International Investors are turning their beady Eyes to Spanish Property Market

Since the formation of SAREB, Spain’s “bad bank”, there has been the hope large scale international investors would step in and snap up hundreds if not thousands of unsold and heavily discounted homes. Such a move would breathe new life into the property market, making it possible for the construction industry to emerge from the ashes and start building again.

Now a host of private equity firms have started to sniff out deals in Andalucía and Valencia. SAREB, the state organised bank that took on toxic assets from Spanish banks with a view to sell them off over the next few years and recoup at least some money for the Spanish tax payer and the EU bail-out fund, is rumoured to be offering property portfolios to buyers from the US, which include funds Lone Star, Apollo and Blackstone.

Spanish investment bankers are openly talking about a large increase in the number of investors interested in Spanish property and Solvia, the real estate division of Banco Sabadell, has confidently launched a new promotional campaign to sell holiday homes at the Costas for unbelievably cheap prices.
 
Starting at just EUR 24,000 for new build 1-bed apartments in Asturias in northern Spain and EUR 24,900 for apartments in Roquetas de Mar further south, Banco Sabadell’s offer will end on 31st July 2013.

Spain, like most countries, has ever-shifting hot spots, where properties suddenly become more popular to buyers in one area, only to fall out of favour a few months later, when the latest trend demands buyers move to another location. While ever-popular Mallorca is still at the forefront as a hot spot, the Costas are a different matter.

Here properties and locations can differ widely. Marbella’s glamorous residents guarantee prices will still be high, irrespective of an overall price fall of nearly 34% since the Spanish real estate market last peaked in December 2007. However, the Costa del Sol is a perennial favourite with buyers thanks to its amazing climate, accessibility and excellent amenities. While British buyers have stayed away in droves, Scandinavians, Russians and Chinese buyers have moved in.

A two-bedroomed apartment in Marbella’s Puerto Banus may start at EUR 255,000, but in less glamorous locations, such as Malaga for example, it is not uncommon to pick up the same size apartment for just EUR 85,000 or less. Marbella’s luxury seafront apartments are so in demand, there’s actually a shortage of the type of properties buyers want. In other parts of the Costa del Sol, like Malaga or Torremolinos for example, properties are still not selling anywhere near fast enough for local estate agents to talk about a modest recovery.

At the Costa Blanca the real estate market is different again - here hot spots include Denia, Calpe, Moraira and Javea, where development was restricted and the coast is relatively unspoiled. Generally speaking, it is possible to find 2-bed apartments within a short drive of the coast for around EUR 50,000 with even cheaper prices further inland.

Meanwhile, the Spanish government is introducing one new measure after the other to make it more appealing for foreign buyers to purchase a property. Now there are plans to enable foreign buyers to do all their conveyancing online, if they are buying a property in Spain, including having their deeds inscribed in the property register.
 
The process will run via notaries in the buyer’s home country, who notarise the deeds, which will then be sent to an authorised notary in Spain who will do the actual inscribing in the register. The initiative is supported by the European Association of Property Registrars.

Buying costs for private individual investors are still high at around 10% to 11% of the purchase price. The land registry alone is between EUR 400 and EUR 600 per property and the legal fee per property is 1% of purchase price.
 
No doubt SAREB will discount properties so heavily for institutional investors and private equity firms that buying costs will more than offset by discounts.