Spain’s financial and economic woes may have left a huge glut of new and repossessed properties sitting empty and struggling to sell, but bargain prices are turning heads, particularly those of the British, and there may never be a better time for your clients to buy a Spanish home.
The Swiss bank UBS estimates that Spanish house prices have plummeted by up to 38% since the peak of the market, and that they’ll fall another 8% before bottoming out. BBVA, Spain’s second largest bank also predicts that prices could fall by another 8% over the next couple of years. Falling prices, together with a concerted effort being made by regional estate agents and tourism boards to improve Spain’s tarnished image among prospective investors, are leading to high hopes that increased levels foreign investment will eventually help to revive the country’s property market.
The market should also be bolstered when a new law granting automatic residency to non-EU nationals buying property worth at least €500,000 is passed, with big levels of interest expected from Russian, Chinese and Asian buyers.
According to the Bank of Spain and the Real Estate Registry’s annual report, foreign investment in Spanish property increased by 17% in 2012 – the highest level since 2004, and British buyers accounted for more than 16% of the foreign market. In total, €5.54 billion was spent by foreign nationals last year compared with €4.7 billion in 2011.
Taylor Wimpey Espana, the Spanish house builder, has also reported an increase in sales to British buyers. It’s year-on-year sales were up by 123% in April this year, with a quarter of second home buyers coming from the UK, up by 50% compared with last year. And Solvia, the real estate arm of Spanish Banco Sabadell has recently reported that UK buyers accounted for 28% of their international sales.
The Spanish property market has experienced a turbulent few years, to put it mildly, but it’s still the second most popular location with our clients, accounting for around a quarter of enquiries we receive. Buyers are in a strong position due to the number of homes available and the possibility of negotiating prices down even further with some very motivated vendors.
Unsurprisingly, mortgage availability isn’t as good as it was a few years ago, but there are still lots of opportunities, especially if your client has a healthy deposit to put down, and they can generally borrow up to around 65-70% of the value of the property. Rates currently start from just 3.21%.
One of the biggest recent changes in the overseas mortgage market is that lenders are no longer using such set criteria for decision-making – it’s much more down to the individual case. This is where tapping into a specialist broker can really help, as they’ve got great knowledge of the overseas markets and are able to source the best possible deal for the client.
If your client is taking out an overseas mortgage, one of the biggest advantages of this is that the lender will do its own checks on the property, ensuring that a proper legal title exists, that the property is registered in the buyer’s name and that a valuation of the property takes place. Banks will also check other issues such as planning permissions and building licences – fundamentally important if they’re buying in Spain.
It may be a good time to buy property in Spain, but as always, it’s essential that clients seek the right advice and they should always go through the same process that they’d follow if they were buying a property in the UK. This includes taking independent advice from an English-speaking lawyer who is not connected to their seller, estate agent or property developer.
Spain has had its problems, but its core appeal hasn’t changed. For many buyers it’s a lifestyle choice and they’re attracted by the climate, amenities and culture, rather than earning a prospective fortune on their home there. If people enjoy what Spain has to offer, property can be snapped up there on better terms than have been seen for years. And with prices expected to continue falling for another couple of years, it’s likely to remain a buyer’s market for some time.
Clare Nessling is director at Conti