EXOTIC AND VIBRANT would automatically come to mind when one thinks of Spain. People always associate the country with lavish festivals, summer getaways, rich culture and gorgeous weather, making it one of Europe’s most popular tourist destinations. Data from the World’s Tourism Organisation show that 56.7 million international tourists visited Spain in 2011, the second highest in Europe, and 10 million more than the country’s population.
However, people also associate Spain at the moment with the words debt-ridden, default and bank crisis. The country’s government is broke after years of massive spending, and will soon ask the International Monetary Fund for a bailout to salvage its banking sector.
So what does this mean for the country’s property market? There are scattered reports of good sales and improved prices in some areas, but Spain’s property market is undoubtedly not in good shape. According to Chesby & Co.’s Peter Esders, the country’s domestic market is not moving, and it looks like foreigners are the only ones interested in buying. But sadly, even they are not buying in the same numbers.
As Spain’s property market has nosedived in the last couple of years, foreigners buying properties in the country are generally paying at record-low prices (and prices are likely to fall further). These people are also buying for personal use rather than investment, and they see their purchases as long-term investments and do not expect to make profits any time soon.
Buyers of Spanish properties at the moment may be considered lifestyle buyers: they are spending their own savings rather than using a mortgage; they are looking for properties for their own holiday use with a view to retirement in the future; and they are looking into renting out these homes when they are not using it.
This is where Spain as a tourist magnet comes in. Being one of the most visited countries on earth, tourists will flock to Spain regardless of its economic condition – and these tourists will need some form of accommodation during their stay in the country.
According to Esders, there are plenty of good deals in Spain. It’s just a matter of choosing the right location. The islands of the Balearics and Canaries offer plenty of opportunities in this department, says SelectProperty.com.
Enquiries from overseas property hunters to Spain are said to have risen by as much as 33%, says Clare Nessling, director of mortgage specialist Conti. ‘Bargain prices and the opportunity to negotiate these down even further with some very motivated sellers mean that it’s most certainly a buyer’s market.’
The property price drop in Spain is now even more attractive to Asian buyers as the exchange rate between Asian currencies and the euro means that Asians get an even better deal. In addition, the value of homes in the Canary and Balearic islands has decreased by almost 7% over the past year according to Tinsa’s Spanish House Price Index for June. This is especially good news for cash-paying individuals purchasing properties on a buy-to-let basis for the purpose of a holiday home.
Also, a possible knock-on effect from the political and economic difficulties in Greece could be that more investors are turning to Spain. So says Jon Ainge, director of International Property Success, who explained the continuing turmoil in Greece is holding the value of the euro down, meaning the exchange rate between the single European currency and sterling is likely to be favourable for British buyers for some time.
Each of the four islands that comprise the Balearics has a theme. Mallorca, the senior island, has a bit of everything, from mountains to the standard seaside tourism. Ibiza is synonymous with clubbing. Menorca is a haven of tranquillity: isolated beaches and coves, and prehistoric monuments. And tiny Formentera, a chill-out island, is the place where some people lose themselves for the entire summer, needing little more to keep them happy than white beaches and sunset parties.
Not surprisingly, properties on these islands are attractive to buyers due to high tourism rates.
Marc Pritchard, sales and marketing manager of Taylor Wimpey de Espana, said: ‘In spite of what is happening in Spain, many property investors still hold confidence in the market, recognising the Mallorcan property sector as one of the most resilient.’
The island has an abundant selection of properties for sale (partly because many people in financial trouble need to urgently sell their properties). According to real estate firm Balearic Properties, some of the properties they sold have reduced dramatically in price.
Examples of such properties include a villa in Pollença in Mallorca’s northern coast. Originally priced US$493,142 (€395,000), the three-bedroom, two-bathroom property now costs US$368,274 (€295,000). Another is a four-bedroom, three-bathroom villa in Bendinat. The 175-square-metre property costs US$755,237 (€605,000) and is close to Cala Bendinat, the municipality’s famous beach. Over at Ibiza, Spain’s famous beach party spot, villas and apartments offer savvy property buyers good rental returns, especially during the summer months.
Real estate website Ibizapropertyshop.com lists a myriad of great deals, one of which is a luxury four-bedroom garden apartment in the island’s Cala Gracio area. The US$699,017 (€560,000) apartment boasts of modern, fitted kitchen, marble floor, private garden and fantastic sea views.
With all of the negativity surrounding Spain’s economy and the eurozone crisis at the moment, it’s refreshing to see that not all is bad with the country’s real estate market. Property investors are still keen on making purchases in Spain.
Nick Marr, director at Homesgofast.com, said the country offers ‘massive bargains. Buyers are treading gently and securing some great deals’. However, he cautions people to ensure they do things properly and seek the advice of professionals when looking into any homes outside their home countries.
Investing on Spanish property is more than just the money. It’s investing in a way of life. Some may argue that living in Spain automatically upgrades the quality of your life, and they’re not mistaken. Whether you choose a villa, a house, a flat or even a tiny apartment, remember this: there’s no judging houses in Spain, and there’s no place like it anywhere in the world.