I want a property in Spain…sometimes when I look at the weather from my serviced offices in London I feel the need for sun, swimming and sangria. And you can get some good property deals in Spain, but is it a good investment?
Well, the Spanish property crash, sadly, continues – as shown by the huge drop in Spanish property valuations over the past year. These valuations are required if someone needs a mortgage and therefore are the necessary prelude to most property purchases.
Needless to say, valuations during the Spanish property boom were notorious for being wildly optimistic. Many times I was astonished at the banks valuations of properties I knew well where a mortgage was being sought. To the delight of buyers, many properties were valued significantly over their selling prices which, no doubt, encouraged some people to take out loans greater than those absolutely necessary. Either way, the lenders were endangering themselves by lending their money on the basis of these defective valuations.
Of course, no-one minded at the time. The sellers were happy, the buyers pleased, the estate agents busy and those earning commissions on the mortgages arranged perfectly content. The figures within lending departments must have looked terrific and wonderful promotions and bonuses followed, yet again pleasing all concerned.
That was all to change though, recent Spanish government figures show that in the first quarter of this year there were 65,855 property valuations, which is a massive 52% down on the last quarter of 2010.
The Spanish property market in 2011 is facing twin evils. The banks are not lending (or only doing so on a very restrictive basis) and the number of people able to borrow money is less, given the staggeringly high rate of unemployment in Spain (currently at 21.3%). It hardly needs me to add that any vital ‘feel-good’ factor is largely absent in Spain, with most Spaniards I speak to talking about the 2012 being even harder (economically) than this one.
It is my own belief that Spanish property prices could fall further before stabilising. This has been backed up by finance writer, Mark Stucklin, who claims that the Spanish property market in 2011 will drop further – with the American investment bank Morgan Stanley forecasting a fall of 10pc.
If you are looking for property in Spain, be it residential or commercial property; wait patiently in order to get the best deal.
