A very different year for the 2015 Spanish Property Market

For the past 5 years, foreign buyers in Spain have been used to taking their time while searching for their dream home. Not only were these buyers waiting for vendors to drop their prices from whatever they might expect to have received near the top of the Spanish Property Market to something far more credible. The revised value ended up being about 40% lower. Nonetheless they could also be pretty certain that once they discovered the perfect property they weren’t likely to be facing competition from many other potential buyers.

From our point of view as property finders there wasn’t any need to rush either, we got accustomed to taking our time on searching and there wasn’t any mad rush for clients to leap on an aeroplane to check out the viewing itinerary. If they had to delay for a month it didn’t make much difference, the list would most likely still be unchanged and they’d have the pick of the original selection. Having said that, as we get into 2015 it’s all becoming very different – there is a definite change of mood in the air and prospective buyers will have to get on top of things once again.

To begin with, let’s consider prices. Don’t end up being fooled by press comments that prices are still going down in Spain. Some are its true, however only within the domestic Spanish market and also the less appealing, secondary regions in the foreign marketplace. Also the rate of decline slowed down dramatically in the first three months of last year to only 1.8% – the most severe quarterly drop was in the third quarter of 2012 at 15.2%. Madrid enjoyed an increase of 1.9% during the initial quarter of 2014, the best progress since 2010. During the same period the Costa Blanca regions all improved and the Marbella municipality managed 4.8%, the biggest increase in all of Spain’s Mediterranean coastal resorts.

There is no question that it’s now safe to assume that in the main tourist regions of the overseas sector prices are up and running and potential buyers have to bear that in mind when it comes to making an offer.

 

That’s not saying that sellers can now begin increasing prices; if they do they will very quickly discover that the market continues to be price sensitive and if buyers have different alternative buying opportunities they will quite likely disappear.

Having said that,, the vast majority of selling prices tend to be more or less where they ought to be; ie. 30 – 40% under the highs that we had, back at the turn of the century, which means purchasers trying to slice another 10 – 20% off the asking price right now will probably be disappointed.

And the primary reason for this is the fact that demand and supply are in all probability closer to equilibrium than at any other time during the past ten years. And we know that fresh property on its way through the system is actually just about nil. Take the situation in Alicante province, among the major locations for foreign buyers, building licences for new projects of villas and apartments are around 96% down from 2007. There were less than 1,000 building permits granted in 2012, dropping another 30% in 2013 and yet another 60% in 2014 and because it can take a few years to get from the drawing board to starting up a sales office we are able to recognize that a normal supply of saleable stock won’t appear before 2016 at the soonest.
The first signs of a real change in sentiment started to be noticed during the latter part of 2013 when vendors began to dig their heels in.

Therefore, with very little new inventory on its way, selling prices at realistic values, supply and demand pretty much stable and foreign customer numbers growing steadily – (they are already returning at a rate of about two-thirds from the highest levels) – potential buyers must recognise that market conditions genuinely have improved in just the last couple of months, and buyers are not likely to have it all their own way like they have during the last couple of years.