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Prospects for 2008

09/01/2008

2008 is going to be worse than 2007, certainly until autumn. The local economy will slow down due to the reduction in spending because there are fewer workers in the construction, estate agency and all the other businesses related to property. It is the same for various reasons throughout western economies and thus the demand will reduced substantially. The supply of houses is still here. Hopefully, existing developments will be completed and not left as unsightly, semi-derelict areas, but others planned will not be started.

Good properties in popular locations will still continue to sell and their prices should not fall substantially as there will always be competition for them. Some of the back line apartment blocks may never sell unless they are offered at prices that will enable people to hold onto them until the next wave of occupation comes or they can offer them at very low rent.

However, that there will be a wave is not certain and is most unlikely to be like the one we have experienced. The change to the Europe-wide euro; the millennium effect; the existence of mortgages in Spain where there were not any before; the significant rise in house values and availability of equity release by second mortgages in the buyer home countries; low interest rates; all these contributed to a unique situation.

However, the principal reasons for buying here still exist. So, the steady and gradually increasing numbers of long term holiday home and permanent resident buyers will continue to take up the best properties. In addition, as prices fall, we will see some investors coming back to buy and hold property in the hope of increase in the longer term.

Then there are the effects of climate change. It's now accepted that it will happen, with the only doubts being as to timescale. Less rainfall will mean more requirements for desalination. That's possible on the coast, but inland properties may experience difficulties. A national water grid, similar to that for electricity, is the long-term answer, but that has political and cost problems that will cause delays and it may never be practical to serve smaller pueblos.

Sea level rise will be the principal detrimental effect on the coast. Beaches will disappear and some beach front properties will effectively lose their ground floors. One should not forget the effects on rivers backing up and flooding previously safe areas.

All in all, the next few years are going to see significant change, but prudence in acquisition should be able to mitigate many of these.

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Campbell D Ferguson
F.R.I.C.S. Chartered Surveyor
Survey Spain
00 34 952 923 520

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