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Some Q&A about Spanish Property today

 
 
Is it the right time to buy?

Nobody can say 100% whether now is the right time to buy, speculating that property prices have reached the lowest possible level. Many experts have failed to predict this accurately since 2009-10. The fact is, prices have been dropping since 2007 and the average drop on the Spanish coasts is about 34% whereas in the cities, it is around 30%. In addition, there is a margin of negotiation for buyers to secure a lower price than the asking price. We would definitely say that this is the right time to search for properties in Spain since there are already excellent bargains to be found there. It is certainly a right time to buy, if you are serious about buying now.

 

Has the market touched rock-bottom?

Again, that is difficult to be 100% sure about, but we believe that with the general financial pressures of the Spanish economy, and the financial reforms that were adopted in early 2012, it is very likely that during 2012, the housing market will reach its lowest, in price terms. It is also unlikely that the property industry will recover in 2013, because the economy will take considerable time to re-stabilize. In other words, prices shall probably stay low for a protracted period.

 

What sort of market are buyers facing at the moment, if they want to buy?

For sure, it is a buyer’s market. 10-12 years ago it was very difficult to bargain on price, since the market trend, was ever-increasing price rises – ‘if you do not buy now, in 3-6 months, the price will be 5%-8% higher, or even 10% more expensive…’. That was the belief, and so any asking price was accepted. But currently, the situation is the opposite: now it’s a buyer’s market rather than a seller’s. Presently, the large supply of properties in the market, is causing prices to decrease: large supply + low demand = lower prices. In addition, the financial problems that Banks and Savings Banks are facing, due to their large property stock, is forcing them to release more and more assets into the market at lower prices. This also increases pressure on private sellers who are now competing on price with the discounted Bank stock.

 

In this scenario of oversupply, do I still need an Estate Agent?

Your Estate Agent is your ally. We encourage you to contact an agent to get advice, provide buying options and arrange viewings, to make your life easier and save you time and money during the buying process. In this distressed market, there are many professional agents, however, it is very important to choose the right one for you.

 

Should I be sceptical about agents and developers?

Have you watched “Cowboy Developers” on Channel 4, in the UK? If so, you know that everywhere there can be sharks. Bad press in the UK tarnished the Spanish market during the boom of the 2000s. Now, the Spanish market is becoming more transparent. Professionals are driving the market and substandard agents and developers had to close or run away when the bubble burst. Always obtain good references!

 

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4 thoughts on “Some Q&A about Spanish Property today

  1. Pierre Waters

    Interesting questions and direct relevant answers ! I would only add the following, especially for Madrid:

    – it’s the right time to buy, if you are planning to hold for at least 5 years, and/or willing to negociate to get a price per m2 20 % inferior to the market average to protect yourself against short-term variations

    – you can only buy in Spain if you have a mortgage secured from your own country of origin, or if you have at least 30% down payment and very stable revenues, since banks are not giving credit lately.

    – estate agents are only your allies if they are on your side. As seller’s estage agent is not your friend. He is working for the seller obviously.
    A buyer’s agent, who you will be paying about 3% commission for a full package service, with credentials and no will to sell you his portfolio, will be on your side, and should have a lawyer to help you all the way through.

    One key question to answer: Is your purchase going to be your home or an investment ?

    All the best
    Pierre

    Reply
  2. DT&K Post author

    Hello Pierre, good comments.

    Yes, it is difficult to have mortgages in Spain but definitely Spanish banks are giving mortgages to foreigners with a solid credit record that needs to be proven with a track record report issued from specific credit record firms (not all of them are ok for banks).

    Regarding the agent, I would say that the Spanish market is now a market for buyers. The agent is currently working with such a large portfolio of properties and obviously long list of sellers that the buyer has many choices. It will be difficult from an Agent side to drive the buyer towards an specific property because the commission can be larger. I am from the point of view that it is wise to help the buyer and find what he needs. Buyers have much more information, more choices and calm that in the 2000s boom.

    Obviously the buyer has always the last word and they decide at last.

    Good point Pierre: home or investment? What about Madrid? I have been said that Madrid now is a great place where to invest for buy to let.

    Regards

    Reply
    1. Pierre Waters

      Thanks for your answer !

      Getting a mortgage as a foreigner requires at least 30% down, and a stable income of 4 times the monthly payment. Drastic but good requirements compared to 5 years ago.

      Yes, it is a buyers’ market. But the seller’s agent is the seller’s friend, it’s as simple as that. For instance, he will not cover all the legal risks behind the sale, and will push for the sale to be made as soon as possible. And how do you make sure you exhaust the market, or know if the price is the right one ? I really recommend to be very cautious with seller’s agents if you are a buyer.

      As always, location is key, and Madrid center is a great place to buy. The Embajadores district (Lavapies neighbourhood for instance) is a big investment hotspot since the prices are low, very close to the center, and on the path of gentrification.
      And as Madrid is lacking quality rentals, buy to let is a great option. But again, if you are buyinbg to invest, I would be very cautious on the time-frame the buyer is considering. He needs to go for the long-term, as flipping is really too risky now.

      All the best,
      Pierre

      Reply

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