Are buyers returning to the Spanish real estate market?

[Nicholas Wallwork]

In the aftermath of the 2008/9 worldwide economic meltdown the Spanish and the Portuguese real estate markets seemed to be amongst the hardest hit. There was a massive buildup of repossessions and to a certain extent this has overhung the market since the economic meltdown. While there are signs buyers are returning is this right

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[nmb]

There has been and always will be particular interest in the Spanish property market from UK expats. While some UK investors may well be sitting on the sidelines at the moment, waiting for unwanted housing stock to be cleared, it seems highly likely they will be back in significant numbers at the first sign of recovery.

 

[Daniel Douglas]

In a word, YES! The market has been in a growth period for almost 18 months, albeit with an inkling of political uncertainty - in my opinion creating a much needed, temporary, shift in focus which will ultimately build a platform for Spanish politics and economy that is sustainable for the long term. Spain as a country has already outpaced all over EU members states in terms of GDP growth, with real estate the driving force behind this. Institutional investors have been positioning themselves in the real estate sector since 2013-14, such as George Soros, Carlos Slim and even Bill Gates (not to mentioned Hispania that has been buying up bulk with the forecast of recovery)

Household demand is the driving force for Spain. Foreign Direct Investment for real estate in 2015 accounting for over €20 Billion!

In tandem with social behavior of the real estate market; big funds move in, copy-cat, retail investors follow the smell of money and as the price-per-square meter creeps up, HPI spikes a little - you have your mom's and dad's buying a home to join the buzz.

The country is slowly picking up, and gaining more of an international presence again. Returning Spanish property back into it's hay day - Madrid was the 5th most-active real estate market in Europe last year, generating over €5 Billion!

 

[nmb]

It will be interesting to see if there is a drag on Spanish property prices in the short to medium term as the banks look to jettison their unwanted property assets. Could the European economy be facing a wider problem if the UK decides to leave the European Union?

 

[Peter Mitry]

Spain will always be popular with Europeans because of the relatively short travel time to get here; the days of the two week summer holiday in July/August are long gone. Most people will come to Spain several times in the year, often just for a long weekend. Prior to the financial crisis there seemed to be a belief amongst Developers that you could sell anything and properties were being built ever further from the beach; these were the first casualties. As Developers crashed, the banks repossessed assets, and an enormous housing stock built up throughout Spain. With credit hard to get, the banks used their funds to move their own stock, leaving agents to struggle to sell resales with limited availability of finance. This favoured the cash buyer and gradually the market has recovered with cash buyers able to negotiate substantial discounts.
Despite this, banks have succeeded in reducing their stock and a degree of normality is slowly returning. However, buyers have favoured finished properties and it is only within the last 12 months that new off-plan projects have begun to reappear. There is no doubt that the recovery is gathering pace. I personally hope that buyers will learn the lessons of the past and be more cautious about what they buy. There is no doubt that many of the shells of failed projects are hideous and should be demolished rather than just given a facelift and flooded back to the market. The greed of the town hall planners can be the only logical reason why some plans were passed and the neglected shells are in many cases an eyesore.

 

[nmb]

I agree with your comments because developers and planning officials in Spain always like to “make hay while the sun shines” but what happens when the sun goes in and the clouds appear? Many of the unfinished developments will be a blot on the landscape for some time to come although at some point they may well be interesting investment opportunities for those with a long-term investment horizon.

I was just about to say that I hope the authorities learn from previous mistakes but they won’t. Once the market recovers, allowing banks to sell repossessed properties, the more speculative developers will no doubt be back on the scene. What will it take to prompt caution in the Spanish holiday property market?

 

[lookinginvest]

Wait for the next big sell-off from the Spanish banks and then the market should start to be more predictable. How much repossessed property do the Spanish banks actually hold?

 

[nmb]

It is in the interests of Spanish banks to keep the market guessing about the levels of repossessed property they own. As we saw with some recent deals, we may see some large bulk purchases of repossessed properties from forward thinking long-term investors. Over the last few years we have seen large pension funds buying up masses of "undervalued property". A strategy of drip feeding repossessed properties into the market one by one would depress prices and forced many investors to wait on the sidelines.

 

[lookinginvest]

When will this much rumoured sell-off of real estate by Spanish banks actually occur? There was a spate of sales a few months ago but since then it seems to have gone fairly quiet.

 

[Longterminvestor]

A recent report by BBVA Research suggests that Spanish property prices will rise by around 3.5% during 2017. A forecast 6.5% increase in transaction numbers also bodes well for the future. Perhaps it is time to revisit the Spanish property market?

 

[DaveBig]

I have been buying properties for an investment fund in and around Sitges which is just south of Barcelona and the market is definitely moving up.
I also found a local agent who let's me bypass the company she works for, so instead of paying 5% commission, I just pay 1.5%.

 

[Veronica]

I also found a local agent who let's me bypass the company she works for, so instead of paying 5% commission, I just pay 1.5%.

In other words she is abusing the trust of the company she works for and cutting them out so that she gets more money? Highly irregular and could end up with her getting the sack and maybe even sued.

 

[DaveBig]

In other words she is abusing the trust of the company she works for and cutting them out so that she gets more money? Highly irregular and could end up with her getting the sack and maybe even sued.

I buy a lot of property for the investment fund I work for and I find this sort of behaviour happens a lot.

In Sitges and Barcelona there are loads of agents desperate to do deals, charging commissions anywhere from 2.5% to 5%. So when someone offers me a 3.5% discount (i.e. I don't have to pay 5% commission),I will take it.

Funnily enough it is usually the upper managerial staff who do it as they are the only ones who can get away with it.

 

[realdeals]

I would presume that you do not receive the same level of protection when effectively dealing off the books?

 

[DaveBig]

I would presume that you do not receive the same level of protection when effectively dealing off the books?

Real estate agents don't offer much if any protection in most countries, that is what lawyers are for.

 

[Longterminvestor]

Surely real estate agents must be part of some kind of industry association?

 

[realdeals]

In any investment market, do not forget:

BUYER BEWARE

Work on that principal and you wont go far wrong

 

[DaveBig]

In any investment market, do not forget:

BUYER BEWARE

Work on that principal and you wont go far wrong

Yes, and don't trust agents.

 

[lookinginvest]

Personally speaking, I think reputation counts for a lot in the investment industry and if an agent is seen as unscrupulous, would you really want to work with them?

 

[nmb]

Going back to the original question - are buyers returning to the Spanish property market?