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News - Article from the Sunday Times

WHO WILL BE FEELING THE PAIN IN SPAIN:

Reports of the market’s demise are exaggerated - but some British investors could still lose out.

Don’t panic- the Spanish property market is not in meltdown. What sparked the recent slew of doom-laden headlines was not the market going into freefall, but a fall in the Spanish stock markets as jittery investors dumped constructions stocks in April.

Shareholders reassessed the outlook for the property market, which is largely a domestic one, catering fro Spanish buyers of primary residences. Share prices have been bullish for the past three years, but despite the booming economy, rising interest rates and evidence of a housing slowdown triggered a correction.

According to figures released by the Spanish housing ministry, average property prices rose by 9.1% during 2006, down from 12.8% annual growth in 2005 and from almost 20% annual growth in the couple of years before that. So, a market that was boiling a couple of years ago is becoming tepid. Spanish Land Register figures reveal that overall house transactions fell by 7.5% in 2006 and, for two or three years now, there has been plenty of anecdotal evidence suggesting stagnant or falling markets in some of the areas popular with Britons.

So with the good times seemingly over, what does this all mean if you own a holiday home in Spain, or want to buy one? The biggest losers are short - term speculators who over extended to buy off -plan in the final years of the boom, thinking they could “ flip” it and make a profit. In the same boat are those who have bought an average property in an overdeveloped area in the past three years and anyone who didn’t do their homework and paid over the odds.

Losses may become more widespread if Spain goes into a construction – led recession. This is not impossible, given the extent to which its economic growth depends on the housing sector. A recession would hit domestic demand for holiday homes hard, pushing prices down. Even so good quality properties with foreign appeal would probably get off lightly and the market would recover in due course.

ANY BRITON WHO BOUGHT AN ATTRACTIVE PROPERTY IN A GOOD LOCATION FIVE YEARS AGO, OR MORE, SHOULD NOT WORRY. GOOD CAPITOL GROWTH SHOULD MEAN THAT THESE PROPERTIES SHOULD STILL FETCH A REASONABLE RETURN WERE YOU TO SELL NOW.

If you are really willing to do your homework, the market wobble could be a good time to hunt for a bargain and now is the best time in a decade to drive a hard deal. Remember a smart buyer looks at whether or not a property value for money, not just how cheap it is.

COSTA DEL SOL:

Buyers activity on the western Costa del sol peaked in 2005 and has been falling since.

Prices are back to where they were two to three years ago, with corruption being tackled and infrastructure improved, attractive properties in better areas are selling quickly for reasonable prices.

You can find a two bedroom flat in Elviria for 220,000 pounds sterling, or a two bedroom townhouse in Marbella for about 465’000 pounds sterling.

Inland there is even a shortage of the fincas sought by affluent Britons . “ Buyers now are savvy people with money, not the deranged investors of a few years back..

Unfortunately there is also a growing glut of apartments in mediocre locations all along the coast. Their value is likely to fall. The same applies in all coastal areas that have been overdeveloped.