Sometimes agents are accused of overselling the recuperation of the Spanish Property Market because the recovery is not uniform all over the country of course. There are areas that are “hot” and there are areas that are “not“. In this post we are going to look at the reasons why we are predicting the recovery based on evidence, real world stuff that is happening right now, rather than anecdote (OK some of it is anecdotal :-)). Take a look.
Firstly, (And this is Graham writing from Valencia), we have made more confirmed sales in January and the first half of February than any year since the business began in 1999 and that includes all of the boom years. I believe there are three reasons for this which are all contributing to the rise in sales.
The Three Factors Affecting The Spanish Property Market
1) Prices are not going to get lower. Every trusted and not so trusted source has now called the bottom of the market in Spain with a proviso that there may be further small falls in areas that are not prime (Personally I think none prime can still fall quite a bit more) but nothing significant will happen on the downside in the prime areas, central big cities and favoured coastal areas.
2) People in areas of countries that have experienced large price rises in the last few years are cashing out at the right time as they see their market stalling now. This is especially prevalent in the London market where we have had a deluge of clients cashing in the 30% rise in prices over the last two years.
3) The Euro has fallen a lot in value against a basket of currencies but mainly against the Pound, the Dollar and the Krona. Prices in Spain for people in countries using these currencies or working and getting paid in these currencies, especially employees of the oil companies who get paid in dollars, look extremely attractive. The British are definitely back in the market after a few years with the Pound in the doldrums. A very happy client last week got 1.36 Euros on transfer using our preferred currency company.
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The next factor which shows the new found confidence in the market is the proliferation of new agents opening up all over the place, offices are springing up everywhere again and the large franchise chains are expanding their operations again. Engel and Volkers at the high end of the market are taking on 100 new staff in their Madrid offices alone. Redpiso are a new kid on the block opening up offices in many places and Don Piso are starting to up their number of offices too after withdrawing support from their franchisees around five years ago.
There are new building companies doing both new builds and modernisations of existing stock and new shops in Valencia such as Bauhaus (German DIY chain), IKEA obviously with their expansion, Jysk from Denmark and many other existing chains such as Leroy Merlin are either expanding, increasing the size of their current shops or are seeing greater footfall. The new IKEA in Valencia is particularly huge.
Interestingly we are seeing a large growth in the numbers of “reformista” companies and individuals who are buying tired stock and renovating and selling on at a profit. The fact that they can do this even with 10% tax rates on purchase and the associated costs of purchase show that there are lots of properties on the market that are currently massively undervalued and it is interesting for people to put in their work and design ideas to increase the perceived value of the properties.
Anecdotally, because the figures are not out yet, we are hearing from town architects in councils all around the region that applications for building licences for renovating property are up very strongly and even new build licence applications are on the rise.
Enquiries are up strongly with a plethora of enquiries about renovated city flats for example and an increasing tendency towards smaller villas in inland areas away from the coast. We are also seeing growing numbers of enquiries from investors looking to buy into the market and ride what they perceive as eventual rising prices. Allied to this we are still seeing as trickle of non EU residents looking to buy into the country and get residency by spending over 500,000 Euros. (You can see more about the Spanish Residency requirements here)
We have recently started a renovations company here in Valencia (Contact here for more information) as the number of great offers we are getting is ridiculous and the numbers of builders applying to work with us is growing exponentially. They are offering their services at really good prices and we are allowing them to do small jobs for us to test their reliability and work ethic before we start using their services on the major modernisation jobs we are currently involved in. The funny thing is that they are mostly from companies set up in the last six months by experienced builders who lost their jobs and work during the great Spanish crisis. The renovations company will be expanding into Madrid and Malaga very soon too.
Finally we are now starting to see banks coming to the table with mortgage offers and credit lines for companies as they have been directed to do so by the European central bank. The European central bank and the EU have injected a large amount of capital into the markets, quantitative easing, and they have been told to let it filter down to small and medium sized businesses which is giving some startups in the construction sector the seed capital to start with their projects.
Choose what you want to believe but there is definitely something better than just green shoots happening now in the Spanish Property Market and you would be well advised to strike while the prices are at their lowest and there are plenty of bargains available. One proviso, be careful. There is still a lot of rubbish around at higher than it should be prices. Avoid it like the plague. How? Contact us for the best advice and tips below.