Clare Nessling, director of overseas mortgage and property specialist Conti, explains how Spain still offers good opportunities for prudent property investors

To say that the Spanish property market has experienced a turbulent few years would be something of an understatement.

The unfortunate mix of the global economic downturn, over-development and high unemployment has led to plummeting prices, particularly with new coastal homes and older properties in inland ‘white villages’ popular with the British. It has therefore been a pretty rough ride for existing property owners. And due to various reports of corruption at the highest levels of local government, and the granting of illegal licenses for property development, it’s safe to say that more than a few prospective buyers have been put off. In some cases, prices have dropped by 50% or more.

There are predictions that prices will decline in some parts of the country for another two years, due to a surplus of homes which the Bank of Spain estimates at somewhere between 700,000 and 1,200,000. It will take time to clear this glut, and owners are dropping their prices even further in order to attract buyers. Even the Spanish president has reportedly had to accept a price for his holiday property in Almeria this year of 38% below what he paid in 2007. Bankinter, the Spanish commercial banking group predicts that housing prices will fall a further 6% up to the end of 2013 and only begin to rise in early 2014 when the economy is capable of generating employment and demand recovers.

As is often the way, however, pain for some means there is opportunity for others, and investors looking for a bargain are therefore in a very strong position. Dramatically reduced prices and the opportunity to negotiate these down even further with some motivated sellers mean that it’s most certainly a buyers’ market.

Still a major hot spot

This may well explain why the percentage of people enquiring about Spanish mortgages has started to creep back up. Spain currently accounts for almost a third (33%) of enquiries we receive, up by 11% since 2009, so it appears that our affections for this country show no signs of waning. The most popular areas for investors include Alicante, Malaga, Barcelona and the Balearic islands.

Take advice

While there are undoubtedly bargains to be had in Spain, 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.

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 to 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.