Rising numbers of foreign property buyers in Spain have prompted much discussion among estate agents and homeowners alike; will home prices remain stable, fall further or even show a modest rise in 2013? While some markets have fared better than expected, such as prime property in Costa del Sol resorts like Marbella or homes in Mallorca, other property markets are either stagnant or have attracted little interest at all.
Chris Mercer, director of Murcia-based estate agency Mercers, said at the end of December 2012 that the temporary reduction of VAT on new housing (from 8% to 4%) had helped to boost sales. However, this tax holiday has now ended and on 1st January this year, VAT on new homes went up to 10%.
One of the most pressing problems for property buyers in Spain is raising finance, Chris Mercer stated. “The main issue is that bank funding will continue to be a problem in Spain. If a buyer wants more than 50% loan-to-value and the property is not bank-owned, it really is a no-go situation.”
He said the market would be limited to wealthy international cash buyers and those not put off by lower-end, distressed property in less desirable areas. According to estate agents’ Mercers findings, foreign buyers tended to originate from Belgium, France, Germany, Holland, Norway, Sweden and increasingly, British buyers, who were returning in greater numbers.
While Murcia’s prices tend to attract the lower end of the foreign buyer market, Marbella and its Marina at Puerto Banus is still top of the list for international buyers looking for Spanish real estate.
Nick Stuart, director of Marbella-based Spanish Hot Properties, sees a very different picture: “Marbella is still a very desirable area of choice for international buyers. There is even a shortage of the best homes in key parts of Marbella and Puerto Banus.” Nick Stuart said, adding that Marbella’s high proportion of sunny days at Europe’s southern most tip combined with great accessibility via Alicante, Malaga and Gibraltar Airports were still one of the resort’s main attraction.
“This makes Marbella very appealing. Move further away from the centre and there are still fantastic deals to be had in secondary locations such as Estepona and Mijas Costas, which are only 25 and 30 km away from Marbella respectively, but half the price,” he added.
Marbella prices are also a talking point among investors. “Two bedroom apartments selling for EUR 250,000 today were priced at half a million at their peak, genuinely many properties are half price, and I don’t think the Brits quite see that.”
Last year Spanish Hot Properties recorded increases for sales and turnover of 25%, compared to 2011. Nick Stuart predicted a 50% increase in sales and turnover for this year, compared to 2012, but stated the sales increase would likely come from Swiss and Norwegian buyers, as their currencies were based outside of the troubled Eurozone.
“We will find that cash buyers will be in a strong position to negotiate and will generally get discounts on properties up to the EUR 300,000 mark,” Nick Stuart said.
Given that a 2-bed, 2-bath luxury apartment in eastern Marbella on average costs around EUR 150,000, cash buyers with at least EUR 300,000 to spend can expect juicy discounts on top of the already reduced sales price.
Despite headline grabbing news of declining Spanish house prices, the real value of homes has actually gone up in many Spanish region, a study published by official source Ministry of Development revealed. Since 2001 home values have risen by 66% in some parts of the country; in fact, values in Murcia and Andalucía jumped up by 75% and 74.8% respectively, according to the survey. So should one see the past few years’ slump as a healthy readjustment of pricing levels?
The collapse of the Spanish construction industry and the huge number of unsold new homes will continue to haunt the market until at least 2019, many experts predict. This means, areas like Mallorca, Ibiza and Marbella at the Costa del Sol will continue to be in short supply of luxury, sought-after prime property and here house prices are likely to rise as a result.