I thought it was really interesting to look at the statistics for asking prices on houses in the Malaga region for the period from 2005-2013 because it presents a fact that is really surprising for regular watchers of the Spanish Property Market. You can see all of the figures here. The thrust of the stats is evident though, the larger the house the better it has maintained its value (asking price) over the 8 year period and in fact 5 bedroom houses have actually risen in asking prices in the period by around 25-30% compared with a drop of around 33% for 1 bedroomed properties.
What does this tell us?
There are various possible reasons for this but here are some of the factors that may cause this situation.
1) Larger properties are usually on more exclusive estates and are aimed at the foreign high end market. There has been no slackening of demand in certain areas from this group and it could be argued that demand has actually grown as Spain is perceived to be more of a bargain now than in, for example, 2007-8 when the market as a whole hit peak. Also people from the markets of Eastern Europe and Asia now compete at this price.
2) Many of the buyers of larger properties are cash buyers from Northern and Eastern Europe and they have sold their properties in areas such as London and Moscow making a large profit which they then put into their ideal Spanish property.
3) The lower end of the market tend to be studios and one bedroom apartments and are much more mass market. Therefore as demand for these reduced due to restrictions on mortgage availability and the financial crash the excess supply meant that the only way to sell was to drop the price under that being asked for by comparable properties of which there were many.
4) One and two bedroomed properties tend to be apartments and built en masse by the coast or around golf courses in order to maximise potential profits for developers. They are often not in prime areas as these areas were built on years ago with less densely spaced properties such as villas with large plots.
In Spain as a whole you can see the stats here. You can see a similar pattern here but it is even more pronounced. A one bedroomed property has dropped by around 35% whereas five bedroomed houses have actually increased by almost 50%.
Now we must take these figures with a pinch of salt for various reasons.
1) These are asking prices. In a rising market the owners were much more likely to get their asking price because they were willing to wait until a buyer came in at that price and with 100% mortgages available in many cases that was a lot easier than it is now.
2) Buyers now expect deeper discounts so it is likely that sellers are pricing in a negotiation into their price.
3) There are far fewer sales even at the higher end and the asking prices even using the median methodology may be far from the truth at the moment. However on the ground experience from our experts all around Spain suggests this is not the truth. Properties in prime areas are selling at close to their asking price if they are priced correctly. Some owners are asking ridiculous prices for their properties and they may remain on Kyero’s site for a long time skewing the stats to the higher end.
4) Bargains may be found at the lower end of the market more easily because there are more desperate sellers out there. However over the long term larger properties are more likely to grow in value.
How would you read these figures?