Barbara Wood has written an erudite article analyzing the current state of the residential property market in Andalucía. It is on Mark Stucklins excellent website Spanish Property Insight. There is a link to the full article at the bottom of this page.
Barbara really clarifies the issues about which we property professionals in Spain all gossip and she makes some interesting insights for anyone thinking of entering the market.
She covers a lot of ground in her article so I hope she will forgive me for cherry picking. Here are some of the things that stood out for me.
The Prime Residential Market is Active
“The key to understanding what is happening in Andalucía’s property market is realising that while much of it remains in a coma, activity levels in the prime locations continued rising during 2011,”
That’s a few prime locations. The buyers are cash rich.
Marbella Property Is Largely All Legal Now
Barbara admits there has been plenty of damage to the regions reputation but the fact is the PGOU is now ratified and all developments must comply with it.
The Overseas Buyers Market Is Active
Barbara makes the point that the domestic market, fired by the domestic economy, is completely distinct from the overseas buyers’ market which is driven by the performance of foreign economies.
For this reason many of the statistics from the ministry of housing which are reported in the press are irrelevant to overseas buyers. The statistics dont distinguish between the two markets. She says “For example, at first glance the figures showing the number of transactions done in the 3rd quarter 2011 look dire; a 16.8% fall compared with the previous quarter and down 6.3% year on year. However, if the purchases by overseas buyers are separated out there is a year on year increase of 24.7%”.
That’s very interesting if you’re thinking of entering the market.
Really Prices Have Fallen 40% from the Peak
She also makes the point that the statistics don’t allow for the fact that at the time of the boom it was commonplace to under declare the sale price so the seller could avoid capital gains tax.
She points out that if you allow for this under declaration of sales prices then prices have fallen from the peak by some 40 % not the 20% the statistics suggest and are now back to 2003 levels.
Asking Prices Now Realistic
Barbara points out that there hasn’t been a year on year decline in property prices in the overseas buyers’ market. She says “they fell like a stone at the outset and vendors either went all the way or they have been nibbling away over time until they reached this floor.” Anyone serious about selling had to suffer a 30-40% price reduction. Many vendors have been hanging on since the peak finding it difficult to accept a reduction from they once had. Buyers got into the habit of putting in offers of 50% or less off asking price trying to flush out the forced sellers. All this created great uncertainty and disinformation in the market place.
However since the summer of 2011 Barbara says this has changed and that with some exceptions asking prices are closer to value. She says “ there comes a moment when people just want to move on with their lives and I think we have reached the tipping point” and “ in 2012 I believe buyers can be more confident that most asking prices are a good indicator of what the right purchase price is, with an element of flexibility for some negotiation”
Eurozone Crisis Dominates People’s Thinking
We all know this and Barbara very wisely points out that everyone will assess the risk associated with this in a different way. She says” As regards predicting market behaviour in 2012 the great unknown is how much confidence is affected by the economic and political uncertainty in the Eurozone and beyond. Confidence is an essential component in property markets but it is a very subjective ingredient and two people can look at the same situation and reach different conclusions. “
Author: John Wolfendale
Bio: John is a founder of Eco Vida and is passionate about bringing modern design and construction practices to Spain. He believes a home which is warm in winter and cool in summer is largely a matter of design and selective use of materials. He is British and a Chartered Surveyor with 18 years experience living and working in Spain.