Is It Safe to Buy Property in Spain Yet?

We’re very well aware that Spain remains one of the most attractive overseas destinations for Britons of all ages thinking about going to live abroad.  The facts of the matter are, Spain is accessible from the UK easily and cheaply, Spain is warm, sunny and enticing, the cost of living is comparable with the UK whilst the quality of life is widely regarded as superior in Spain - and it’s a very easy nation to move to, set up home in, retire to or even get a job in.

Therefore, it is of no surprise that we have received a few requests for information about the current state of the Spanish property market from Britons interested in moving to live abroad in a sunnier destination than the UK – the enquiries have been along the lines of: ‘is it safe to buy property in Spain yet?’

The problem that many Britons are facing is that the high value of the euro in relation to the pound has eroded the benefits that they could otherwise have gained from the falling Spanish property market you see.  What’s more, others are worried about how safe an investment made into Spanish bricks and mortar is, bearing in mind how spectacularly the market in Spain has crashed recently.  So, naturally enough, it is important for anyone thinking about making a move to Spain to understand the state of the market right now.  Which is where we come in!  Here’s the latest overview of Spain’s property prospects in our humble opinion.

The strength of the euro against the pound is damaging on a deep economic level – and more pertinently perhaps, it is deeply damaging on a personal level for any one of us who has wanted to holiday in Europe this year or who has thought about moving to live in Europe this year.  Everything costs more in very real terms!  It costs more to fly to Europe, to rent a place in Europe, to buy food, pay for goods and services – and it’s really not fair!  Why?  Because we in the UK are in a recession and we need things to cost less – what’s more, there has been a crash in property markets in Europe and many of us would love to take advantage of that fact!  The trouble is, the crash that is very real in relative terms locally to the given market, has not been fruitful for us Britons who would be forced to buy with our weak pounds.

Nowhere is this more the point than in Spain where there has been a spectacular crash in prices right across the nation – particularly on the southern coast where many Britons would truly love to own a holiday home, a new property or an investment asset.  But have prices fallen anywhere near far enough for property to be a bargain anyway, and if you’re not just looking for a bargain but a good investment, is there anywhere in Spain where you could buy real estate and profit at the moment?

These are all incredibly pertinent questions…and the answers are as follows.  According to Campbell Ferguson, a British Chartered Surveyor working in Spain, it is possible to negotiate up to 70% discounts on 2006 quoted prices.  Properties in the most popular southern spots of Spain – i.e., along the Costas – have already fallen between 30 and 50% from their peak, but with many buyers being forced to sell to get something out of the market, further discounts are negotiable by those in a strong buying position.  So, if you’re going to enter the market and have cash in hand or a mortgage agreed in principle, you are in the right position to haggle with your vendor.

Mr. Ferguson further highlights the fact that many banks have repossessed stock on their books that they have yet to release to market via the auction process.  It is likely that as the fiscal year comes to an end in Spain, they will be looking to offload some of this stock to balance their books.  This means for those looking for perhaps an investment bargain, later in the year could be a wise time to explore the auction process and offerings in southern Spain. 

Others who want to be assured of buying well in today’s market and who are prepared to look to the long-term for property price appreciation but reap good rental returns in the meantime, might like to consider looking at the city based opportunities in Spain.  Whilst prices have not crashed as significantly in Barcelona or Madrid as they have in Benidorm or Marbella, they have fallen to give Britons buying with a weakened pound a slight advantage.  What’s more, property in such locations is better longer-term more sustainable bet because of consistent demand from multiple sources.

Whilst a property in sight of the coast in southern Spain may make a lovely holiday home, retirement property or sometime jet-to-let investment, a property within a business or fashionable district of one of Spain’s leading cities could appeal to local or international professional demand, corporate let demand, tourism demand or even family rental demand.  Therefore those looking for purely investment returns from rental income should perhaps overlook that euro/pound dilemma to a degree, and instead examine whether an investment’s returns in the form of rental yield would still be profitable and attractive when applied to a city based property bet.

Those looking to crash into the market and scrape the barrel for bargain basement homes can and will do so – if you want to take such an approach then have cash in hand, look to areas where there are fewer if any unfinished developments, target completed property, distress sales and locations where there are in-demand facilities and amenities that will allow you to either rent or resell your property in the future.  Accessibility to an international airport should also be a consideration with most people being reluctant to travel much more than 90 minutes from where their plane touches down to where they can lay their head.

In conclusion therefore, the weakened pound needn’t prevent you from making a good property purchase in Spain whether you’re looking for a real bargain in terms of baseline asking price, or a sustainable investment asset that will bring you in a decent income over the longer-term.