Spanish Property 2008- to Buy or not to Buy? (an Independent Surveyor's View)

Buyer bargains in Spain? 

Every cloud has a silver lining and a market downturn means that property price reductions are now clearly evident throughout Valencia and Spain as a whole. While this makes little difference to people moving within Spain (sell for less – buy for less) it is advantageous to buyers with cash in the bank, even when it is in Sterling, as available discounts often outweigh recent exchange rate changes. Those buying through a mortgage may find that the banks are now far less optimistic with their valuations and more stringent with their lending policy (very evident since the new year), though lower prices mean lower overall commitment and help to soften any rate increases. If you are knocked back by one bank it is certainly worth trying others or contact a mortgage broker for a wider look at what’s available. It is currently evident that buyers from different countries are behaving very differently.

While many Brits are uncertain of what to do following exchange rate changes (and media scare mongering about isolated cases of loss), the Irish and Dutch (already in Euros) see Spain as cheap living and a property bargain hunter’s paradise. The Germans are still suffering the after shocks of large scale tax investigations of assets held in Spain, while buyers from much further a field including Canada and Russia are showing increased interest. Those that have owned in Spain for more than two years will generally have benefited from a significant increase in capital value, such that price reductions would have to move further to wipe out their gains (this excludes some areas of mass development where buyers paid over the odds in the first place, having been duped by false promises). Brit owners will also benefit if they convert their Spanish property back into pounds, and the lucky people that have owned structurally sound, legal properties for 5 years or more are still seriously ‘quids in’. (Remember few UK TV shows or news papers want to feature expats gloating about how well they have done, so it’s generally the disasters that get exposure resulting in an unbalanced media portrayal).

Examples:- 

Property Type:- 5 bedrooms, three bathrooms, house including guest apartment and communal pool on established golf development. Smaller easily maintained plot.

Location: La Sella Golf (just inland from Denia)

Price: €250k

Surveyor's tips*: La Sella Golf offers relatively upmarket living and good rental potential, it benefits from a Marriott Hotel, attractive natural surroundings and proximity to coastal towns such has Javea and Denia. This property has a bank valuation of 360k but is on offer for much less. It is the prefect option for those that need extra bedrooms but don’t want the hassle of garden and pool maintenance (it’s a ‘turn up and enjoy’ type of property). Though relatively new, all such properties deserve a close inspection for signs of structural movement, lower wall damp and flat roof ‘solariums’ should also be checked for leaks.

Property type:- 7 bedrooms, 5 bathrooms, Villa on urbanization with own pool and 2200m2 plot (also close to golf)

                                                                                          
Location: La Lluca
Price:€499k

Surveyor’s tips*: With a double plot established gardens and 400m2 build, a property like this would normally command far more money, indeed some buyers may be currently paying similar money for a 4 bed house elsewhere. This property is just a short drive from the beach with the amenities of Javea and some great local restaurants. A less prudent buyer could pay well over 1m for a similar property in this zone. Many large price reductions are due to personal circumstance, but always get the structure checked as some 'bargains' are due to serious defects such as subsidence, which may be costly to rectify. Legals and local plans must also be carefully checked including the registration of accommodation. Generally larger plots allow for retrospective licensing of added elements if not already registered.

Summary:-

I am often asked as to my personal opinion of the market. The best way I can give advice is to imagine what I might do with a spare 500k as well as assessing my own property investments. I would certainly not sell up my property in Spain, which has doubled in value over 6 years and is just part of a generally improved lifestyle and environment. I do own property investments in the UK, which have also doubled  in value over the last 6 years (I don’t plan to sell, but if I did I would re-invest the money in Spanish property without delay). In the medium to long term I am perfectly happy to have property investments in both the UK and Spain. If (only) I had a spare 500k (whether in Euros or Sterling), I would have no hesitation in investing it in Spanish property. I would however do some dedicated shopping around, looking out for true bargains, which are now available and making sure that the location and amenities were right. I would also make sure I was in a strong position to ‘strike a deal’, possibly making a lower offer in return for a fast completion and 10% deposit available within 10 days (subject to checks).

Though every property must be assessed individually, I would generally steer clear of anything that was not fully legal and obviously anything with serious structural issues,(though I may well use evident structural issues to get a further price reduction). I would much rather get an ‘honest’ established resale property than a newbuild (some newbuild community facilities may suffer long completion delays, many developers are in financial trouble). If buying subject to a mortgage, I would look out for bargains which were likely to attract a higher bank valuation, I would also drop my proposed spend by 30% from what it might have been last year, so as to take a more disciplined approach and soften any exposure.

There is considerable opportunity in Spain for sensible prospective buyers, making 2008 a potentially sound time to buy, despite the recent downturn. I recently saw a client have an offer accepted at 360k having had a previous offer of 495k refused by the same vendor 12 months before. They have got the house they wanted for 135k less simply because of the downturn. I frequently see other northern European buyers getting excellent value for money. Playing the waiting game may see this window of opportunity pass, (and may well not see any improvement in the pound) as the number of Brits wishing to purchase abroad is still increasing, and the economic downturn will most probably simply delay rather than change some purchasers plans to flee the UK .