British Retirees are flocking back to Spanish Property Market

The favourable double whammy of low house prices and strong Sterling are sending British property buyers back to Spain to look for retirement and holiday homes. Although a huge number of British expats were forced to abandon their Spanish property dreams when the country was struck by an economic crises that equals the Great Depression of the 1930s, a new wave of UK property buyers is coming back to snap up bargains in Marbella and other resorts at the Costa del Sol.

While in the past expat buyers were often young families and professionals seeking a better life style, today’s property buyer in Spain is typically a soon-to-be retiree who won’t have to worry about working in Spain, where high unemployment rates are still the order of the day.

Out with the Old, in with the New

An estimated 90,000 British expats left Spain last year alone, many of them having seen their dream of a place in the sun go sour, when they lost their jobs or had to sell up their businesses and hand back their homes to their mortgage providers. Pensioners have a fixed income and don’t have to worry about the job market too much. Selling up in the UK, where house prices have rocketed by as much as 20% in some areas of the country means not only being mortgage free in Spain but also having a sizeable nest egg to boot for many British buyers.

A Buyer’s Market

With thousands of empty foreclosures still on the Spanish property market, banks are keen to sell them off fast, often at discounts of up to 60% and with a 100% mortgage offer for qualifying buyers.

Martina Heynemann, managing partner at Costa del Sol based estate agency Your Viva, stated recently their own records show that the average property they sell exchanges hands for no more than £180,000 at the cheaper end of the market. Around 42% of their buyers come from the UK, an 11% rise from 2012.
 
The majority of buyers are aged between 40 and 60, so typically people who are either making a long-term investment for their retirement or those who will be retiring in the next few years.

Ms Heynemann explained that Spanish property prices had fallen between 50% to 60% since they last peaked in 2007. Although property prices are steadily rising in some parts of Spain, there are hundreds of thousands of empty homes still held by SAREB, the “Bad Bank” set up to deal with the enormous portfolio Spanish banks took on from developers and home owners who went bust.

SAREB is gradually selling these off, in some cases having to complete unfinished construction projects first. This will keep house prices in Spain low for the foreseeable future.

Favourable Exchange Rates

The latest wave of British expats buying a holiday or retirement home at the Costa del Sol is taking advantage of the strong pound, which allows them to buy even “more house” in resorts like Marbella, Benehavis or Estepona. Moneycorp, a company offering money transfer services for large scale currency transactions such as house purchases, explained that they had experienced a 37% growth in the volume of such transactions in Spain over the last 12 months.
 
Over the last 10 months Sterling has gradually gained in strength over the Euro, rising by 7% over that period. By mid-May 2014 Sterling had reached its strongest position against the Euro since December 2012.

Although attempts by the Spanish government to lure large institutional investors back to Spain have pretty much fallen flat on their face, foreign demand from private individuals buying holiday or retirement homes has gone up steadily. Spain’s property market is still not seen as an investor’s market, so institutions tend to stay away from snapping up portfolios.
 
However, for people who see a property in Marbella as a lifestyle choice first and a long-term investment second, buying a property at the Costa del Sol seems preferable than spending retirement in rain-soaked Britain, where high cost of living is making retirement a daily balancing act of household budgets for many retirees.