Quarterly Property Market Report – Autumn 2016 – January 2017

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

The Overall Market – Increasing divergence of markets.

• “Where it is good, it is very, very good, but where it is bad it is horrid” (Adapted from Henry Longfellow)
• In the prime locations in the main towns of the Costas, there is increasing demand for ‘the best’, with ripples out a short distance from those locations. Increasing numbers of construction cranes are seen to be working on individual and small groups of luxury villas and urbanisations of luxury apartments.
• Elsewhere and especially in locations and buildings without any special selling features, lower prices are the only way any properties sell.
• Banks, and especially the large investment companies that have acquired portfolios of properties and/or management companies from them, are carrying out renovation and completion of part completed shell buildings and taking up the planning licences where they have already been granted.
• All this activity is good for the construction industry and for initial investors, but there is concern that it is perhaps being overdone, with the number of actual purchaser/occupiers being uncertain. Is another property bubble being inflated?
• Undoubtedly, there are fewer British buyers, but since the beginning of the year, at Survey Spain we have seen a considerable increase in enquiries and instructions from UK and other northern European purchasers. This indicates to us that demand is still strong, with any reduction in interest from UK buyers and perhaps increasing interest in selling by UK owners in Spain, encouraging other nationalities, both Euro and independent currency based, to take up any ‘exceptional’ opportunities.
• One other point of note, by both ourselves and reliable estate agents, is that buyers appear to be prepared to pay well over the market level for new property, when with a little research they could obtain equal or better second-hand properties at much lesser price. It appears that strong marketing, confidence in the builder and ease of acquisition are the prime reasons for this. Individual property sellers cannot compete with the marketing budgets and mortgage offers that developers/banks can provide.
• As stated before, the apparent ‘exceptional’ drop in exchange rates gets the blame for much of the decrease in UK demand, but from recent research we have carried out at 1GBP = 1.17€ euro we are 13% above the lowest level in the last 10 years and only 3% below the average. After today’s speech by the UK Prime Minister, the pound has rallied from about 1.137 to 1.155€ euro. We are in for a rollercoaster two years, with formal declaration of leaving Europe expected before the end of March, plus President Trump, French, Dutch and German elections all to happen within 2017.
• Within Spain the market is still difficult and extremely fractured. Similar to the Costas, the main cities are experiencing significant demand and rising prices, though much of that could be investment based, which can be fickle and could reverse quickly in the event of problems with the euro exchange rates and/or the EU. Mortgages for the average Spaniard are still at a relatively low percentage of valuation, with these valuations themselves being held significantly below actual market value due to the prevalence of MLV valuations. Accordingly, a substantial deposit has to be found by the individual purchaser and, with there still being so much individual debt, this situation is unlikely to change. Market predictions vary, with developers and estate agents anticipating an increase in value, whilst other pundits are indicating that there could be a drop during the year.
• The high costs of acquisition and sale and the apparent increasing costs of holding property are bound to be influencing some potential purchasers/investors. The requirement for licensing of tourist property and the potential for restrictions of the numbers of those that may be granted in the future, will also affect values.
• Many of the comments in previous reports are still current.

Analysis of Statistics

• Survey Spain is recording prices and valuations throughout our Network.
• The general opinion is that the market is holding firm and gradually increasing in value, although there are significant areas where values have been reduced in order to achieve a sale.
• Again, within the last two weeks of the beginning of the year, there are reports from agents that a number of seller decided that this must be the year the property sells and have therefore agreed to reduce their prices.
• This is likely to further increase the value differential between new build with strong marketing and one-off used property sale.

The market in individual areas. 

• San Roque, including Sotogrande, Jimena and Gaucín.
  • The investment plans of the new owners of Sotogrande are beginning to be put into effect, which, as long as they include significant infrastructure maintenance and upgrading, is likely to raise values generally in the area and especially around La Reserva.
  • Values generally have been maintained, though there is a substantial amount of property still on the market.
  • Brexit and its effects upon Gibraltar is very important and it’s likely to see ‘hesitation’ in demand from that source until the border situation and effects upon the Rock’s economy are clarified. Fortunately, the new Spanish government appears to be taking a more moderate attitude with regard to creating artificial difficulties.
  • Inland, there is still demand for substantial properties from wealthy international purchasers, although there are a substantial number available, thus reducing the possibility of any substantial price increase.

• Manilva and Casares
  • The traditional coastal areas of these municipalities have always been looked upon as lower value market. As a result, they still have a substantial amount of property available and significant price increases are unlikely.
  • However, the more inland areas and those close to significant golf courses are experiencing demand and so are likely to maintain the values.

• Estepona and Benahavís (The Western section of the Golden Triangle and the New Golden Mile)
  • Both of these municipalities are benefiting from displaced demand due to the planning restrictions within Marbella caused by the absence of a general plan for the municipality.
  • In the better quality locations, such as La Zagaleta, Madroñal and even El Paraiso, the number of properties available is beginning to reduce, which may lead to increases in value in the future.
  • However, somewhat illogically, there are many new villas being built, both for owner occupation and investment speculation. Financially, this doesn’t really make much sense, but it appears that individuals with finance have aspiring ambitions to own new property and they proceed with that despite the fact that they can obtain existing properties, possibly in better locations, at significantly lower prices than the land, building and stress costs associated with creating a new property.
  • Within the towns, there is some demand and so lower priced properties are selling, but values are not increasing substantially.
  • In the more ‘suburban’ locations there is still a significant quantity of property available, which is likely to keep prices at a relatively steady level.

• Marbella
  • The planning situation is largely unchanged, with it proving a brake on any development in the Municipality.
  • As Marbella remains the main internationally renowned address, it does mean that property and development sites with full permissions are at a premium and so there is likely to be an increase in value generally as the supply is restricted.

• Mijas and Alhaurín el Grande
  • Within the Mijas municipality, whilst carrying out valuations over the last two or three months, we have noted a substantial decrease in comparable value, with the asking price of many properties being reduced significantly.
  • Discussion with estate agents does not provide any particular reason as properties appear to be selling without huge discounts.
  • We will be watching this market carefully to see whether it is a predictor of wider change.
  • Alhaurín, like all inland areas, is still experiencing significant difficulties principally due to there being so many illegal properties. However, there are always buyers looking for a smallholding in the sun and who, either through naivete or being prepared to ‘take the risk’, proceed with purchases.

• Fuengirola and Benalmádena
  • These towns have a substantial number of one nationality enclaves, which can lead to steady demand. However, there are a substantial number centred on British occupiers and culture and these are experiencing many owners wishing to return to the UK prior to any Brexit settlement.
  • Accordingly, it’s a very mixed market, with some increased demand in specific areas and more supply and less demand in others.

• Costa del Sol East, ‘Inland Spain’ and Granada.
  • Axarquía and the area around it always has demand due to its picturesque setting around Lake Viñuela. However, the substantial number of illegal properties that have been built in the area, tends to dissuade potential purchasers. In addition, geological conditions were not always taken into account when properties were constructed in the ‘boom’ years.
  • Nerja and the coastal towns to the west of it, have always experienced steady demand and in some locations property values can be exceptionally high. However, there too there are many properties available, which is once again restricting any value increases.
  • La Herradura and Almuñécar have a steady demand from a mix of wealthy Spanish and international purchasers. However, again, the surplus of demand over supply is restricting values.

• Almería, Murcia and Alicante South
  • The report from our local valuer is as follows.
  • Mixed signals at the moment. A lot depends on the Pound in the next few months. Almeria is being described as a hot property location and the local agents confirm this. Murcia and southern Costa Blanca are a little more sluggish. I think it could all be a question of supply and demand. However, non-British buyers appear to be taking advantage of the current low prices, although inland properties are still struggling.

• Costa Blanca North
  • Comment by the local valuer for Costa Blanca North –
  • Generally, the market has been very quiet since the summer and prices remain unchanged, with some exceptions for high end locations.  Continued uncertainty over Brexit and falling exchange rates mean that demand from UK buyers continues to be low, with demand from other nationalities only for quality properties in good locations at competitive prices

• Málaga City
  • The areas closest to Málaga City and in the City itself, are experiencing significant demand both from investors and potential occupiers. Many are involved in remodelling existing property and creating apartments close to the city centre. The area to the east, stretching as far as Rincon de la Victoria, has many traditional houses and also new apartments that are seeing increased demand.

• Balearics
  • The local valuer states –
  • It is traditionally a quiet period for sales across the Balearics and no different this year.
  • Local purchasers continuing to invest in smaller units as renting offers better return than banks.
  • Swedes, Danes, Germans active at top end.
  • Some UK investors about as they still feel Spain is undervalued even with poor purchasing power of pound.
  • Uncertainty over holiday rentals with new legislation expected shortly.
  • We have recently been involved with valuing larger properties on Ibiza and have found that this market is remarkably consistent, not having experienced the recession nearly as deeply as in other areas. Since approximately 2010 market generally has increased at a slow rate, but steadily and without the ‘rollercoasters’ experiences encountered elsewhere.
  • Throughout the Balearics, rustic and coastal planning control has been very strict. On Ibiza especially, this has increased to an absolute prohibition on granting new licences for at least the next two years. Accordingly, existing property and land with permissions able to be exploited, are likely to experience increases in value.

• General
  • With the British still being the largest expatriate community, Brexit is still the dominant factor, with related currency fluctuations affecting many currencies and certainly confidence for medium term future.
  • However, there is a gradual confidence that living, and especially health, conditions will not change radically in the future so that the flight of residents is not as strong as it was.
  • Other countries with stronger exchange rates are increasing their share of purchasers and with the possibility of the EU suffering from Brexit as much as the UK, it’s likely that the euro will also experience significant currency variations, all to the benefit of non-sterling, non-euro purchasers.