The 'real' Spain is poised to weather the property downturn
Posted by Administrator (admin) on Aug 19 2008
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Can Spain weather the downturn? The Spanish property market has had its fair share of headlines recently. If you were to believe them then the image that comes across is of a country hit by a never ending stream of bad news.

Corruption scandals, illegal building, demolition threats, land grabs, over development, dishonest estate agents, incompetent lawyers, obscene commissions and countless stories of unhappy owners, buyers and investors.

Developers are going bust, estate agents are going out of business and there are bargains for those willing to take a risk with the Spanish property market.

But when you go beyond the headlines a very different picture emerges. Yes, Spain is suffering from the credit crunch, but so are many other countries. Banks are lending less and finance is harder to find. Repossessions are on the increase.

However there is a lot of good news. According to those actually working in Spain in the property sector it is the greedy and the unscrupulous that are going out of business and that can only be good for the property market and those investing in it.

The high end of the market, particularly property in gated communities, connected to golf courses that are well built and have quality finishes are still selling well, according to Paul Rossiter of Carrington Estates.

Although custom from the UK has dropped off there is still keen interest from the Swedes, Germans, Dutch and Russians. For the market to recover it is the quality of the investors and buyers not just quantity that matters.

'There are a lot of speculators arriving who think they can get 30 to 40% off the asking price, but that just isn't happening,' said Andy Welland, who has worked in the property business in Spain for the last ten years. This is a trend seen by many agents. 'I heard of one buyer who viewed a €550,000 property and wanted to offer €350,000, that is not realistic. But you can find good prices, there are deals to be done,' said Rossiter.

Ten years ago Welland witnessed a lot of small businesses like butchers and hairdressers closing down and re-opening as estate agents. He saw the rise - and the fall - of big companies with branches in every town. They came, they saw, they fell by the wayside.

He saw greedy developers asking for mega prices, sales agents earning fat commissions persuading investors to buy multiple properties with unrealistic promises that they could sell before completion.

For developers it was a matter of pile them high, build them cheap. 'People were persuaded to buy beyond their means. Where they should have perhaps bought one or two apartments off-plan they were convinced they could afford five, six, seven, even more,' said Welland.

'I have spoken to five people recently that have lost 30 to 40% because they could not afford to complete. Buying to flip is a very hard game to play. You must be prepared for the worst case scenario and that is to be able to complete.'

Mark Stucklin of Spanish Property Insight agrees. 'The downturn in the market has put an end to speculative herd buying but does not deter genuine buyers who do their research,' he said.

The issue of scandals is being addressed. 'The Spanish government has focused a huge amount of effort on cleaning up the problems associated with illegal building and corruption involving the former mayor of Marbella,' said Daniel Zartesh-Lloyd, operations and marketing manager of Malaga based Duchy Estates.

'The developers who built illegally are currently going through the justice system and properties built without permission are going through a process of negotiation. This does not necessarily mean being demolished,' he added. And as Rossiter points out the land grab issue is confined to one region – Valencia.

The Spanish government is also taking positive steps to make the real estate sector more transparent.

This is confirmed by property consultants Jones Lang LaSalle who's 2008 Global Real Estate Transparency Index shows that Spain is indeed making real progress. Spain is now ranked 16th compared with 18th two years ago.

Dodgy agents are being clamped down on too. 'The Spanish government has got really tough. Officials are conducting snap inspections to ensure that agents are adhering to regulations,' said James Gonzalez, market analysts at Obelisk.

The volume of leads has fallen by around two thirds but the quality has improved. Agents also say they have more time to spend with clients. There is an oversupply of two bedroom, two bathroom properties but not all areas have suffered massive price falls.

Some completed developments are virtually empty but many in Spain are doing fine. 'Certain urbanizations have kept their value very well. What has made Spain so attractive over the years such as climate, beaches and lifestyle doesn't just disappear,' said Zartash-Lloyd.

Last changed: Aug 20 2008 at 10:56 AM

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