Current State of Play in the Spanish Property Market
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Current State of Play in the Spanish Property Market

Currently the property market in Spain has many repossessed and distressed properties available which can be purchased at significantly reduced prices compared with a few years ago. In fact, Savills report that there are properties in the Costa Blanca, Costa del Sol and Costa Calida, with discounted prices of up to 50%, including some houses with no reserve price at all.

Sales of distressed properties are on the rise and these represent a sound purchase. Very often the owners are stalling the banks from legal repossession and are prepared to sell at a loss rather than lose out completely. Many of the properties that were purchased in the boom years are in negative equity which equates to the fact that officially advertised prices by agents are often open to much more downward negotiation.

What all this means however is that anyone looking for Spanish properties should therefore thoroughly research the areas they are looking at and avoid any black spots which have been subject to compulsory purchase orders or demolition threats.

New property developments Spain

The G-14 (group of largest Spanish developers), estimate that there will be property shortages in Spain within the next 2 to 3 years in certain areas should the level of granted build licenses continue to drop. Pedro Perez (General Secretary of G-14) claims that due to the lack of building permits handed out over the last couple of years, prices on newly built properties in City centres have already been adjusted via supply and demand.

“The new build property market is already in its fourth year of adjustment and now is the time for change and for the financing of buyers and promoters” he said.

Perez believes the time is right to start building again as in many cases prices have already dropped between 20 to 30% . Prices may continue to drop in certain areas due to lack of demand and over supply, but in many others there will be shortages shortly.

According to the INE (Spain’s institute of Statistics), sales of residential property increased by 17.6% in April 2010 and it appears that at least on a national level there may well be a recovery in the market.

Mortgage finance

Spanish property owners are likely to see their mortgage payments increase going forward through 2010 and beyond after the nation’s benchmark for loans, Euribor, rose 1.42% in August, which may well lead to more distressed properties coming to the market.

Legal issues

Owners of holiday home properties on the Costa del Sol need to be aware of new UK laws applicable to owners of furnished holiday homes which may affect their ability to take advantage of the financial benefits of owning a holiday home. The change will mean that in order to take advantage of these benefits such as offsetting excess property expenses their rental home must be rented out for a minimum of 105 days per year, compared to 70 under current legislation.

As a result of this change being introduced it’s important for holiday home owners to ensure their property is rented out for as many days as possible.

Tourism

The Costa del Sol saw an increase in the number of visitors during August 2010 compared to the previous year with 930,876 visitors – up a total of 2.4%.

Overall, August saw 6.97million arrivals, the biggest increase experienced for 26 months and representing the third consecutive month to show an improvement

Why overseas property buyers choose Spain

Below are the main reasons property buyers from abroad choose to live permanently in Spain.
Climate and environment - 48.1%
Pace of life and health - 18.4%
Childhood, family links - 8.9%
Antipathy to the UK- 8.9%
Lower Living Costs - 6.2%
Admiration of Spain - 5%
Work or Business - 2.7%
Social Advantages - 2.1%
Practical Advantages - 1.8%

Reasons overseas residents choose to leave Spain after moving there.

Language difficulties - 34.3%
Separated from family - 17.9%
Other reasons - 13.5%
Bureaucracy & red tape - 12.1%
Lack of mental stimulation - 7.9%
Exchange rate/banking difficulties- 6.4%
Rising cost of living - 3.6%
Poor medical/hospital facilities - 3.2%
Cost of air travel - 1.1%
Source:Vivaestates.com

KEY HOUSE PRICE FACTS

Square Metre Prices: €3,932
Rental Yields: 3.81%
Rents: €1,500
Price/Rent Ratio: 26 yrs
Price/GDP per Cap: 15.52x
Roundtrip Cost : 12.16%
Rental Income Tax (Effective): 24.00%
Capital Gains Tax (Effective): 18.00%
House Price Change 1 Year: -4.70%
House Price Change 5 Years: 10.72%
House Price Change 10 Years: 117.94%
Landlord & Tenant Law: Strongly Pro Tenant
GDP Per Capita: $35,332
GDP/Cap Growth 1 Year: 5.12%
GDP/Cap Growth 5 Years: 1.43%
Economic Freedom Rating: 69.63
Ec. Freedom 5 Years: 1.08%
Competitiveness Rating: 4.59
Property Rights Index: 70
Currency +/- Value: €1.15
Taxes on Residents (Average Rate): n.a.
Source: Global Property Guide

Source Overseas Property Professional September 2010
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