q-reportThis is our 10th Quarterly Report. We have kept it brief and specifically relevant to the locations where Survey Spain is especially active.

As part of the research we have identified a number of wider and national property comments.

Votes and Results

  • Brexit is the biggest item to have hit the market. Prior to the vote on 23rd June 2016, the £ sterling fell slightly, but the principal effects were in potential buyers waiting for the vote before purchasing or committing themselves to purchase, some with a clause permitting them to pull out of the contract in the event of the UK voting to leave the EU.
  • Since the vote there has been a marked drop in British interest, evidenced in this office by 3 pre-acquisition building surveys being cancelled the day after the vote.
  • Foreign exchange companies report that they have experienced a considerable drop in enquiries from UK, but many enquiries from Costa del Sol to transfer funds into sterling.
  • After the vote, the exchange rate dropped by approximately 10% and has maintained that low-level, making property purchase here by sterling buyers that much more expensive.
  • However, for sellers wishing to go back to the UK, they are now going to achieve 10% more sterling when they sell. Accordingly, some sellers indicated that they are prepared to drop their asking price and/or permit negotiation on that price.
  • Whilst the British market is the major one in some areas, it is not by any means the only one and thus buyers from other currencies will have found more bargains.
  • The end result is likely to be a continuing reduction in UK buyers, both due to volatility in the exchange rate, but also, for those intending to take up residence, uncertainty with regard to health care, working rights, tax levels, etc.
  • The political situation in the UK has stabilised slightly with the appointment of a new prime minister who has stated that “Brexit means Brexit” and therefore the perception in the market will be that it is something that we have to deal with. However, there could still be legal and political challenges to it so in addition to the uncertainty regarding the eventual economic environment for UK passport holders, there is continued uncertainty as to whether the UK will pull out of the EU and when that might be.
  • Within Spain, there was also an election 3 days after the Brexit vote, which, as in December last year, was inconclusive in not appointing one party with sufficient votes to govern independently. As before, there is considerable negotiation between the parties, but as of this date there appears to be no conclusion in sight and the Popular Party continues to govern in absence of any decision.
  • This is likely to continue the uncertainty within the Spanish economy and, whilst there are reports of increased demand and resultant property development in the principal cities of Spain, this is unlikely to spread out to the country as a whole due to the continued indebtedness of individuals, banks and the Spanish national economy.
  • Given that the property markets of the Costas are so heavily influenced by international buyers, the areas where these buyers predominate are largely unaffected by Spanish national politics.
  • The exception to this and significantly affected by Brexit, are the areas where Gibraltar residents, workers and investors catering for them have traditionally purchased. These areas are likely to be significantly affected by Brexit, with concerns that the economy of Gibraltar will be severely hit and even the gates to Spain closed as they were in 1969. The Popular Party is also the most strident in its demands for the change of sovereignty for Gibraltar and in continued harassment of businesses, tourists and general personnel travelling to and from and connected with the British colony.

However

  • The situation as detailed last quarter continues, with strong demand from other nationalities, tempered a little by concerns as to how Brexit is going to affect the strength of the euro.
  • Construction activity has continued, with reported substantial increases in planning applications and construction starts throughout the best locations in the Costa areas. Developers are encouraged by estate agents reporting that there is a shortage of quality product in the right locations. However, the developers are finding that best locations have already been acquired and that the banks have largely sold off their skeletal semi-finished urbanisations. Some difficulty is being found in Marbella, though, where developers are unwilling to acquire developments from banks where the development has been found to not comply with the planning regulations and where there is no certainty of the development being approved in the next round of Marbella is planning cycle.
  • Whilst the market was seeing some reasonable increases in value in ‘hot spots’, this is by no means universal and in some areas where there is a surplus of supply and/or a significant lack of demand, prices are continuing to reduce.
  • The overall effect on actual prices paid due to the increased certainty of Brexit will not be able to be ascertained for a few weeks, other than adjustments by agents and developers as a result of anticipated changes in demand. Most parties are waiting to see what happens before making any radical changes.
  • However, it is probable in the medium to long term that there will be less influence of the UK and an increased concentration by estate agents, developers and other businesses on other markets, principally northern European including Irish, Nordic, Finnish, Dutch, Belgian, German and even some Poles, plus Middle Eastern, Chinese and other less prominent buyer groups. Estate agents already report increased activity. One agent who deals principally with Swedish buyers, reported that May and June up to the UK Brexit vote had been very slow, but that July had already surpassed the deals done in the previous 2 months.
  • The Costa del Sol and the Costa Blanca report that they have never been so busy with tourists and certainly personal experience has shown exceptional traffic congestion due to the weight of traffic, and that before the holiday season of August. UK tourists are reported to be spending less per head, but others are proceeding as before and business income is projected at record levels, which will all increase the local economy and eventual tax income of the country.
  • The requirement for a licence for individual rental properties available on short-term let came into effect in Andalucía on 11 May. This has caused considerable concern and possibly a reduction in the availability of such properties in the general market, which will result in an increase in rent levels thus making properties more attractive to investors. However, it is too early to ascertain whether these have had a significant effect upon the property acquisition market, and that is likely to be the case until there is publicity regarding heavy fines of individuals and companies who have continued as before without obtaining a licence. As licensing such as this has been in place for some time in a number of other parts of Spain, it is probable that the market will settle to a level of acceptance. The difference now is the active identifying of such properties by the authorities, employing a considerable number of additional ‘detectives’, who are ‘trawling’ Internet sites advertising tourist properties to let. If the licence number is not stated on that site, then visits are made, fines incurred and the activity stopped.
  • One additional matter and related to the above is that it’s been revealed that the Spanish Supreme Court has decided for objectors to the general plans (PGOU) of a number of municipal areas and not just of Marbella. Accordingly, whenever a new PGOU is created governing the planning situation of a municipal area, it is probable that these decisions will encourage objectors to appeal against them and take those appeals all the way to the Supreme Court. This will provide another level of uncertainty to the planning situation of many properties depending upon changes in the PGOU.
  • On the other hand, due to continuing pressure from single interest groups, it appears that the Junta de Andalucía is gradually refining its ‘regularisation’ procedure for the tens of thousands of illegal properties within its territory. Many of those, for example built in ‘dry’ riverbeds, cannot justifiably be ‘saved’ as many have already been damaged or indeed destroyed due to the riverbeds becoming active once again during periods of exceptional heavy rain. As these periods are forecast to increase frequency and intensity due to the global warming, it is not practical for these properties to remain. In addition, they are highly unlikely to obtain building insurance and therefore mortgage finance, making them unsaleable to any prudent person.
  • We also refer you to comments made in the last quarter statement, many of which still apply.

Analysis of Statistics

  • Brexit could bring considerable changes to the market in some areas, as discussed above. Note that the statistics are based on the pre-Brexit market and thus should not necessarily be projected as likely to continue in the Summer quarter to October.
  • Survey Spain is recording prices and valuations throughout our Network. Due to the limited number of properties and the even fewer number of reliable sale figures, we are only able to provide a meaningful analysis of prices and values for some Municipalities this quarter. However, as before, we have commented on the majority of the areas relevant to the Bank, with the opinion sourced from our valuers, agents and other sources in the areas.
  • Where we have insufficient information, we have combined information into larger areas.
  • As requested and also as this is the area with most activity, we have been able to provide more information on the Costa del Sol market.
  • Note that the rates per square metre may be averaged from a small number of properties in some cases. We have continued to supply these as we believe that they will show a trend over a number of quarters, whilst the variation between one quarter and the next may be ‘out of step’ with the perceived trend

Value per sq m for this quarter.

  • There is a substantial range over the whole area.
    • Values this quarter were higher than previously, but that is probably just the result of the larger property sizes forming the database. The highest total value was a villa in Benahavís, but not Zagaleta, valued at 7,350,000€ euro, though the highest rate per sq m was found for an apartment in Marbella at 7,437€ euro/sq m.
    • The average of all the properties inspected was 2,107€ euro/sq m.
    • The lowest value, for a villa in Alicante, was 587€ euro/sq m. Given that the village it is in is called Dolores, meaning pain or sorrow, that is perhaps appropriate!
  • Analysis of all the Asking Prices, Buying Price and Valuations, over the period from the start of our record in 2014, has shown a decrease in the differences and currently indicates the following –
    • The % difference between Asking Prices and actual Buying Prices –
      • 3rd Quarter 2014 -15.80%
      • 4th Quarter 2014 -11.41%
      • 1st Quarter 2015 -18.64%
      • 2nd Quarter 2015 -10.73%
      • 3rd Quarter 2015 – 8.72%
      • 4th Quarter 2015 – 9.38%
      • 1st Quarter 2016 – 11.68%
      • 2nd Quarter 2016 – 5.69%

We are of the opinion that the above records showing the difference between asking prices and buying prices are the most significant information relating to the market. However, we comment on the other statistics found too.

The market in individual areas. 

  • San Roque and La Línea, including Sotogrande.
    • The evidence relates to villas, townhouses and one apartment within Sotogrande and the surrounding areas.
    • Rate per square metre for all property types – 2,429€ euro per sq m
    • Within this ranges from 1,047€ euro per sq m to 3,638€ euro per sq m.
    • There must be an increased level of nervousness in the area due to Brexit, and the belligerence of the Spanish Government’s attitude to Gibraltar, as many of the owners and tenants are Gibraltarian and/or work in Gibraltar. The economy of the whole area benefits so greatly from Gibraltar sourced income that logic states that Gibraltar should be assisted by Spain, but as far as Spain and Gibraltar is concerned, logic does not always apply!
    • We anticipate that prices will remain at the current level, but may reduce due to hesitation by potential buyers.
  • Manilva, Casares, Gaucín, Castellar and Jimena 
    • These towns have a substantial amount of poorer quality properties near to the coast, but also high quality villas and country houses further inland.
    • As previously, there has been increased activity.
    • Rate per square metre for all property types – 1,810€ euro per sq m
    • Within this ranges from 817€ euro per sq m to 3,043€ euro per sq m.
  • Estepona and Benahavís (The Western section of the Golden Triangle and the New Golden Mile)
    • These municipalities contain a wide variety of locations, property types and values.
    • They have seen increasing activity in all sectors, with Benahavís continuing its normal quality product and Estepona, especially relatively close to the town, being favoured by many and seen as a positive area by agents and developers.
    • Rate per square metre for all property types – 2,689€ euro per sq m
    • This ranges from a penthouse at 1,654€ euro per sq m to a villa in Benahavís at 4,605€ euro per sq m.
  • Marbella
    • As ever, Marbella provides the bulk of our statistics.
    • See the previous quarter’s report for comment on the planning situation.
    • The demand for high quality accommodation continues on and with the shortage of property in prime locations, there is the probability that the market is rising.
    • Overall, the average rate per square metre has increased to 2,913€ from 2,527€ euro, with a maximum of 7,437€ euro for an apartment in San Pedro de Alcántara and a minimum of 1,459€ euro. As last quarter this was for a villa in a less popular area to the east of the town.
    • One of our valuers states –
      • I have inspected more in Marbella area recently and think it (the market) may have slowed down, even seeing some units reduced.
      • Nueva Andalucia has thousands of stand-alone properties available with a massive price spread dependant on location and size, but in some cases still big bargains due to be found due to amount of stock.
      • I also feel that there are less units available in bigger urbanisations across all our areas, with many revaluations having less units available (for comparisons). I think this indicates that many of the quality units are being sold.
  • Mijas and Ojén
    • As before, the area retains its popularity and with stricter planning and reduced number of sites, it is probable that there will be increased development. However, there is still a substantial amount of secondary property available, which is depressing the market.
    • Rate per square metre – increased from 1,574€ euro per sq m to 1,732€.
    • As before, the range of values is relatively narrow, from a low of 990€ per square metre for a villa with problems, to 2,381€ for a villa relatively close to the previous one.
  • Fuengirola, Benalmádena and Torremolinos
    • Developers are reportedly looking at development sites in Benalmádena, perceiving that there is a good demand due to all the leisure and other facilities available nearby and the relative proximity of the airport
    • Rate per square metre – approaching equality with Mijas at 1,491€ euro per sq m.
    • The range of values is relatively narrow, from a low of 900€ per square metre for a rather rundown apartment, to 2,172€ for an apartment in a better quality building and location.
  • Costa del Sol East, ‘Inland Spain’ and Granada.
    • There are too few properties to provide relevant statistics.
    • There have been indications that this is the area of Costa del Sol, east of Malaga, where there is most likely to be significant growth from a lower base. Planning in the towns of Nerja and nearby Frigiliana is very tight, so locations between Rincon de la Victoria and Torre del Mar and Torrox are being tipped for development in the future as developers buy land cheaply awaiting an increase in demand.
  • Almería, South Murcia and Alicante South
    • The bulk of the property in these areas are relatively small low value properties. These are the ones where potential buyers are more concerned by the vagaries of exchange rate and thus there has been considerable hesitation.
    • There is also a strong preponderance of British buyers and as such it will be more particularly affected by the general matters as discussed above.
    • The average rate per square metre is 1,411€ euro, from a range between 587€ for a small apartment in an inland town, to 2,293€ euro for a villa in a developed urbanisation
    • Our local valuer states –
      • Still too early to say. Up until Brexit, things here (One of THE places for the Brits to buy) was on the up and up. However, I’m afraid that the value of the pound will have some effect for buyers, although sellers can now take a lower price to gain the same amount of pounds. Locally, agents think that overall, there will not be much effect one way or the other, but only time will tell!
  • Costa Blanca North
    • This area was experiencing a strong increase in demand and even rising prices, which all came to a halt with the pre-Brexit hesitation and now the significant doubts on the future and immediate exchange rates.
    • It benefits from interest to a wide range of nationalities and thus is likely to recover quickly.
    • The average rate is 1,647€ per square metre, with a narrow range from 1,210€ up to 2,020€
    • Comment by the local valuer for Costa Blanca North –
      • The market in general has been very slow since the referendum was announced.  I have only anecdotal evidence since Brexit, of UK buyers putting purchase decisions on hold.  Agents are talking up the market, but not providing evidence.  A number of property market commentators and economists have confirmed a likely fall in volume of sales, if not prices, as uncertainty continues, although it is encouraging to note the improved exchange rate since the Conservative party decided on the UK Prime Minister.
  • Balearics
    • We have not carried out sufficient valuations to provide meaningful statistics.
    • As stated in the previous report, these islands remain popular and have a wide variety of buyers from many countries and thus are less likely to be affected by the UK referendum. However, as stated by our colleague in Costa Blanca North, there is bound to be some nervousness felt throughout the EU, which could have a detrimental effect upon demand.
    • The local valuer states –
      • The Market had been showing all the signs of a green shoots recovery up to the referendum. Brits had once again become the principal purchasers in the Balearics, but this will not now be the case. 
      • Swedes, Germans, et al, are still buying, but after choice properties in good areas at the right price. 
      • Local market is also improving. Cheaper units being bought and rented as this option offers better yields than savings in bank.  
      • Expect price correction due to Brexit and euro political and economic uncertainty.
  • General
    • The market has undoubtedly been shaken by the run up to and especially the actual Brexit decision. However, most sectors of the market are just getting on to deal with it as best they can. The general impression is that most serious potential buyers are unlikely to put their lives on hold for 2 or 3 years whilst the Brexit effect is worked out and will proceed, but perhaps with a little more caution than before.
    • Whilst these experiences are principally relating to the British buyer market, as stated above, other nationalities working in other currencies are seeing opportunities left by the absence of the British, which is likely to be a temporary situation.
    • The natural assets of climate and close proximity to northern Europe with a so far stable government and economy will continue to attract buyers and sustain the residential market.