Nowadays, to be able to buy a property below €100k, €70k or even €50k in Spain sounds like a dream compared the mid 2000’s when the prices were at their peak. In this article that you have started reading, we want to give four examples and cases in order to explain why what is Spanish online property is not always such a bargain but rather what nobody able to buy wants in Spain. Overseas buyers and investors acting by themselves are not at the forefront.
Buyers are chasing the market and they sometimes get stunned at such amazing prices that they “leave their brain at the airport”.
To “leave your brain at the airport” has become a well-known sentence amongst professionals when talking about buyers getting excited during viewings, and buying what seems to be a bargain before it goes away or, what is worse: someone else takes it. Then, after having paid the deposit or even completing the purchase they realise that due to the building, the surrounding areas and the poor local market conditions, what seemed like a bargain is just and average purchase.
6 years after the crisis broke out, and two years after 2012, a year in which the average fall in house prices was the fastest ever at -13%, in the UK online we still saw Spanish properties such as apartments by the beach at €58k, 100sqm flats in the city centre at €76k and houses by the beach straight from the banks at €100k.
So is there a catch? It depends, but what is definitely true is that what can be seen here, especially online, are the leftovers of the property opportunities in Spain.
Despite the fact that the economic crisis in Spain is cruel and that the recovery does not show signs of improvement for the domestic economies, when good opportunities arise there are 2-3 local investors waiting to get it and the opportunity goes quickly.
Don’t get me wrong, there are always opportunities…Not only now when prices are very appealing, but it’s always a good time to invest when the opportunity arises. Also, it often happens that there are some opportunities that are there for a long time and nobody appreciates the potential value to turn it into a profitable asset.
Here we explain four examples or cases to explain how quickly bargains and opportunities go and how they get filtered by locals: From Banks to Agents dealing with Repossessions and Agents dealing directly with sellers.
- BANKS REPOSSESSION BARGAINS REMAIN “IN-HOUSE” – Searching a residential block in the centre of Madrid for a client aiming to generate cash flow in Spain, one of our contacts, a sales executive of one of the top three Spanish companies that commercialise repossessed properties from all the Spanish Banks, with whom we have been working since 2011, her comment was: “real bargains are not even in our books. Bank Directors tend to keep the best opportunities in their own business network”. My question is: Is that part of the game? Well…here in the next example we can see the easy way in which others in Spain sort it out at the next level.
- REPOSSESSIONS THAT GOES THROUGH TO THE OPEN MARKET IS CAUGHT BY THE SECOND FILTER: THE AGENT-INVESTOR. The example of the Bank Repossessions agency in a town near Almeria. I met the two agency partners in Moixent (Alicante) in February. We had lunch and, before pudding arrived, we started talking procedures when operating. As a registered agency that sells for banks (they have a website with more than 16k repossessed properties all across Spain), they are not allowed to buy properties from the bank’s portfolio, since they are supposed to just commercialise. Quote from the Agent: “In the last two years we have been selling many bank properties to buyers and investors. We realised the real profit from the bargains was for the investors. We were getting “peanuts” from the banks and the happiest people at the end of the process was the buyer. The bank sold the asset and we got a meagre 1% from a property that will never get a value above 100k. So we decided to start buying and investing a few months ago via a third party who we have registered as a client-buyer, because we are not allowed. When we see a good opportunity, we just get it quickly as long as it fits in our portfolio. Our best deal has been a house that we bought for 36k and sold for 100k”.
- THE AGENT RESELLER DEALING DIRECTLY WITH OWNERS.- Another case is the classic Agent-Investor. One of them (whom passes bespoke deals to us whenever clients need) also recently invested in a low cost apartment coming directly from the owner. They bought it for 15k and did it up. The case of the Spanish Agent taking clients to the refurbished apartment. They put it on the market for 60k and started bringing clients round. They got worried 3 months later seeing as they could not sell it. Eventually the sold it at 40k, with a reduced margin of net profit. This was the case I took on from an investor in Valencia.
- ANOTHER THOUGH ABOUT OVERSEAS BUYERS. – Also, dealing with local networks can adulterate the prices, especially if you are an overseas buyer dealing directly with sellers. If a proprietor needs quick cash and wants to sell the property at a very good price, and the person who approaches him is a foreigner (not Spanish), they immediately increase the price because they immediately understand that there is more demand for that property…it means a higher profit margin. But if a Spaniard is the one approaching, the mood of the seller is different. That’s why when I’m working for my overseas clients I always say that the property is for me or my brother. I never say that I am the one looking for the property in behalf of a foreigner in order to avoid this sort of painful situation.
– Properties online can sound good or very good (online) but they are not always the real jewels. If they have been online for months, it is because no one else wants them.
– There are not as many thousands of bargains as home hunters believe.
– If you are an investor or a buyer keeping an eye on the market, be ready to grab opportunities: the account open, the funds and deposit ready. You have to move fast.
– How do you get TRUE bargains from banks? By dealing with a Bank-agent with a good local network and make some sort of partnership or agreement. Always agree everything beforehand…Signed