Some experts predict it could take until 2016 for the Spanish property market to recover. But Nicole Rapaport has high hopes for Andalucia in the second part of our trilogy.
Last month the Spanish Mortgage Association declared that the country’s property sector is bankrupt. The Association’s president, Santos Gonzalez Sanchez, says there is so much debt in the industry that finance for property development has effectively dried up.
He pointed out that Spanish developers had a combined debt of €324 billion in the third quarter of 2009, the equivalent of around 30 per cent of Spanish GDP, according to figures from the Bank of Spain. The interest bill alone is around €15 billion a year. Meanwhile financial calamity in Greece has sparked fears of a domino effect across the Euro zone
While some accuse the Spanish government and banks of looking the other way, we turn our attention to what good can be gained from these tough times.
Cádiz
Jerez is a wonderful city within the province of Cádiz and is wildly undervalued compared to its neighbours. Most famous for being the spiritual home of flamenco, the birthplace of sherry and a centre for Andalucian dancing horses - Jerez has much to offer the globetrotter. It’s ‘Casco Histórico’ with a walled medina concealing cobbled streets, authentic tapas bars and the period palaces of the sherry dynasties, draws year-round attention, whilst the unblemished beaches of the Costa de la Luz are a 20-minute drive away.
Easy to reach, for nationals and northern Europeans alike, Jerez’s modernized International Airport is set to serve four million passengers each year by 2012 (up from 1.4 million in 2006) and will have its own AVE (bullet train) station connecting it to Spain’s major cities.
Chris Mercer, director of Mercers agency, thinks in the current climate it’s important to look for the best value, yet most profitable property for sale.
“We have some ideal investment properties, which you could snap up for around the €70,000 (£60,750) mark which could be rented to locals for around €450 (£390) a month, €5,400 (£4,690) per annum - a return of eight per cent or so, and still enjoy that capital appreciation in years to come. If you’ve got a 20 per cent deposit then the rent will comfortably pay the mortgage and, as you’re truly buying at the bottom of the market, you have an asset that will certainly appreciate,” said Mercer.
“The reality is that decent investment properties are out there, whatever the market. It just takes expertise and effort to find them. Our message right now is quite clear. If your property is overpriced you will not sell. You are wasting your own time and our time, whilst also giving the buyer an unrealistic view of the market.”
Steve and Lynne Breckon renovated an old townhouse into five luxury apartments in Cádiz. Always having been interested in the ‘real Spain’, they prefer the more authentic inland locations.
Steve said: “ Andalucia is a very big place, with lots to offer, and so you have to know what kind of lifestyle you want to create for yourself. For example, living in Granada is very different from being in the Costa del Sol. If you decide to move to a place away from the latter, you will have to understand basic Spanish, or at least know that plain English will only go so far. Embrace the idiosyncrasies of each Andalucian area, as each town is very different from the other.”
Huelva
Over-development is not a problem here, partly because two-thirds of the province is a designated national park, giving it a rural and unspoiled feel, and a shabby, provincial charm. This also means that the property markets have not experienced the volatility that others have seen.
Infrastructure is set for an overhaul. Huelva’s landing strip is to be expanded into an international airport by 2012. The area has fewer foreign visitors than any other coastal province in Andalucia, but1.5 million passengers are expected to pass through the new airport within the first decade of its opening.
And SAD sufferers need look no further, as The National Institute for Statistics in Spain last summer released a report which ranks Huelva, located at the westernmost tip of the Costa de la Luz, first in terms of hours of sunshine each year with a mammoth 3,200 hours – almost nine a day.
Malaga
There is something for everyone in Malaga - history, beaches and city culture, all with a superb Mediterranean climate. From the Picasso Museum to Puerto Banus, there is a diverse range of property investors located in one of the most famous, and indeed infamous, parts of Spain.
Victor Sague, marketing director of Taylor Wimpey España, said: “Whilst it is true that the Spanish property market has suffered price falls comparable to those in England, the extent and longevity of these falls are from universal. The market for homes in Spain throughout 2010 is set to be extremely fragmented. The prices for new homes in secondary locations where there is significant over-supply will continue to fall and it is these sectors that the Spanish Mortgage Association is no doubt referring to. However homes in the best locations are in short supply and already prices are rising steadily to keep pace with demand. “
“It is a grave mistake for anyone considering investing in Spain to generalise at all about the state of the market. How can you compare the market conditions in the centre of Marbella (high demand, low supply) with, for example, Seseña in Toledo, where a development of 3,000 units in a town of 13,000 inhabitants has been paralysed and has left a ghost town?”
Kandy Paterson, Marketing Director of developer Alanda Homes, agrees, stating that invariably, some areas do better than others.
She said: “Many will be surprised to learn that the Costa del Sol is weathering the property market downturn better than most other parts of Spain. The latest figures from the National Institute of Statistics show that transactions in Malaga province, home to the Costa del Sol, fell just 16 per cent last year, compared to a national average decline of 27 per cent, not to mention the 36 per cent fall in the Balearics.”
Waiting to see if prices go down further could be a mistake. “Quality properties are selling at these prices, and soon buyers will not have as much choice or bargaining power,” warns Paterson.
Seville
The godfather of all things Andalucian, Seville is the cultural, artistic and financial capital of southern Spain. Beloved by visitors, Spanish and foreigners alike, property in the city centre does not come cheap. However, property purchasers can find houses and land in areas where the residential tourist market is still being developed and consequently prices are favourable.
Barbara Wood of The Property Finders, buying agents and search specialists, advises that the rental potential for property in Seville is vast. This comes from year-round cultural tourism, a strong local market and huge events such as Holy Week processions and the April Horse Fair, when every single room is booked months in advance and rates at least double - even more if a window overlooks a procession route.
She said: “Looking at prices in the historic city centre of Seville I see evidence that many sellers are still not reducing their prices by enough. I see variations in prices per square metre that show this. For example apartments in the same zone at €2,500 (£2,170) per square metre, with others at €4,500 (£3,900) per square metre. As with the coastal markets, finding properties at the right price is about finding a seller who is desperate to sell and buyers should only focus on the absolute prime locations. In central Seville that means the Barrio de Santa Cruz and the Alameda area. Stray even one street outside the best areas and rental potential drops like a stone.”