if you want/ have to sell, then I'm afraid you have to face up to the facts of life-best advice is do not sell unless you have to

Of course there are exceptions but in general buyers are looking for bargains: an example is a re sale of a 2 bed maisonette with large solarium at Polaris World for sale at 87.500 € compared with the new price of 119.800 €,,……for a life style buyer a good deal ! or a 2 bed duplex in Almeria , sale price circa 185.000 € now a distressed sale at 134.000 € 

The current round of stimulus packages will take time to work, so for starters you can say that the property market in EU will not improve in 2009 

Here in UK there is the political price to be paid and the next election is due June 2010 ,so there is unlikey to be an upturn until this uncertainty is out of the way

So it is looking like sometime 2011 before any confidence comes back in UK...other EU countries have similar scenarios.....and then it will be slow, slow, slow

Off plan is dead for a decade or so...when buyers come back it will be ready now/ re sales and the product they want will change……more emphasis on houses instead of apartments

The good thing is that the demand for a home in the Spanish sun will not diminish and probably increase but it is the effective demand [ those who can afford to buy] which is important

The property cycle continues, with an underlying increasing curve over the decades, and in about 10/12 years time we may  again see a boom waiting to go bust yet again!!!   

So long term ,the economics of property indicates, that if you buy now, whilst maybe not at the bottom, and provided the property and location is good, then you will have made a good investment.....in the meantime having lots of enjoyment out of your home in Spain

What about the agents?

Those who survive will have to work harder and commissions will be much lower and I see no reason why the market for second/ retirement/holiday homes will not follow the patter for primary homes

Here in UK over 75% [maybe a touch higher] of residential buyers now first see the home they eventually buy via an internet search. In other countries it is similar

Does anyone now buy a flight ticket anywhere else except via the internet!!!…..as we come out of this recession the same will apply to buying a home in the Spanish sun…….a prediction sure!…but a safer one than predicting just now the upturn in the market !

Rowlandsbb

I find your response pretty much encapsulates the current situation. I have a feeling that the original article was written by someone involved in real estate sales, trying to talk up the market. It isn't going to happen. Especially while we still have all the problems of lost deposits, no bank guarantees, no planning, illegal builds, high unemployment, high bank lending rates, etc, etc.

If anything surely prices will continue to fall over the next year or more. I think people should strap themselves in for what could be a long and bumpy ride.

Dave

Long and bumby ride agreed....a general continual fall in prices...well who knows...problem for valuers is that there is such a small volume of sales and most of those are in differen ways forced, that current market stats are open to question

Trying to predict the botton is OK for investors but for life style buyers there is a balance between the investment aspect and the living aspect..waiting a couple of years in case prices come down more is for some '  a waste of living time' as when you get in to your 60's the clock is ticking

One of the problems many who want to buy for life style reasons in times like this, is that it is not always easy to find what you are looking for!.....most of the reduced properties may be not suitable and those you like are not on the market because of the current situation!!!

For those who have already bought, use, like and can afford their properties the fact that just now prices have fallen a lot is irrelevant...they just keep on enjoying their life and wait for ther upturn...and there are many of these

Just flown to Alicante for a week's stay and both way the plane was full and that has been the case all winter, so people do keep coming to Spain...also lots of sun tans!!!

it is not all misery out there!

I've just been playing around with an online historic inflation calculator (for the UK). Of course, there are many different ways to calculate inflation (RPI, CPI etc.?), and the results should be taken with a light pinch of salt I suppose, but it was quite interesting to see that my father's house which he bought in 1962 for £5000 should today be worth £76,750. At the peak of the market a couple of years ago, the next door house (identical) sold for £450,000 - which in 1962 would have been about  £29,300.

Makes you realise just how out of whack property prices have become. Maybe the bottom is even further away than anyone suspects?

(On the other hand, if your life revolves around TVs, videos, walkmans and international flights, you probably feel that your money goes a lot further than it did 25 years ago).

Roberto

1962 to 1967 prices did not move up very much..I bought my first house in 1967 for a similar price and the same house now would have increased by the same amount

It is just the long term cycle and in the meantime there have been ups and downs

But are you sure about the inflation figures you are using.......the basis has been changed several times over the years!!!

But the point you are making is correct....if a middle age family buy a holiday home now then in the years to come  the odds are that it will be a good buy!

Was that the point I was making?!

Actually, there's plenty of evidence that waiting a bit may still be a good idea. Granted, if you plan to keep a property long long term it'll probably work out OK, but if you can wait and buy it much cheaper, so much the better. Graphs such as this one show that after prices have gone way above the long term trend, the subsequent crash tends to bring them down way below the same trend line before coming back to "normality". Same generally applies to stocks. Of course, all statistics are bull5h1t, so you can take or leave this kind of info as you like.

For life style buyers, investment is not always a priority!.....it's living that matters and doing what you want in the time left to you!!

Simialr principles apply for a young family buyer, who decides that a holiday home in Spain  is a good option cost wise for family holidays...best to do it now before they grow up...again investment is not the main consideration

Ah, yes.........I think I may have been making a similar point over on another thread, re: investment v lifestyle etc.

Truth is, I don't really know what my point is - I just enjoy these little discussions (as opposed to discusiónes - which could be interpreted as arguments!)

Here's another one: I've never really seen the appeal of buying a holiday home anywhere, when you can go somewhere different every year. When I was growing up, my parents dragged us to France every bloody year - different part each time, but God, was I sick of France by the time I was ten! If they'd bought a holiday home there, I swear I would have run away. (Maybe to Spain?!)

Roberto EOS Super Star ........you keep the forum ticking over and that is good

Holiday homes have always been popular and one reason may be that if you go back on a regualr basis to the same place, which you like, then it is relaxing straight away...no learning curve

Some like the excitiment of a new learning curve every time they go away

And for some having a holiday home is a practical and economic way of having lots of family holidays

Often discussions on buying a second home in Spain gets tied up with the investment issues which do not have a priority with holiday how buyers. Naturally they like to think they have a bought a good long term investment and compared to say buying a caravan in UK it will be  [ which can be more expensive!]

And Roberto, are you still a traveller? .....or has the time arrived in your life when you prefer the relaxation of a familiar environment!

Keep posting

why on earth would anyone buy now?  With prices expected to fall for at least another 12 months, surely the thing to do is 'watch this space' and move fast when the signs are right. I wouldn't expect someone trying to make a living out of property to agree though obviously!

I personally think that we are 4 to 5 years away from the highs of a couple of years ago. We are still on a steep downward trend with no real prospect or signs of recovery. The market will when these signs appear "flat line" for some time as confidence slowly grows and as it does the market will begin to recover; only it will not be a sudden boom period again. Purchasers, agents, promoters, developers and financiers will all be exceptionally cautious before jumping back into the market.

In the Costa Blanca South a good 30-40% of property purchases came from the big inspection tour companies such as Parador, Ambasum, Masa, Atas and Iberian. These companies of which some have now gone to the wall are a pale shadow of themselves 18 months ago. One company had 80 reps a fleet of 60 cars 100 backroom staff, an admin office, telesales office, Almeria offices and a swanky marina side designer head office. They now operate with a skeleton staff and those that have been laid off are not being paid.

Many of the builders and developers that I have spoken to have plans for the future, but no date set to implement them. Those with unsold properties are bending over backwards to get the sale. I was dealing with a developer  on Monday whilst snagging a new build for a client and they will now landscape, terrace and plant a garden as well as fit a 8x4m pool at no cost on a €180,000 property. The same property cost €220,000 18 months ago with no discounts or freebies!

With the credit crisis, exchange rates, job insecurity, banks not lending and houses not selling in the UK, it will be a good few years before the situation improves. The over supply of properties will then become a huge problem. I snagged a new build house yesterday that had ben built 3 years ago and had sat unsold and deteriorating since then. On the coast this will be even more of a problem as these houses need living in and maintaining.

At least it should prove easy to find a great spot on the beach this year!

goodstich44

That is certainly an option which many will adopt but there are others who plan for buyig in Spain is for a relaxed way of life and are not intersted in chasing the good deal....certainly they expect to get very good value for their money...but taking on the role of the investor/dealer is not their priority

I am a bit of both but as regards the winter home I am buying I am very relaxed about the current market as I am buying this one for ' life style' reasons...but I do expect that when I am in my 70's I will look back and see that it was a good buy

I do not think we are foolish as the clock is ticking and my wife and I want the life style living now....not in the next few years after waiting to find the bottom of the market

Thanks to IT I can work between Spain and Uk......work and still have the winter life style in Spain!  

rowlandsbb

why not rent for a year or two, you could still enjoy the life style and could save many housands at the same time?

Renting is not the same as having your own home which you can do with what you want

no, but makes far more more sense than paying over the odds because you bought at the wrong time. If you don't mind losing money, then i agree, why wait?

Whilst I may or may not be paying too much, right now there is no money loss ,if I do not sell now  and ,if in due course in the future  ,I do decide to sell for some reason, then again there is no money loss ,if I hold it until the economic recovery  

There maybe a 'paper loss' for a time  but even here I think I have bought at a reasonable price The builder is still holding his price  because he only builds to order and will just not build, at a reduced price.....he is quite happy to wait for the recovery also!

Anything [ TVs cars etc] you buy just now may or may not be cheaper in a few months time, depends if deflation sets in, but people will and still are making rational life style decisions to buy...property is a product like any other ...except that it has a long term economic history of no depreciation   

But anyone looking nowin Spain, if they can find what they want , will in any case be buying near the bottom   

Brian - you asked "Roberto, are you still a traveller? .....or has the time arrived in your life when you prefer the relaxation of a familiar environment!"

Well, yes and yes. I've already spotted my next home. Best of both worlds. Unfortunately the estate agent appears to be Jeremy Clarkson, but if you can bear it, watch the video

You do keep these threads rolling over!!...no wonder you are a ' Superstar' 

Sorry, forgot to mention that I have been following the thread (honest!) and think there have been good points well made (by all) and have nothing much more constructive to add. As I think I mentioned before, I rarely have any particular point in mind that I'm trying to make (for I am a bear of very little brain etc etc) but I do like to oil the wheels so to speak!

So what do you think? At 750 grand I'd like more than one bedroom, but it does have a garage which is very important these days, what with parking being so difficult!

The last housing bubble burst in 1989 and prices did not begin their upturn until 1995. Thats 6 years. Todays bubble burst in 2007, so using the same figure would bring us to 2013, BUT, this is a worldwide recession and goes much deeper than just housing. I predict that house prices worldwide, not just spain, will continue to fall and we will not see an upturn until the begining of the next decade.

The boom is well and truely  over, and only property agents still believe we are anywhere near a bottom. Spains housing is vastly overpriced and will fall much deeper than current prices before an upturn occurs.

I am a FTSE trader and going by all previous downturns, the stock market will lead us out of the recession, BUT, the "bottom" will only be defined as we leave it behind. You cannot call it before hand.

Depressing sod aren't I ?

Eva2008,

Your post reflects the conversation that my husband and I had this morning over our morning cuppa!  Having seen and survived two previous recessions, we concluded that this one is cutting so deep and globally, that in our opinion, it is going to take a very, very long time to pick up. Indeed we do not think it will ever return to "normal" as we have been used to of the latter years. Depressing? VERY!  Especially as we are coming to retirement years. Our saving grace is we have no young family to support or a mortgage.

Eva/Tish

I think you are both right. 

Agents have to be positive as it's their living, but despite trying to talk things up, it all rings a bit hollow to most I feel.  In the meantime, Spain has a chance to put it's house in order while everywhere is being hit hard by the downturn. When things do turn around the 'hot' countries that people feel confident with when it comes to buying, will probably fair better than those who have a reputation of poor regulation/justice etc.  Will Spain act on it's failing reputation, or will it just carry on ignoring critisism, and blaming the victims?

IMO, Spain will take much longer than the UK to see an upturn in the property sector. The UK is a small island with not enough housing to supply demand. Spain on the other hand has a glut of empty property, overpriced because developers have mortgages on them at inflated prices and they cannot afford to sell for a lot less....and  very very few buyers.

As you say Goodstich, until  Spain can put it's house in order re justice and implementing their own laws, who is going to trust the system?

Edited for typo errors!
 

This message was last edited by Tish on 3/28/2009.

Tish

yes, only this morning on the news, they said due to the slowdown of building in the UK, there will be a large shortfall in a couple of years.  As for the situation with Spains developer mortgages, what the hell's going to happen?  Hard to see property prices going up at all, that alone enough for developers to sell off stock to pay back the banks, but if they don't, I guess more will go bust, but where does that leave the banks?  Looks to me like sooner or later massive losses must be accepted, but 'till then there's just a 'head in the sand' denial going on?.......or is it all part of a bigger plan i'm missing?

where's TJ been, I thought this would have been right up his alley. For interested in reading the tea leaves I highly recommend Edward Hugh's Spain Economy watch, while the coast is a bit of a different beast due to the fact that it's a vacation area, it still gives you a good idea where economy is heading. Needless to say it's usually bad news.

Anyways here's a relevant quote

The average interest rate charged by Spanish banks for new mortgages in January 2009 was 5.64%, meaning that the average cost of a new mortgage had gone up by 10.2% over January 2008 (when the rate was 5.1%), and by 1.1% when compared with December 2008. Meanwhile the Euribor reference rate looks set to close this month at all time record lows of 1.91%. In January - the last month for which we have data on mortgage lending - the Euribor rate was 2.27%.

The reasons lying behind this upward movement in Spanish mortgages are twofold. On the one hand the Spanish banks are having increasing difficulty raising finance due to their perceived risk level, and on the other they themselves have have been forced to raise the risk premium they charge to clients due to the rising levels of non performing mortgages they have on their books.

Basically what this means is that the ECB policy isn't working in Spain, and that despite the massive quantities of liquidity provided, the monetary conditions continue to tighten, and doubly so give that the real value of the rates charged (ie the inflation adjusted value) keeps rising automatically as inflation falls.


Mortgage lending in Spain more than halved in January while the number of homes started in the fourth quarter dropped an annualy 62 percent. The 51.7 percent year on year fall in mortgage lending for urban dwellings was the steepest in 12 straight months of decline.

He also has a nice chart showing how mortgage rates have hit record highs inspite of the fact the eurobar has hit lifetime lows.

link here

Two Graphs that say it all

http://spaineconomy.blogspot.com/2009/03/two-graphs-that-tell-it-all-on-spain.html

So in other words, you're screwed if you want to borrow, and you're screwed if you want to save? Terrific. What a mess!

Roberto

what a mess indeed, though not suprising as they will do anything i guess to try and claw money back, though almost certain to backfire I would think?

Eh?