The current low prices of Spanish resale and newly built property may be tempting many buyers from the United Kingdom and other Northern European nations to invest in holiday or investment homes, but what about people who are seeking to relocate permanently?
High taxation, cost of housing and inflation in Britain are stretching household budgets to the limit. Utility bills in particular are the bane of the British householder, who is forced to pay out considerable amounts of money to stay warm - nearly all year round thanks to damp British summers that mostly resemble autumn and winter. For a decade and more it was Spain that people flocked to in a bid to escape the British weather and high cost of living.
Last year, however, was the first time since 1998 that British expats started to return from Spain in greater numbers. Homeowners, who bought their Spanish dream home before the end of 2007 for a fortune, now cannot sell it because prices for resale properties have dropped to rock bottom. Cash-strapped Spanish banks with nearly half a million unsold, repossessed new-built properties on their balance sheets have started to sell them off at incredibly low prices, adding to existing home owners’ woes.
The unemployment situation in Spain together with increases in rental values and higher cost of living are also driving expats home. Since 2011 the price of basic food stuffs like milk and bread for example has gone up by some 48 per cent. Homeowners are forced to pay around 11 per cent more for their electricity bills, while at the same time their home values have fallen by around 50 to 60 per cent in some parts of Spain.
The cost of living at the Costa del Sol is not significantly cheaper than in Britain, although there are obviously not the high winter fuel costs to consider. Other increases in costs of living are already looming on the horizon. The Spanish government wants future residents from Britain to contribute at least 10 per cent towards their prescription costs for example and there are still many issues over property and planning laws that need to be clarified to avoid more costly court action.
As less Spanish people are able to buy properties, rental values have already gone up across most of Spain, something to consider if buying property with a long-term investment view, but also when renting for the foreseeable future.
Pundits believe the rescue package Spain’s government negotiated with the EU will eventually force house prices up again, albeit at a modest level. Spanish banks won’t be able to avail themselves of the money until next year spring, so anyone wishing to buy property in Spain should consider doing it before the year end, when various tax incentives come to an end, such as a 50 per cent reduction on capital gains tax or 50 per cent reduction on sales tax for newly built property.
While the cost of potatoes may have gone up by 116 per cent from 2011, there are signs that Spain’s tourism is on the up and up. For people who live at the Costa del Sol all year round and depend on the revenue tourist bring in, this is good news indeed. Not only will hotels, bars, cafes and other catering establishments hire more temporary staff, self-catering accommodation will also be more sought after, making it possibly for people to let out their Spanish property for at least part of the year, while they return to the UK, perhaps to do some contract work or to visit family back home.
There is, on the whole, considerably less work around though and British expats hoping to set up in business and trade with other expats should remember that those already living out in Spain have far less money to spend than they used to. However, the strong pound against the Euro enables tourists to spend more on their holidays, which helps the local economy.
From an investor’s point of view Spain is ripe for the plucking, but for those considering moving to Spain there are far more things to consider.