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By Vic Hurlstorm | November 18, 2009
Now may be the time buy Spanish Property at knock-down prices as the property market in Spain tumbles and “Distressed Property Sale” is prevalent in so many of the property for sale ads in Spain.
Prices of property in Spain are tumbling just as they are here in the United Kingdom and often they are falling at a greater rate. The financial problems of many Brits who bought a property in Spain for their retirement is compounded by the feeble exchange rate of the Pound to the Euro. This is a double edged sword that is bringing great distress to many retired Brits who have no choice but to list their property in Spain for sale and prepare to return home.
Spain has such a huge stock of distressed property for sale and these are some of the reasons why:-
The Pound/Euro exchange rate slumped from almost 1.3 to just over 1.0 Euro/Pound in the months from Oct 2008 to Jan 2009.
As the purchasing power of the pound fell, those people who retired in Spain in their own property, but who relied on an investment or pension originating in the UK were hit by the effect and some could no longer pay their daily bills.
People who assumed that the price of property in Spain would continue to rise when they took out a loan from a European-based lending institution also suffer from higher loan repayments and falling property prices.
And for people that have been struggling to keep up payments on a loan in Euros from their UK Sterling earnings and have not been able to do so, many have had their property in Spain repossessed by the bank and now it can be found for sale with the sign: ‘Distressed Property for Sale – Must Sell’.
A mix of considerable property oversupply, bad and in fact illegal planning grants, next to the universal monetary dip has meant that prices have in actual fact nose dived on Spain’s Costa’s and as we speak greater than 1,000,000 unsold properties are on the books of unfortunate local agents in Spain, but plenty of these have been built with Spanish buyers in mind.
Of course Brits have been buying property in Spain since the 1960’s and the love affair with the Costa Del Sol and in particular Marbella has always been a particular favourite. For buyers who purchased in Spain in the 1990’s and prior they are likely to be sitting on a handsome profit but for anyone who decided to invest in the last few years their journey may not have been as profitable or stress-free as hoped. They may well have been distressed themselves.
However there is a light at the end of the tunnel. Confidence is slowly returning to the Spanish market as the decline in house prices stabilises and banks allow developers to remortgage projects. Many agents in Spain are now confident the bottom of the market is in sight and I would argue you can buy today at the very lowest prices we are likely to witness. The number of distressed property sales in Spain may be set level off.
Below-market deals are nothing new, but the critical financial position of many developers, banks and owners is pushing more deals into the distressed sale category which in turn means that more deals are being done below actual values rather than merely at a discount to the asking price.
The combination of dropping property prices in Spain and a strictly restricted route to backing has persuaded experienced investors to search for and invest in low, mid and top end first-rate distressed property at a price truly below their open market value.
With the popular choice in all-found holidays on the way out and many of us electing to lease private living accommodation and therefore choose a many private vacation, the leasing market for superior houses is thriving. This further builds a to think about buying a property abroad, although the rent achieved on vacation lettings infrequently covers the full yearly mortgage payments and maintenance costs hence well thought-out cost planning is recommended.
As any savvy investor will advise you, it’s the rate that you pay instead of the rate that you sell for that really dictates the earning ability in many a property deal. Marbella in southern Spain is a real case in point of a ‘lifestyle’ investment choice, fundamentally a holiday home that can provide a fabulous center for personal vacation and that will be retained for at least 5 years.
Now truly is an opportune occasion to get hold of a property in a distressed sale position for up to 50 pc under the current market price for those of you who are well-off enough to be in a position to put up a deposit of approximately 30-40 pc on a distressed property purchase in Spain and who hire the knowledge of the leading consultants, lawyers and banks, and crucially take pleasure in your investment in the Sun.
This fifty percent discount on some properties is down to the fact that they are heavily reduced by the property owner (or the bank if previously foreclosed) by a considerably larger amount than the mean price drop in Spain. This is effectively an opportunity for the inexperienced investor to advertise the property just about instantly at a higher price.
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