Gains in Spain
If you believed everything you read, you probably wouldn’t touch Spanish property with a bargepole. There’s no denying that the country’s financial and economic woes have left a huge glut of new and repossessed properties sitting empty and struggling to sell, but some bargain basement prices are turning heads, particularly those of the British, and there may never be a better time to buy a Spanish home.
Perhaps that’s why Taylor Wimpey de España experienced a 22% rise in the number of real estate transactions in September 2012 compared with the same period in 2011. And the figures are even more impressive for property in the Costa del Sol, which has seen sales increase by 52%, while the Costa Blanca enjoyed a 76% rise. And August 2012 saw just over half of all the company’s property sales made to British clients – the strongest sales month to British buyers since September 2010.
This renewed interest is echoed in figures from Rightmove Overseas, which reported an increase in searches for almost 60 per cent of overseas regions in September, with Spain accounting for a quarter of the total. And according to the most recent quarterly index from the Overseas Guides Company (OGC), there was a sizeable increase in enquiries for buying abroad between July and September this year, with Spain continuing to dominate the leader board.
It’s a similar story for Conti – Spain currently accounts for 33% of our enquiries, up from 31% last year and from just 14% back in 2008, thanks to excellent buying conditions and signs that the market is starting to bottom out.
Strike while the iron’s hot
A combination of factors have come together to provide some ideal buying conditions. The euro zone crisis continues, but the growing strength of the pound against the euro is boosting the budgets of people in the UK who are looking to buy property in Spain. This together with some bargain property prices and low interest rates, are making it even more affordable. And prices are continuing to fall in many areas.
The average value of homes in Spain dropped by 9.5% in September 2012 compared with 2011 which means that prices have fallen by more than 25 per cent since the height of the market. But some coastal areas have experienced much bigger price decreases, with the Costa del Sol seeing extreme reductions and an abundance of low-priced repossessed properties swamping the market.
It seems that the market has reached a low point, so buyers are using it as an opportunity to shop for a bargain. And they’re finding themselves in a strong position – dramatically reduced prices and the opportunity to negotiate these down even further with some motivated sellers mean that it’s a buyer’s market. It also helps that Spain offers cheap and easy access from the UK, and rental opportunities are good too. It basically ticks a number of boxes that Britain doesn’t, including the weather!
You may be surprised to hear that mortgage availability is generally good, despite the negative headlines about the property market, and financial institutions still have a healthy appetite for lending, with maximum loan to values still around 65-70%. Generally speaking, smaller deposits are possible in areas where house prices are more resilient, such as the Balearics, the Canary Islands, Madrid and Barcelona.
Recent data published by the Spanish Mortgage Association revealed that the average mortgage in Spain is now 40% cheaper than it was four years ago. This is due to the plummeting Euribor, the index used throughout the eurozone to set mortgage repayment terms. Economic experts believe that this rate won’t rise again in the near future and may even drop further. This means that mortgage rates are at an historic low, starting from just over three per cent at the moment, with repayment deals prevailing.
The Spanish banks now own a lot of repossessed properties, so are offering some attractive rates and higher loan-to-value ratios in order to get these off their hands.
One of the easiest ways of obtaining a mortgage to buy in Spain is to use a specialist UK broker. They will know the exact mortgage application requirements for each lender and can source the best possible deal for you. It can also put you in touch with specialists in Spain, to ensure that you comply fully with planning and legal conditions, and can also assist with currency exchange.
Take advice and choose wisely
It may be a good time to buy a property in Spain, but it’s essential that you seek the right advice and you should always go through the same process that you would follow if you were buying a property in the UK. Take independent advice from an English-speaking lawyer who is not connected to your seller, estate agent or property developer.
This means that you should also be very selective. Many so-called bargains are being offered at knock-down prices because they’re of poor quality and in undesirable locations. It’s very easy be pulled in by descriptions of ‘cheap’ or ‘knock down’ prices, but you really don’t want to end up with a toxic asset simply because you didn’t do your homework or take the right advice.
If something seems too good to be true, then it probably is. It may be wise to look at re-sales, where you can get references from previous buyers and check any other re-sales being offered on the same development. As a result, you’ll get a much better idea of the property’s true market value.
To say that the Spanish property market has experienced a turbulent few years would be a bit of an understatement, but it appears that our affections for this country show no signs of waning. It’s most certainly a buyer’s market, but you must choose carefully. There’s nothing to be gained, and everything to lose by cutting corners and failing to carry out due diligence.
Clare Nessling is Director of Conti, the overseas mortgage specialist.
Call 0800 970 0985 or visit www.mortgagesoverseas.com