Quarterly Market Report – Spring 2017

This is our 14th Quarterly Report. As part of our research we have identified a number of wider and national property comments.

The Overall Market – Concern as to amount of new construction.

• As reported last quarter, building activity is undoubtedly continuing and increasing, and the concern is that we may be heading for another ‘bubble’. Yes, there is demand, but there is also a substantial amount of existing property on the market. As always, developers have the selling advantage of larger marketing budgets to bring in the buyers, but we are seeing signs of some discovering that all is not as fast as they expected, with ‘free’ cars being offered to buyers and 10+% commission offered to agents. See the article “Are we heading for another Bubble” in https://www.surveyspain.com/blog/are-we-heading-for-another-bubble
• As before, Brexit, and its effects upon the UK buyer and existing British residents, is still an unsettling force, with other EU nationalities becoming increasingly frustrated at the disruption it is causing. However, there are still many UK buyers.
• The EU and UK have now put forward their proposals for the other’s residents in their countries. Whilst there is a general agreement in principle, there are many details still to be clarified, especially for what happens with expatriates who arrive after the as yet unspecified ‘Specified Date’. See the article “Is the future becoming a little clearer”. https://www.surveyspain.com/blog/is-the-future-becoming-a-little-clearer
  • In that I state that it is my opinion that those residents here before the Specified Date, assumed to be March 2019, will have special rights of residence, but others arriving after that date will be treated in the same way as all those of other non-EU nationality.
• The reduction in UK buyers is adequately being replaced by those of other countries, with Nordic, German, French and others being active in the market.
• As stated before, the market dependent upon Gibraltar, both due to proximity and business, is undoubtedly the most nervous of all. We are seeing prices and values dropping in this area, counter to most of the Costa del Sol.
• Tourism is still very strong, with record numbers being expected over the summer. Hopefully, there will be enough water freshwater for them all!
• The requirement for licences to legitimately offer individual properties to let, is likely to reduce the number of buyers who are depending upon rental income to afford the running and finance costs of their purchase. This will especially be the case should there be publicity of draconian fines to people discovered to be acting illegally.
• In the background, there is the thought that if interest rates should rise, many owners may find that they cannot afford their second property in the sun and that there could be a significant increase in properties being offered for sale.

“Pending legal changes that could affect property values?”

The agents we’ve talked to have declared themselves busy with numerous buyer clients and plenty of properties on offer, though, as always, a shortage of good properties in the most popular areas. There are pockets of scarcity where prices are rising and others where still not much is happening and sellers are having to discount to attract buyers with bargains.

• This was a specific request for this quarter. As replied, “I’ll be pleased to comment on what I know, but I suggest that it will need a lawyer’s advisory service for those.”
• Lawyers comments received relating to the question, include
  • We are currently dealing with:
    • (1) Claims against Banks (law 57/68 actions) More difficult now due to lots of competitors on a ‘no win no fee’ basis
    • (2) Mortgage settlements with banks (Properties back to bank as payment of debts)
    • Not much conveyancing work at present
    • Mortgage enforcement procedure is being revised and soon out. This will affect the market obviously as Banks will adapt criteria to this.
    • I am becoming increasingly interested in preferential rights of debt purchase for debtors when the mortgage loan is being sold to a third party.
  • The only legislation really affecting things are the AFO (‘Regularisation of illegal property) and the new rules on tourist rentals. Both of which are already in force.
    • The new inheritance tax rules are beneficial, but I don’t think they impact much on buyers’ behaviour.

Further Questions were asked of Agents and Valuers. Their responses were as follows. 

General

• The agents we’ve talked to have declared themselves busy with numerous buyer clients and plenty of properties on offer, though, as always, a shortage of good properties in the most popular areas. There are pockets of scarcity where prices are rising and others where still not much is happening and sellers are having to discount to attract buyers with bargains.

What’s your opinion on the last 3 months and the next 3?

• Balearics – Market showing its usual springtime enthusiasm. Plenty of demand and likely to continue for the next few months.
• Barcelona and Costa Brava – Fall of pound sterling has caused fewer British wanting to buy. Next 3 months I remain cautious
• Almería and Murcia – According the information I got from different solicitors (I collaborate with some in the area) the situation is coming better. They can see the number of purchases are growing, slow but growing.
• Almería and Murcia – The market appears to be holding up quite well, although some areas are better than others. Still plenty of supply and still plenty of demand, the Brexit effect not appearing to have changed much, even though the Pound has depreciated by about 20%. Next 3 months are thought to continue the upward trend, barring unforeseen circumstances.
• Costa del Sol – it’s getting better especially with non-British buyers.
• Costa del Sol – There are many people around wanting to invest.
  • In Marbella, they tend to want existing properties that can be reformed because new build licences are taking so long.
  • New builds are graduating out to Benahavís and Estepona with other places like Mijas, Ojén and Istán also starting to see more investment.
  • I think it’ll continue like that until the end of the year or until Marbella gets its act together.

Who is buying and where are hot spots and where not? 

• Balearics – Still driven by Scandinavians and Germans. Some Brits buying but, in our opinion, Brexit uncertainty holding some UK buyers/investors back. Spaniards back in at the top end and investing in apartments. Soller, Andratx, Portixol & Palma old town all very popular. Agents complaining about lack of stock! 
• Barcelona and Costa Brava – Nordics mostly. Hotspots are Madrid and Barcelona and some selected coastal areas with a view to become buy-to-let landlords (holiday rentals).
• Almería and Murcia – I move among foreigner buyers. No idea about the Spanish market.
  • Coast and inland hills look similar.
  • Mojácar, for example, according to Tinsa, has appreciated by 17.3% in the last 12 months, the 3rd highest in Spain!
• Costa del Sol – Scandinavians, Belgians, Dutch and French, everywhere.
• Costa del Sol – The Golden Mile and Nagüeles seems to be attracting a lot of attention lately. Not to mention Puente Romano, which sells like hot buns.

What’s the margin between asking and actual selling price? 

• Balearics – For good properties, very little, perhaps 5-10%. The rest, which may have been sitting around for a while now shifting with a more generous discount….
• Barcelona and Costa Brava – >20%
• Almería and Murcia – Houses in this area are really cheap, so sellers and estate agents try to keep the asking price. If the property has any problem, then there is a chance to counter offer the final price.
• Costa del Sol – next to nothing in many cases.
• Costa del Sol – There is a margin of 10-15% between asking price and achieved sales price
• Costa del Sol – I can only tell you that construction prices are creeping up and its getting more difficult to find good people because they are busy.

Is B still being asked and paid? (Note – this refers to tax avoidance)

• Balearics – Some vendors try, but very little is paid in B to my knowledge. Often, some cash is exchanged for furniture but perhaps 5-10k only etc nothing like the amounts seen pre-euro.
• Barcelona and Costa Brava – yes, not as much.
• Almería and Murcia – No idea regarding properties.
• Almería and Murcia – B still paid when there is a difference between the minimum declarable (ie % of Valor Catastral) and actual price paid, principally preferred by Spanish!
• Costa del Sol – Not with us, we won’t do it.
• Costa del Sol – None, we avoid it.
• Costa del Sol – If the property is for personal use B is still a factor, but not for investors.

Analysis of Statistics

• 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 most popular areas with the opinion sourced from our valuers, agents, lawyers 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
• It should be borne in mind that we have very few valuations of new property, with the majority being resales.

Value per sq m for this quarter.

• Balearics – Market showing its usual springtime enthusiasm. Plenty of demand and likely to continue for the next few months.
• Barcelona and Costa Brava – Fall of pound sterling has caused fewer British wanting to buy. Next 3 months I remain cautious
• Almería and Murcia – According the information I got from different solicitors (I collaborate with some in the area) the situation is coming better. They can see the number of purchases are growing, slow but growing.
  • Almería and Murcia – The market appears to be holding up quite well, although some areas are better than others. Still plenty of supply and still plenty of demand, the Brexit effect not appearing to have changed much, even though the Pound has depreciated by about 20%. Next 3 months are thought to continue the upward trend, barring unforeseen circumstances.
• Costa del Sol – it’s getting better especially with non-British buyers.
• Costa del Sol – There are many people around wanting to invest.
  • In Marbella, they tend to want existing properties that can be reformed because new build licences are taking so long.
  • New builds are graduating out to Benahavís and Estepona with other places like Mijas, Ojén and Istán also starting to see more investment.
  • I think it’ll continue like that until the end of the year or until Marbella gets its act together.
• There is a substantial range over the whole area.
  • This quarter shows the lowest difference between Asking and Buying prices that we have recorded at 6.76% of the Asking Price. This appears to be at variance to the comments above, but does continue a general trend that we would expect with an increasingly active market. The highest total valuation was a very special beachside villa in Marbella at more than 10,000€ euro per sq m, with the lowest being 614€ euro per sq m for a townhouse in inland Costa Blanca, that has significant planning problems likely to lead to partial demolition.
  • We are pleased to note that our valuations continue to show a high degree of accuracy, with them being 98.41% of the agreed Buying Price.
• 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 –
    • 3^rd Quarter 2014 -15.80%
    • 4^th Quarter 2014 -11.41%
    • 1^st Quarter 2015 -18.64%
    • 2^nd Quarter 2015 -10.73%
    • 3^rd Quarter 2015 – 8.72%
    • 4^th Quarter 2015 – 9.38%
    • 1^st Quarter 2016 – 11.68%
    • 2^nd Quarter 2016 – 5.69%
    • 3^rd Quarter 2016 – 11.97%
    • 4^th Quarter 2016 – 13.48%
    • 1^st Quarter 2017 – 6.94%
    • 2^nd Quarter 2017 – 6.76%

• We compare valuations of properties that we have carried out over a number of quarters and the average of these still shows a positive trend of +4.93%. This does include a wide range of variations with the largest increase being +64%, where detailed inspection showed qualities in a property that had not been previously assumed from ‘walk by’ surveys; down to -25%, where a property had been abandoned and internal inspection had shown that it had been vandalised, which again was not apparent from the previous ‘walk by’ inspection.
• As before, we have also noted a number of properties where optimism by owners and agents has encouraged them to increase asking prices.
• We are also still noting that new build properties are being sold at significantly higher prices than similar existing property nearby, especially regarding apartments. It appears that new build properties are being compared against other new build, rather than the market as a whole.
• This quarter, the average Asking Price and our valuations have both risen since the previous quarter. Although it’s of a relatively small range of property, it could be confirmation that the market values overall are increasing, as is reported by a number of other national statistical sources.
• Marbella is still the highest rate per sq m of all the areas we have valued, with Benahavís being a close second and the Balearics coming third.

The market in individual areas. 

San Roque, including Sotogrande.

• The average valuation for properties in this area is 2,254€ euro a square metre, which shows a reduction of 15% since last quarter. Given the relatively small sample, this may be an exaggeration of the market, but it certainly shows the downward trend is continuing.
• We are of the opinion that this can only be due to the uncertainty over the effects of Brexit on the Gibraltar economy, leading any possible purchaser to decide to wait until that has been clarified, whilst some sellers may be deciding that they should have their assets more liquid and be prepared to reduce their price to achieve that.
• It is leading to opportunities for potential buyers not affected by Gibraltar to consider purchasing in Sotogrande, as the attractiveness of the location and physical properties will remain unchanged.

Gaucín, Manilva and Casares

• There is a wide range in quality, style and value in the properties in these Municipalities, from ranch like ‘Cortijos’ to individual small ‘not yet Regularised’ smallholding; and from grand villas in urbanisations down to semi-ruined traditional townhouses. Thus, average values do not have much relevance.
• However, we are seeing continued demand for all these types of property, though there is a surplus of supply of the large houses over demand.
• The highest value is just over 3,000€ euro/sq m with the lowest is barely above 1,000€ euro/sq m.

Estepona and Benahavís (The Western section of the Golden Triangle and the New Golden Mile)

• With the continuing restrictions on planning within Marbella, these towns, which have always been popular, are the areas where there is the majority of new developments being carried out present.
• The average valuation for the sample of properties in this area, is in the region of 3,208€ euro per sq m, which is a slight drop on the previous quarter. However, that is likely to be due to the restricted number of properties we have valued and we are confident that the area is still popular and the value of good, prime located property is upwards.
• Countering that, there are still pockets in both Municipalities that will never be popular or attractive and will always rumble along at the low level of the market.

Marbella

• As stated last quarter and emphasised by the project manager’s comments above, the planning situation is largely unchanged, with it proving a brake on development in the Municipality, all to the benefit of neighbouring towns.
• There will be very few sites within Marbella with permission to build that are not actively being worked at present. There is strong interest in the town, with shortage of prime properties ready and available for clean purchase.
• Countering that optimism, the average rate per sq m of 3,318 euro is less than last quarter, but that is likely to be caused by variations in the types of properties valued rather than an overall trend.

Mijas, Fuengirola and Benalmádena

• The average rate per square metre has risen slightly to 1,718€ euro per sq m, confirming the continued general attract ion of these areas.
• With the forecast increase in tourists this year, these areas are likely to be very busy over the summer, which could increase the number of potential ‘impulse’ buyers.
• However, for the reasons stated above, the individual rental restrictions could reduce the number of buyers depending upon rental income and the number of properties available increase due to interest rate rises.

Costa del Sol East, ‘Inland Spain’ and Granada.

• Apart from the coastal towns of Nerja and Almuñecar, most of the properties here tend to be rural fincas of individual villas.
• Many have significant planning problems as this has been an area of ‘cowboy’ Municipalities giving permissions against the wider planning rules and also its relative remoteness has encouraged people to build and add extensions without seeking permission at all.
• In addition, many of the areas have seen properties developed without geological studies and appropriate foundation. Undoubtedly, we have seen more significant problem buildings here than in any other area of the Costas.
• Accordingly, the statistics we have are swayed considerably by these defective properties and thus, we assume, are not reflective of the market as a whole.
• Having said all that, the area does have considerable physical attractions and continues to attract many potential buyers. We just suggest that they should certainly have a building survey and planning investigation carried out before they commit themselves to buy.

Almería, Murcia and Alicante South

• As stated above, the market here is steady if not spectacular. With lower value properties and significant British enclaves, these areas are more affected by exchange rates and Brexit.
• Mojácar would appear to be the area with the most potential, but it is a small market and statistics for there tend to be swamped by those of the more utilitarian areas in N Murcia and southern Costa Blanca.
• The values show that the average value per sq m for Mojácar of just less than 2,000€ euro/sq m is about 50% more than that for nearby and more distant areas of this grouping.

Costa Blanca North

• Again, see the comments of the agents above.
• The area is always popular and generally has a better quality of location property and market that Costa Blanca south, reflected by the average value of 1,786€ euro/sq m of the North being about 40% above that of the South.

Balearics

• See agent’s comments above.
• The strict planning regulations throughout the Balearics have led to preservation of the natural beauty of the islands and as a result a scarcity of prime properties. Thus, values have been maintained and continue to gradually increase as there is interest from all over Europe and beyond.
• Values in select areas can easily match those of prime property in other areas of Spain, but the average for few properties this quarter is a relatively low 2,638€ euro per sq m

General

• We can only repeat the comments of the previous quarter, with perhaps more emphasis on the Spanish economy increasing and thus ability and confidence to buy,
• The UK interest will continue to go through it’s roller coaster in relation to statements and rumours regarding Brexit. Why, oh why?
  • General comments stated in the previous report are still applicable, in that despite the significant reduction in demand from British buyers, they are still by far the largest individual sector of the expat market. Strong interest from Nordic countries is seen, but their population is limited and therefore is bound to reach a level where the majority of demand has been satisfied. Strong Belgian demand has been noted recently, which we understand may be due to tax changes within the country.
  • All in all, the market appears to continue at a steady pace with the gradually recovering Spanish economy beginning to bring in more buyers and those from Scandinavia, Germany and France making up for the reduction in British demand.
  • However, Brexit and all the other political happenings within the world are likely to keep a continuing uncertainty as to future prospects.