Spanish Property: Now Is The Right Time To Invest
For some time now, I have been telling my clients there has never been a better time in the past ten years than right now to invest in a holiday, retirement or investment property in Spain’s Costa Del Sol holiday region.
Prior to the global financial crisis (GFC) three years ago, new property developments were happening everywhere on the Costa Del Sol and generally sold well before completion “off the plan”.
However, since the GFC, NEW property prices in the region have dropped considerably, in some cases by up to 50%.
For example, new 2 bedroom 2 bathroom apartments which were selling for €240,000 – €260,000 prior to the GFC are now on the market for €160,000. Some higher end developments are currently being sold at even bigger discounts as a result of developers needing to liquidate their stock.
Now of course this is nothing new as there’s been a downward trend in property prices in many markets since the GFC.
However, the property market in the Costa Del Sol region is different … and poised for capital appreciation over the coming 3-5 years back to the levels we enjoyed prior to the GFC.
My analysis – and confidence – is based on the following factors:
1.) Europe’s Holiday Playground
Even allowing for tougher economic conditions, tourism to the region has held up as Europeans of all persuasions still take holidays … and the Costa Del Sol is still their favored destination.
For example, tourism numbers out of the UK are still strong with more than 10 million visitors each year from that market alone. This demand is not going to change as the Costa Del Sol region has the widest selection of facilities and resorts in all of Europe, including some of the best golf courses in the world. As a result, there will ALWAYS be a demand for property on the Costa Del Sol.
2.) Buyer Demographics
Before the GFC, approximately 35% of properties sold on the Costa Del Sol were acquired by British residents and a further 13% acquired by Scandinavian residents. (Only 32% of properties were being acquired by local residents.)
This buyer demographic split still applies, demonstrating that even in sluggish market conditions, the Costa Del Sol attracts investment interest from all parts of Europe. This makes investing in this region more attractive than investing in almost any other market.
3.) Banks Are Still Lending To Non-Spanish Residents
If you can provide a 30% deposit and normal proof of identity, then there’s a good chance that a local bank will lend you the balance to acquire a property on the Costa Del Sol as their confidence in the local property market’s long term potential is no different to mine. Rates are still at an attractive 3.00% – 3.50%.
In addition, many of the existing developers are providing guaranteed rental plans for periods up to 2 years to sweeten the investment opportunity.
4.) Supply and Demand
Unlike prior to the GFC, there are currently very few new developments underway on the Costa Del Sol. As a result, when current property stocks are diminished, normal supply and demand principles will apply and prices will start moving upwards again.
5.) Established Properties Holding Their Value
The discounted property prices outlined above apply to new developments only, generally because the developers have found themselves in trouble due to sluggish demand and therefore unable in many cases to meet their financial commitments.
By comparison, established properties have pretty much held their value with any price reductions driven by personal financial hardship more than anything else. This does not happen much as local banks are generally very supportive of their clients, often giving them ample time (in some cases up to 2 years) to get themselves back on track before taking action.
New developments typically sell at higher prices as today’s building specifications are much higher than in the past. Therefore, when you buy a new property which has solar panels, double insulated flooring, etc at similar or lower levels than older established properties, then you have got a good investment on your hands.
6.) Natural Market Correction
Every industry goes through a correction at some stage and that’s exactly how I view what has happened in the Costa Del Sol region over the past three years where our industry – plus the local timeshare industry – attracted many developers (and realtors) interested solely in quick returns.
Fortunately, this correction has led to a cleanup with more than 60% of the realtors who were trading in the region prior to the GFC now gone as are many of the smaller “one-off” developers. This rationalization is good for investors as those of us (realtors and developers) who are left have a commitment to providing investors from other EU countries with trustworthy advice and direction such as personal introductions to banks, etc.
When you take all of the above into consideration, there really is only one way for the property market to go in the Costa Del Sol region … and that is UP!
Because of these factors, my belief is that an investment in a new property today at approximately 50% of the price it was selling for prior to the GFC will deliver superb asset appreciation back to its original price within 3-5 years.
There really is no better time than NOW to be looking at investing in a property on the Costa Del Sol!