According to the Spanish Statistical Institute, in 2014 throughout Spain sales of resale properties increased by 18.4%, whilst on the other hand sales of new builds fell sharply by 16.9%. Certainly, we at Survey Spain have seen a significant increase in demand for pre-acquisition building surveys of resale property over the last six months. As usual with statistics there’s more to this story than just the headline. Apparently new builds sold by banks, who have secured them from developers/investors, are classed as resales even though they have never been lived in. Therefore, a property that could have been sold by a developer is a new build but when sold by a bank will be classed as a resale. It can have the benefit to the banks marketing the property and for the buyer acquiring from them, in that in some areas of Spain the purchase tax on resales is less than the 10% VAT on purchase of new property.
Locally on Costa del Sol, in the best of areas the market appears to be buoyant. Taylor Wimpey are reported to have sold out the second phase of their San Pedro de Alcántara development and to be actively negotiating for another two sites nearby. Their beach front property to the west of Estepona is also reputed to have been selling well. The best located completed and almost completed urbanisations have been sold by the banks to investors some time ago and even those further back in Nueva Andalucía have seen the last available units sold, which shows the power of providing an attractive product at the right price with the right marketing.
The growth in demand is not restricted to the ‘Golden’ areas of Marbella, Benahavis and Estepona, but is also reported by our Network valuation colleagues throughout the Costas. The principal way that the strength of demand is shown is by the continuing reduction in the difference between the asking price and the eventual sale price. In early January we reported that it had dropped during the last year from 15.37% down to 10.93%. Although this quarter has not been completed and thus the statistic is not available, there is undoubted evidence to show that in many places it’s less than 5%. Indeed, some sellers are showing such confidence that they are increasing the asking price of the property, knowing that still they will be able to offer a discount to a potential buyer that will be attractive, but bring in a higher end price.
One slight cloud has been the significant reduction in Russian buyers due to the sanctions and collapse of the strength of the Russian economy and the rouble. However, for those who have funds available outside of Russia it will perhaps make them keener to take up the rights of residence available through significant investment in the country. In addition, the weakness of the euro has meant that other buyers from outside the Eurozone, being mostly in northern Europe, with those from UK seeing house prices here effectively reduce by about 9% over the last year and therefore are keener to acquire ‘bargains’. The reverse is true of course for the seller who is intending to buy in one of the non-Eurozone countries, but they and the buyer can perhaps reach an understanding, consciously or not, to share the exchange benefits by a slight increase in price or hardening of the negotiating on the reduction.
Some wealthy buyers have been dissuaded from purchase and becoming resident in Spain due to the recent introduction of the declaration of foreign assets of more than 50,000€ euro. However, the good news is that it’s been reported in the press that the EU has objected to this legislation and imposed a fine on Spain to ‘encourage’ it to remove this requirement. That can only be good news for the property sector.
Lastly, to what’s going to happen over the next few months? Elections and the European Central Bank’s Quantitative Easing will be the principal determinants of the economies both in Spain and in its principal market, the UK.
According to the polls, both countries are going to see substantial political change with greater uncertainty over what will be the medium to long term outcome. No market likes uncertainty and some potential buyers may wait until the politicians sort themselves out, hopefully by the middle of the year. However, there will also be others who will declare a ‘plague on all you politicians’ and decide that the want to leave the UK and come to live, perhaps with a little ‘head in the sand’ attitude, in the sunshine and warmth of Spain.
It is hoped that the Quantitative Easing will permit banks to lend more to ordinary businesses and individuals, some of which must come in the form of mortgages. A greater availability and relaxation of the conditions of these will lead to more people being able to buy property, offer higher prices and generally increase activity in the market.
We at the Survey Spain Network, assisting existing and potential property owners throughout the Costas of Spain, are expecting the existing overall market to continue to gradually level off from its eight year fall, whilst the best properties in the best locations will undoubtedly see competitive demand resulting in reduced discounts and increasing prices.