“Let’s go and find ourselves a bargain house”. Those were our words 4 weeks ago. All the recent talk about a crumbling Spanish property market got us thinking that now was a good time to find our perfect home in Spain at an unbelievably good price.
So, I rang up my good friend Andrew who owns Hamilton Homes in Sabinillas. “Andrew, we want to take a look at some properties but we want a bargain. We want a house with a big terrace or garden but most of all we DON’T want to pay the asking price”. Andrew stuttered a bit on my words but was happy to select three properties for us to take a look at.
The first property we looked at was a large 4 bedroom townhouse on a development by the beach. It had a huge terrace, double garage, a basement ready for conversion and stunning views from the top floors. It was on the market for Euros 365,000. We liked it….a lot!
However, it had no kitchen as it was brand new and we would have to spend some money sorting out the basement to get my snooker table in there! Considering our mentality of “it’s a buyers market” we put in a “crazy” offer of Euros 300,000. The owner had a good laugh and rejected our offer out right….and rightly so! This is after all a big townhouse on the beach, they don’t exactly come up that often. But we didn’t want to pay the asking price so we moved on.
We then saw a private villa on for just over Euros 400,000. It had it’s own pool but….one of the bedrooms had a toilet in it (and I don’t mean en-suite) so that kind of put us off. No offer for that one then.
Next we saw a house in Duquesa. It was a large 3 bedroom end townhouse which the owner had totally refurbished. It had it’s own private pool and a large garden around the house. Inside everything was finished to a very high standard and there were some great views from for the property. It was on the market at Euros 485,000. This was a really nice house and we really liked it (although the kitchen was a little small). However, upon chatting to the owner he was adamant that he wouldn’t drop his asking price one cent! “Take it or leave it”, those were his words.
We were starting to get a little bored now. Of the two properties we liked neither owner was prepared to negotiate. They would rather hang to the properties than sell them for what they believe they were really worth.
We decided to take a break (we were exhausted after just three properties) and do a bit of research instead and chat to some estate agents to see what their opinion were regarding “cheap”, “distressed” (whatever you want to call them) properties.
We found out something very interesting!
Through Eye on Spain we have met many estate agents in Spain. We’re not “agent haters” as some people think (some of my best friends are agents), we only hate the bad ones! So I called some of them up. They all practically said the same thing….
“Bargains….what bargains?”
It’s no big secret that the market has slowed down, but in what respect? Five years ago there were a huge number of buyers, and speculators, but there was also less property available than there is today. Today there are more lifestyle buyers than investors, but there are still a huge number of properties on the market.
It seems that property owners are just not prepared to drop their prices. Most seem happy to wait until the market catches up with what they feel their property is worth. I suppose it comes down to affordability.
If you can afford to hang on to your property then why not? Many are choosing to rent their properties out on a long term basis to at least cover most, if not all, the mortgage and running costs whilst the market “comes to them”. This isn’t such a bad strategy at all.
We live on the Costa del Sol. Ten years ago this place was very different to what it is today. The huge improvements in infrastructure alone enable an easier way of life with better roads and facilities. Yes, there are still many problems in certain areas but although the construction industry is slowing, progress is not. Areas improve all the time and sitting on your property for a few years is probably as good a strategy as any, especially if you can get it rented out and cover most of your costs.
Digging a bit further we also found out that if a real bargain does become available it doesn’t sit on an agent’s books for very long. These seem to be snapped up quite quickly.
But what constitutes a real bargain?
This is a really difficult question to answer because property valuations in Spain are very “hit and miss”. Banks base their valuations predominantly on the size of the property, not it’s views, facilities, decorative order, etc, and different banks give different valuations. Owners believe their property is worth what they paid for it x number of years ago, plus the costs (as high as 13%) plus whatever he/she believes the property should have appreciated in that time. And if it’s got a sea view they’ll whack another few thousand on for that too.
Here’s an example of what we consider a bargain. In July 2006 we saw a 5 bedroom townhouse on the beach for Euros 420,000. The agent, a friend, told us that it was an absolute bargain as the owner was desperate to sell. If we wanted it we had to be quick. Not being ones to get pressured into anything we went away to think about it. A week later it was sold….for Euros 380,000! Similar properties on the same urbanisation are on the market for Euros 630K – 750K. Whoops…it really was a bargain. A 5 bedroom house on the beach for 380K…wake up Justin!
But examples like these seem to be very few and far between. Yes, there are some desperate sellers who really need to sell. The problem is that for cheap properties, say around the 200K mark, dropping 10 or 20K isn’t going to make that much of a difference (we know many people in this boat). Therein lies the problem. Lifestyle buyers will pay the going rate for the right property, as they are currently doing, modern buyers like to take their time and not be rushed or pressurised into anything.
Time to cut costs
What we are seeing is that instead of people drastically reducing their prices, which many really aren’t, they are turning to the Internet to market their properties for sale privately, therefore saving the agents commission.
Private sale websites are becoming more and more popular. In the US www.zillow.com, which is one of the top ranking real estate websites, recently launched a service for private sales. On the first day they had over 4,000 listings! A recent survey by Nielsen NetRatings found that 50% of buyers would try to sell their property privately. Asked why they responded, 76% don’t want to pay commissions, 61% don’t see the value agents provide and 52% said they don’t like pressure from agents.
I have yet to find a decent private sales site for Spanish property. Most of the new ones just don’t have the necessary traffic to justify the price. Eye on Spain has it’s own private sales listing service at http://www.eyeonspain.com/property-for-sale-direct.aspx which generates over 120 enquiries per week, but we get over 6,000 visitors to the site every day so we can justify the small listing fee.
So, on your Euros 200K apartment you can advertise your property for Euros 190K, saving the 5% agent commission. You don’t necessarily have to take any money out of your “profit” to reduce your price and the end buyer gets a saving.
Bargain hunters are having a tough time
So if you are out to bag yourself a bargain then you may not find it as easy as the press make it out to be. We are guilty of this ourselves and recently talked about a “buyers market”. It’s only a buyers market in terms of choice, not necessarily price.