Now may be a good time to invest in Spanish property, but my advice would be to tread with caution, and to be well researched.

The market in Spain has taken a hammering in recent times, and although not every vendor is desperate to sell, some of them are. Remember that a large proportion of these properties were purchased as 2nd homes, meaning that they were bought as a luxury item. So as the economic climate for owners becomes more gloomy, disposable incomes begin to shrink and people face job losses and spiraling debt, it is these luxury purchases that are often the first to be cashed in.

I don´t think that we have quite reached the bottom of the market in Spain, but I fear that within the next 6-12 months, there will be so many people trying to bag a bargain, that it may end up a bit of a ´free for all´, with a huge volume of buyers feeding off the scraps under the table. Imagine a high street store in the UK opening its doors at 5am, with promises of massive discounts on all merchandise – everything must go! I fear that there will be a similar scenario in Spain – the equivalent of people queuing around the block, ending up getting in too late, and panic-buying that last orange t-shirt…the one that you´ll never need or like!

I am preparing to buy in the next 3 months, as I think that I should have a decent amount of competitively priced stock to choose from. I am targeting three types of vendor:

- those vendors who have owned their property for more than 6 or 7 years, meaning that they purchased before the rapid price increase during the boom years. These vendors will probably still be sitting on a decent amount of equity in their property. Of course, these people may not need to sell, but if they do, there is plenty of margin in the deal before you hit their ultimate bottom-line.
- recent investors who have been badly stung by the credit crunch and the general downturn in market conditions. I´ll be looking to target those vendors that simply do not want to own their Spanish property – perhaps they had planned to sell before completion, or perhaps they are unable to complete, having purchased off-plan at the height of the market, and now unable to secure finance or to service an existing debt on the property. Some of these vendors may decide to ´cut their losses´ to simply get out of the deal. You may not have the large margins to play with as in the first example, but you will be buying a brand new property at a discounted price.
- developers. All developers need cash in the bank, some more than others. I will be treading carefully here though, and targeting nearly completed developments where the developer needs to sell the final units, and is prepared to do so at a discount. I may not end up with the best-located units on the project, so I will be trying to negotiate hard to secure the best financial package. The best developers to target will be those relying on volume sales, but be careful that you are not investing at the start of an off-plan project – if you do, make sure that you have bank guarantees in place in case the developer runs into problems and can´t afford to complete the property or project. Of course, there are some well-financed developers who are content to lower their sales targets and to ride out the current storm, so don´t expect massive discounts from all angles.

Finally, for future resale and rental potential, I will be trying to stick to the old mantra of ´location, location, location´, and trying to target the best properties and projects within these areas. It all sounds so simple, but the problem I face is that I am unlikely to be the only one with the same criteria!

Bargain Properties in Spain

Discounted Development in Costa Blanca

Great Value plot in 5 star Marbella