The Spanish property market reached a peak in pricing terms exactly a year ago, according to Spanish Property Insight, and since then it has seen a radical shift in its fortunes. The property bubble has burst, fraudulent activity has been identified, builders have gone bankrupt and prices have crashed.
The changes in the market have been so dramatic in just twelve months that we have decided the time is right for a Spanish property market update now in December 2008. In this article we will therefore look back at the previous year, comment on the state of the market currently, and give you the expert market opinions for 2009.
If you own property in Spain or have long dreamed of either investing in a house in Spain or perhaps moving to live, work or retire to Spain, then this information will be important for you.
According to Spanish Property Insight, property prices in much of Spain reached their dizzying and loftiest heights last December. This was already in defiance of growing sentiment relating to an over supply of real estate, particularly in coastal areas, however prices were kept healthy until this point by on going demand for city and town based property. And then the mood in Spain changed.
There were many contributory factors to the decline of the Spanish property market’s fortunes. A strong euro against a weak pound frightened some British buyers away, as concerns then grew in Great Britain about the health of the UK economy and housing market this stopped greater numbers of people even thinking about buying a home abroad, let alone committing to a house purchase in Spain. The Spanish economy faltered, and then to undermine everything even further, word broke about potential Spanish land fraud and builders facing bankruptcy. It suddenly seemed that the intensive period of construction in Spain had produced a massive oversupply and glut of homes that no one now wanted or was able to purchase.
Almost overnight the Spanish property market’s fortunes changed. Today we find the market having returned to the median prices of May/June 2006 and falling, with average prices on the coast more savagely hit falling up to 12.8% in just 11 months. Meanwhile between 600,000 and 1 million new homes sit empty and unsold and property transactions in Spain are down by 70%. Spanish property investment company Fortuna Estates is being investigated for land fraud with arrests already having been made, and the likes of Compañía Inmobiliaria Masdevallia and Martinsa Fadesa are in administration as they cannot afford to carry on building. This has left thousands of investors and home buyers from the likes of the UK and Ireland out of pocket and facing law suits and legal battles to either get their hands on the houses they have bought, or get their money back.
Naturally all of this has almost entirely soured the appeal of Spanish property, and nowadays even leading property consultants are advising that Spanish property prices need to fall by up to a further 23% to bring any affordability and interest back to the market. Fortunately construction rates have fallen in Spain which will ease the backlog of homes to be sold, but this has a knock on effect with the chairman of the Promoters Association of Madrid predicting that up to 900,000 Spanish workers related to the property industry will lose their jobs as a result of the downturn in 2009.
So, 2009 is highly likely to be as bleak as 2008 as more companies go to the wall, staff lose their jobs and buyers remain conspicuous by their absence. This will likely force values down as anyone seeking a buyer will have to fight very hard to get their attention. This means that if you’re attempting to sell a property in Spain you will potentially be very hard hit. However, if you own property in Spain and do not need or want to sell it, you needn’t overly concern yourself as long as you can afford to sit on your asset and wait out this negative period until the market returns to health in the medium term. Additionally, if you’re looking to buy property in Spainor you want to move to live, work or retire to Spain you could find that in 2009 your position improves considerably. As prices fall and buyers and developers become more desperate, so you will be able to secure a property bargain. Plus, if you’re in no hurry to purchase you could always rent in Spain while you watch the market and feel for the bottom of this terrible pricing trough!
You see, there are winners and losers in a situation like this. The losing side is obvious, but we should not overlook those who will be able to use this downturn to their best advantage and afford to buy a home in Spain that they may otherwise not have been able to buy if prices had continued spiralling upwards!