“We think prices will recover in the traditional coastal areas like the Canaries or Malaga within five to eight years, but for now banks are offering huge discounts and nobody is calling. Marbella [property] has already fallen by 50% and prices are going down and down,” said a worried Mr Fernando Rodriguez de Acuña, the president of Spain’s foremost property consultants RR de Acuña & Asociados.
Many industry experts are forecasting another 30% drop in prices throughout major cities in Spain with a predicted 50% decline in the over-supplied Costas property market to follow. Some of the Mediterranean coast has so much unsold property on the market, it may take another 15 years to sell.
While this is terrible news for people who bought at the peak of the housing boom, which ended catastrophically in 2008, the decline of prices is good news for people wishing to retire to Spain in a few years’ time. Buying in 2013, when prices are still falling, and renting out the property for a few years as a holiday let will recoup some of the purchase costs and make for a great nest egg in the future, when the market starts to recover. There’s plenty of choice.
“We calculate that there are almost 2 million properties waiting to be sold. We have made no progress at all over the past five years in clearing the stock. The market is broken,” said Mr Rodriguez de Acuña. “There are 800,000 used homes on the market. Developers are sitting on a further 700,000 completed units. Another 300,000 have been foreclosed and 150,000 are in foreclosure proceedings, and there are another 250,000 still under construction.”
From golf resort villas and seaside apartments to town houses in major Spanish cities, banks are cutting prices by as much as 60% in some instances. Perhaps not surprisingly, some coastal properties will face demolition, since banks are no longer financing in areas like Castellon near Valencia, where the construction of new developments went completely out of hand during the peak of the housing boom.
In Marbella and other Costa del Sol resorts luxury properties costing around EUR 250,000 are currently the greatest hit with foreign buyers – the reason being that such offers are really for apartments that once entered the market with a list price of more than EUR 500,000 and therefore represent top of the range bargains.
In a bid to attract more buyers from emerging markets like Russia and China, the Spanish government recently announced new legislation for residency permits. Easing residency requirements for citizens coming from outside the Eurozone was a means of attracting foreign buyers to property markets in Ireland and Portugal – Spain is clearly trying to jump on the band wagon, but if this latest measure will be a similar success remains to be seen.
Russian buyers have jumped at the chance to own Costa del Sol property but Chinese buyers prefer to hedge their bets. They have targeted real estate in industrial areas instead of heading for Mediterranean holiday homes or residential property in major cities.
With the residential real estate market suffering from melt down the private rental sector is booming and rents are rising across Spain. Some Costa del Sol properties can be purchased for less than EUR 100,000, offering a healthy rental yield to investors.
A typical 1 to 3 bedroom apartment in Elviria in the east of Marbella can cost as little as EUR 150,000 for a brand new property with 107% finance. A luxury apartment in El Rosario, a sought after residential district in Marbella, will cost around EUR 270,000 for a 2-bed, 2-bath south-west facing property on the ground floor and EUR 280,000 for an apartment located on the first floor.
Marbella property is ideal for holiday and long term rentals, thanks to the resort’s close proximity to airports and a large expat community already living there. For those thinking of relocating to Spain permanently in a few year’s time, now is the time to consider buying a Costa del Sol property and renting it out.