Cash Buyers will Lead Spain’s Property Market to Recovery in 2013
As Spain prepares to head into a new year, its real estate market is showing promising signs of a recovery. After a turbulent few years, the country ended 2012 on a high note, with reports rife of sales increases among real estate agents. Sales from overseas buyers increased throughout the year, as did investment and cash purchases, which helped to lead the market out of turmoil and into a new state of hope.
No easy road
Although a recovery is in sight for many parts of the country, experts warn that it is not going to be an easy ride for both those looking to sell and those looking to buy a home in Spain. The country’s lending situation still presents large challenges for those that do not have large deposits; many lenders throughout the country stopped lending to foreign buyers in 2012, and many others only offered deals to buyers that could provide deposits that were greater than 50 percent. However, this has led to a new breed of buyers for which Spain offers excellent prospects.
Cash buyers in strongest position
Nick Stuart, director of Spanish Hot Properties, said that the banks' reluctance to lend has led to cut-price deals for those that have a lot of capital. "We will find that cash buyers will be in a strong position to negotiate,” he said, "and will generally get discounts on properties up to the €300,000 mark.” House prices in Spain have generally never been so affordable for those with cash; along with the sharp increase in number of repossession, it is not uncommon for buyers to be snapping up properties in popular locations for as little as 50 percent of their pre-recession price.
Leading the way for the country’s property market is the Costa Blanca. Javea, which enjoys a prime spot looking out to the Mediterranean sea, has long been an area popular with tourists, expats and foreign buyers looking for a summer holiday home. Situated on the nearest point of mainland Spain to the Balearic Islands, Javea enjoys outstanding natural beauty and an enviable coastal location next to the Parque Natural El Montgo. Although property prices in Javea have fallen since the height of the property boom, interest in this popular area has increased as a result.
The average house price in the Javea region has fallen from €468,000 in 2006 to just €374,000 in the second quarter of 2012. However, for the first time since the start of 2011, house prices increased by the end of quarter three of 2012 to €387,000, signalling that those buyers in a strong financial position (largely cash buyers) were starting to take advantage and cash in on some of these reduced home prices. It is hoped that the increased investment appeal and injection into the upper end of the housing market will lead the whole market to recovery throughout the next couple of years.
Overseas buyers snap up high-end properties
Official figures indicated a common theme throughout 2012; that confidence in Spain's economy was returning to overseas buyers and sales levels were increasing. The prospect of bagging a bargain on investment property and holiday homes has led to a surge in the number of UK buyers in particular, boosting the profile of locations typically popular with British holiday-makers, such as the Costa Blanca.
Light at the end of the tunnel for domestic buyers
There is no doubt that Spain’s high unemployment rate has had a huge impact on the domestic property market. Affecting almost 25 percent of the Spanish population, unemployment has lead to many buyers being priced out of the market. This, coupled with reduced wages and rising living costs, has meant that many people have not been in a position to buy a home. However, planning approvals on new build residential complexes have fallen by more than 90 percent in the past two years, meaning that the amount of available properties has started to fall. Spain’s excessive number of unoccupied and unfinished new build properties once led to a saturation of the market. However, now that new build levels have been controlled and capped, domestic buyers are able to have their pick of available properties, and are slowly buying this previously unsold stock. It may be a slow process (the number of approved mortgages during 2012 had fallen more than 35 percent compared with in 2011), but it is a feeling among real estate agents that recovery will start in 2013.