bargain spanish properties buying spanish property in sterling euro sterling exchange rate properties in spain for sale a
The general feeling is that most British buyers are waiting for sterling to recover to particular ´trigger´ rates such as 1.15 and in particular 1.20
In fact, the last 2 weeks has seen a surge of UK enquiries for property in Spain after sterling rallied over 5% to hit the first of these magical triggers.
But let´s look at this situation from the other side. As we previously mentioned, most of the Spanish properties for sale in the key hotspots of the Costa del Sol and Costa Blanca are owned by British vendors, and during the demise of sterling in the last 12 months, they have been able to lower their asking prices considerably, and in some cases accept incredibly low offers, precisely because of sterling´s dire straits.If someone had bought a property for 300,000 euros in 2005 at a rate of 1.40, they would have paid the equivalent of £214,286
If they sell the same property at a whopping loss of 30% (90,000 euros), and then change their proceeds from euros into sterling, they will net the equivalent of £190,909. Despite making a 30% loss on the price of the property, the real loss to them is actually only 10.9% (£23,377), not ´that´ bad considering all the doom and gloom around the Spanish property market.
But this win-win situation is all set to change, and we are already seeing the effects of the recent recovery of sterling on the attitudes of buyers and sellers alike.
Buyers from the UK are now becoming more confident in their ability to buy into the Spanish property market – after all, their pounds are now worth more over here in Spain…..aren´t they??
British sellers of Spanish properties are now toughening their stance when it comes to accepting low offers, and some are even raising their asking prices, all due to the fact that, as sterling rises against the euro, so their position worsens.
For instance, if sterling pushes on to hit heights of 1.25, that same property that had previously cost 300,000 euros (£214,286) in 2005 would fetch just £168,000 if sold at a 30% loss at 210,000 euros. That represents a £22,909 loss on the figure that they could achieve by selling their property now (and a whopping net loss form the original price of £46,286, or 22%) even at the same price of 300,000 euros.
Don´t be at all surprised to see the following occur in the next 12 months:
- an increase in the confidence of UK buyers of Spanish properties as economic conditions ease
- a perceived increase in UK buyers´ spending power as the value of sterling increases
- a hardening of attitudes by British sellers of properties in Spain
- low offers being rejected by British owners, with only offers close to the asking price being accepted
- potential for price increases in certain very popular areas
This may come as a bit of a shock to many British buyers considering investing in Spanish property, but agents in the popular areas are seeing this happening on a day-to-day basis at the moment.
It may sound far-fetched, but I fear it is true – the Brits are in danger of missing the boat and buying into the market too late to take advantage of what are clearly excellent conditions for anyone looking to snap up a Spanish property bargain.
comments
Criss Rogersaid
What utter rubbish.
The Euro is grossly overvalued hence the contraction of the Spanish economy, dependent as it is on services to tourists (& on its former bloated construction industry). The result 20% gneral unemployment & rising, 50% unemployment in 25s & under age group.
The UK economy, by contrast is dependent on financial services, which are again in the ascendent.
The Euro is expected to hit circa 1:1 US $ in autumn 2011
The US $ trend is 1.45 to 1.55 to £ Sterilng.
Ipso facto the Euro will rebalance to the conservative norm of circa 1.4 to £ Sterling, barring any unforseen problems in the UK economy by late autumn 2011.
The depreciation in the grossly overvalued Spanish property prices is the result of demand & supply, not exchange rates.
There are approaching 1,500,000 NEW properties on the market, let alone the resale market which has balooned because of
(i) UK speculators buying off plan, on a ludicrously rising market, in the hope of turning the property around i.e. selling it & making a profit before they had to pay for it (or the ability to pay for it) the result mortgage defaults & repossessions
(ii) Gordon Brown’s contrivance in devaluing £ sterling by 30%, the result of which is that UK residents in Spain in receipt of £ sterling based income suffered a substantial drop in their effective net disposable income/living standards.
The Bank of Spain has conservatively forecast a further 20% - 30″ decline in property values over - 2011 & 2012 - property prices in Spain will continue to fall until they reach a 2003/4 level.
End of June, María Antonia Trujillo, former Spanish Housing Minister, said she expects house prices to fall by a further 30-50% & would not consider buying property in Spain now.
Of course there are exceptions e.g. anyone wishing to sell a house or flat in madrid should not have a problem.
seansaid
I am sick to the back teeth of ´experts´ telling the world that everything in Spain is crashing through the floor. THAT is utter nonsense. The whole world is seemingly on its knees, but does that mean that every single area within a country is suffering similar property price falls? No, of course not.
If buyers believed that property prices in all Spanish regions had 50% further to fall, then there would be no buyers. Simple as that.
Criss Rogersaid
Sensible property prices in Spain have held up in business/commercial areas such as Madrid, Barcelona etc where the infrastructure does not support commuting to the extent in the UK and as commuting is not a Spanish lifestyle. In any event these areas were not subject to the speculative hysteria of the costas during 2003-2007.
However, property prices in Spain have fallen 30% since 2007 in other areas. Spain is still in recession.
The banks have tried to avoid further falls by renting out properties or rent to buy, in some cases converting mortgages to rent.
Whilst fortunately having a comparatively low loan to “value” ratio of 80% max, the banks’ intentions have been to avoid any further write-down in their portfolios, as this would affect their cover & liquidity ratios already damaged by investing in the property builders & the approaching 1.5 million unsold new homes on the costas.
The biggest drop in transaction volume has been in the new housing sector. Traditionally older housing is not attractive to buyers in Spain and thus represented a considerably smaller proportion of the market volume.
Spanish property prices doubled (200%) in the decade to 2007, mostly in the latter 3/4 years (Netherlands 102%. Italy 102%, Denmark 128%, Belgium 131%, France 144%, in Germany they fell!).
Regardless of 20% unemployment & rising (50% of first time buyers - 25 & under), property prices as a multiple of average Spanish incomes are grossly out of sync with other euro countries, the multiple having increased almost 2.5 times between 1986 and end 2009, (in UK up by almost 1/2, Germany down by 1/5).
Accordingly, on 8 July 2010 the EIU estimates that Spanish property market generally, as of the start of Q2 2010 the is 50.4% overvalued (Germany 14.5% undervalued).
BOS conservatively estimates a further 20% - 30% fall in property prices 2011-2012.
Given the increases in taxation, doubtless including property taxes to address the Spanish deficit, the forecast lack of growth in the Spanish economy, the requirement of banks including CAJAs to increase their reserves, there is no possible forseeable improvement whatsoever in the property market for many years to come.
With property prices continuing to fall back to the comparatively realistic levels of 2003, an anticipated strengthening of Sterling against the euro to circa 1.35, patently any UK buyer would be insane (or ignorant) to buy property on the costas without applying a discount approaching that calculated by EIU to redress the existing overvaluation.
In the real world, those who have property to sell will doubtless reduce the asking price appropriately to reflect this if they seriously wish to move from their property to another.
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