Buying Property in Spain is Getting Riskier

Only just a few years ago Spain was the land of sunshine and promise.  Buying property in Spain was considered a decision that would pay off with big financial rewards.  Fast-forward to 2007 and this property market is now officially sitting on shaky ground.  Some investment and real estate experts are describing what’s happening in the Spanish property market as a crash; others are saying the market has become paralyzed.  But what is really happening in Spain?

According to the International Herald Tribune, Spain’s property market is faltering in a big way for a number of reasons.  First off, interest rates have increased dramatically making home financing much more difficult.  Secondly, the building boom that fueled this country’s economy has now left an abundance of properties on the market.  Where there was once a lack of options, there is now a glut.  Add to these two things the fact that mortgage lenders are getting antsy and they’ve made approvals more difficult to come by, and all the ingredients for a major downturn are well in place and therefore, buying property in Spain is getting riskier according to some.

Evidence of the sharp downturn abounds.  Where developers once could sell straight off blueprints, they are now giving away incentives to entice buyers.  Purchase a flat and get free mortgage payments.  Buy a villa and get a car.  The promotions are growing in size and number.  Add to this the steady decline in value growth, and real estate companies that once couldn’t keep up with the business at hand are now closing their doors.

The Spanish property market is hurting, pure and simple.  It is however, not completely out of the game.  The 17% pricing rise of 2004 will likely not be seen again for a while though.  The 2007 prediction is a mere 5%.  Even so, some investors are finding the Spanish market very appealing right about now.

Rather than look at pricing growth potential as their pot of gold, savvy investors are considering the long-term option of buying property in Spain and holding onto it.  As prices here start to fall and developers stack on the incentives, this market does hold some interesting potential.

Many buyers are now looking at Spain for their own second or first homes.  Others are buying with an eye toward catering to the ever-strong tourism industry.  Spain is, after all, still Europe’s playground in the sun.  Even if the property market is taking a beating at present, this country still plays host to millions of visitors annually.  In fact, the Foreign & Commonwealth Office estimates a whopping 17 million visits a year generate from the UK alone.

When the right investment strategy is considered, buying in Spain can still pay off.  Getting financed with banks being skittish is another story.  Only those with squeaky-clean credit are finding the financing process easy at the moment.  If you can get financed or already have funding in place, Spain does still hold some opportunities.  If the market continues to slow, chances are bargains will soon abound too, making buying property in Spain even more intriguing.