Has the Spanish Property Market reached its bottom?

What do people think - with the German/French coming out of recession and the UK housing market showing a price increase do you think that prices are now at their bottom (in euros) and will gradually increase?  Or do you think there is further movement downwards?

 Absolutely no sign of recovery at all here on the Costa del Sol.

Neighbours just sold house for what it would have sold for 10 years ago and similar bargains not shifting.  So further decline in the horizon from our point of view anyway.  I don't think we've yet seen the worst of it.

Jjustin

We think it has bottomed or certainly close to. We have noticed that prices at the lower level on the Polaris World resorts where we sell have risen in recent months. This should not be taken as an indication for the wider property market but it does mean a lot of the very distressed sales have cleared. For example at La Torre you could buy for €100k 3 months ago, now it's €115k. Condado de Alhama was €83k now around €90k. There's less desperation from sellers, partly due to the fall in interest rates, they can afford to hold on. We ran a recent poll (ongoing), to date 31% think prices will rise in the next 3 years (and 31% think a fall) so it's very finely balanced. 46% believe property is now value for money on the Polaris World resorts. It doesn't indicate a rise in property prices but it does show a clear turn in the market so hopefully better times are not too far away. You can view the live poll results on our website.

 People may be expecting more return from their properties but it doesn't mean people are buying them.

The Spanish government has let foreign buyers down very badly during the boom time by not sufficiently protecting their money, so the confidence in the market is still very low, especially from overseas buyers.  The Spanish are still buying up some of the bargains as this is their country and they need to have homes here, so they constitue the majority of purchases at the moment.

Don't mean to be negative but the reality is that the massive boom in Spain over the past 10 years is going to take a little longer yet before we see the true signs of recovery.  With record unemployment levels and a lack of available finance we're still in for a rocky ride.

Justin

Don't mean to be picky, but I think Spanards have always and will always make up the majority of property purchases in Spain. The idea that foreign buyers are a significant factor in the bigger picture is surely a little naive? Sure, foreigners were buying in droves and much of the construction along the Costas was aimed specifically at the foreign market, but the overall boom in Spain was not really any different to that in the UK or the USA. It was basically fuelled by the cheap and easy credit made available by greedy and reckless banks, and Spaniards bought into it as much as anybody else. Thanks to slightly stricter banking regulation (introduced the last time a major Spanish bank got itself in a mess) means that Spanish banks were not as heavily exposed to toxic debt in the US as their British counterparts, but there are suggestions that Spain's own sub-prime crisis is yet to really rear it's ugly head, as more and more bad loans default due to rising unemployment. If this is the case, it can only have a further negative impact on property prices.

Based on the relationship between average earnings and average property prices, property is still way overvalued. As an investment, it makes little sense at the moment. There is so little confidence, that nobody is likely to buy in the hope of making a quick capital gain for the forseeable future, and rental yields are dropping sharply, since there is now a glut of rental property on the market due to the forced landlord situation - owners who can't sell, so try to rent out their property meanwhile.

I suspect that the recent price increases reported in the UK, and the so called recovery in France and Germany, are just temporary blips in a general downward trend. I agree with Justin - any recovery is a long way off, and in fact the worst may yet be to come.

Looking at property prices in the Costa Blanca it appears to me that they have dopped by about 40% to 50% (the ones that are actually well priced).  Unfortunately in the same time the pound has dropped by about 25% - so if someone was to buy in sterling the price is probably only about 20% lower.  A few years ago (when the pound was strong) the advice was to look at German estate agents as the properties that were being mainly sold to the Germans were better value than those being sold to the brits.  If you are a German, Spanish etc buyer surely looking at the large 'British'  urbanisations will allow them to buy good value properties.  Even though there is a high unemployment rate in Spain there are many people with money to spend (to be honest if you are  still in employment in the UK you are not really worse of) and with low interest rates isn't now the time for Europeans to buy second homes in the sun?

If you are a German or Spanish buyer, you probably never did and never will see any value in the large "Brit" urbanisations, which is why they will remain largely unsold and empty for years, if not for ever. Never confuse value with price. Germans will probably continue to pay high prices for property in places such as Mallorca, which has proved to be a far more stable market than the overdeveloped Costas.

Interest rates won't remain so low for ever, but even if they do for a while yet, how many foreign banks are willing to lend for property purchases in Spain right now, and how many Spanish banks are willing to lend to foreign buyers? Not many, I would guess.

May be - but everthing has a price.  Also I have just returned from holiday in La Marina, Costa Blanca - a typicall 'English' urbanisation.  There seemed to me to be allmost as many Germans as English in the restuarants we went to.  Most of the menus that were in English were also in German - I felt if the Germans were holidaying there and they could buy a 3 bed semi for less than 100,000 euros then surely with their economy no longer in recession then properties should sell to them.  Unfortunately because the euro is so strong against the pound the brits are not getting the bargain they would have if we had joined the euro a few years ago.  (This is just an observation not a statement that we should have joined the euro as there are other advantages and disadvantages).

 I agree with Justin's posts on the property price outlook - the bust has been like waking up with a bad hangover after a big party. To continue with the analogy perhaps we're at the stage where the hangover sufferer is thinking of getting out of bed.  It doesn't mean he still won't have an awful headache and be shuffling round drinking coffee, moaning and trying to put off clearing up the mess.

As for the Euro and Nigela's comments, if we had joined a few year's Brits would have locked in at a higher exchange rate but there would have been two other nasty consequences - the UK boom would have been all the greater because of lower interest rates in the Euro area and the UK would now be struggling to recover without a devaluation of the pound against its main trading partners.  The Euro was a large part of the reason why Ireland and Spain had suhc bad booms and busts and why they are struggling to recover.

The problem with a recession is no one knows when the bottom is ended.  When buying a property the best time to buy is at the bottom or near the bottom - it is so easy with hindsight to say I should have bought then.  I would have thought for Europeans wanting to buy second/retirement homes in Spain the market must be near the bottom - for us Brits it is no where near as good due to the drop in exchange rate.

I totally agree with bakeja comments re Stirling going in to the euro.  I would hate to think what state our economy would be in now if we had joined. 

Whenever you are at the bottom in a recesion it's difficult to envisage things recovering at any pace. Take the property market in the UK back in February this year. Nobody predicted five months of prices rising even slightly. Spain faces far bigger issues in its property market but needless to say we are seeing improved optimism and a clearing of the most distraught sales. I think we are through the worst but a long slow road ahead.

VCB...sounds like a very sensible approach!