This is our 9th Quarterly Report. We have kept it brief and specifically relevant to the locations where we are particularly active.
As part of the research we have identified a number of wider and national property comments.
There are three items in the news now that are affecting demand and supply.
Brexit and the Euro/Sterling exchange rate – The doubts as to the result and it’s after effects are undoubtedly causing UK buyers and sellers to hesitate. In addition, the fall in the value of sterling, from the 1.40’s to 1.20’s € euro in the last three months has made the relative costs of property here much more expensive for UK buyers – but of course better for those wanting to repatriate to UK. However, the latter will be concerned that there is more reduction in value to come and so may decide to hold onto euro asset until closer to the referendum in the UK on 23rd A recent letter received from a client confirms this situation – ‘We are concerned that if the UK leaves the EU, then we expect that property prices in Spain may fall considerably and, therefore, we should be grateful for your view as to what the property would be worth in the case of the UK leaving – and in the case of the UK remaining in the EU. If we go ahead with the purchase before the referendum, we are thinking that we need to cover ourselves regarding the price that we agree, to compensate for any likely fall.’ These particular buyer clients have agreed to pay the seller in sterling, which is to the client’s advantage as the exchange rate has changed.
The risks associated with a change of Government in Spain – More than one client and acquaintance has stated that they will sell and move if a left wing Government should be elected. Again, the uncertainty could be causing buyers and sellers to pause until there is a result, which could be before the end of May or, with a new election, at whenever a new Government is established after the end of June.
The Spanish banks are being obliged to update their valuation of assets practice to include regular annual or bi-annual valuations of each individual asset – This has seen Sareb, the Spanish bank rescue bank, announce a write down of their portfolio by more than 2 billion € euro, in addition to the 968 million € euro write down in the past two years. It may be that many private banks will have to do the same, which may result in them lowering the asking price for properties they are trying to sell, thus reducing the market level as a whole. The reduction of asset values also could reduce the banks’ ability to offer mortgages. It could lead to a downward spiral again. See https://www.sareb.es/en-en/press-office/news/Pages/Sareb-makes-an-additional-write-down-of-EUR-2,044-million-in-line-with-its-new-assets-valuation-accounting-standards.aspx The requirement for regular revaluations has also been quoted as one of the reasons for private equity firm Cinvin buying TINSA, the Spanish based tasadores.
This is our 8th Quarterly Report, as part of the research we have identified a number of wider and national property matters.
Significant expatriate demand has continued on the Costas, with the availability of mortgage finance assisting. With international terrorist incidents happening in other Mediterranean countries Spain is seen as a safe resort. However, this is a fragile situation and it would only take one major terrorist incident on one of the Costa areas of Spain for there to be a significant pause in the rate of demand. However, due to its location and whether advantages, especially with travel times from the UK, Spain is likely to continue to be the top 2nd home and expatriate destination.
Anticipated continued demand is evidenced by the significant increase in land sales in prime and good secondary locations. There is a notable increase in construction cranes on the skyline, both for apartment developments and individual villas. The few new developments that have been constructed during the last couple of years are reported to have been selling well, with waiting lists in areas such as San Pedro de Alcántara.
However, there is still a substantial amount of property available for sale in all sectors of the market and this prevented any significant overall increase in prices. There are indications, especially in prime locations with few properties available, that prices are definitely hardening and increasing.
The prices for resale properties have not shown any significant increase overall, with any reduction in supply due to sales being countered by additional properties coming on the market due to the perceived activity.
Some of the demand is coming from speculative purchasers, acquiring properties with the intention of remodelling and renovating and then selling on. Thus the property is not really removed from the market, merely moved up a level.
The increase in market activity is also evidenced by the number of estate agencies increasing significantly.
However, the costs of acquisition and sale are still high. We anticipate that there will be pressure from the authorities, possibly due to EU pressure, to increase the significance of the energy rating of properties. This is already evidenced by the indication from central government that local property taxes will be reduced for properties with better energy ratings.
As we stated in our reports, the Spanish government is now actively working on improving the accuracy of title deeds and tax descriptions, by ensuring that information is combined on the title deed ideally by the inclusion of a plan. Since November 2015, where there is any significant change to the property or discrepancy between the descriptions, the owner is obliged to have a topographical survey carried out both of the building and of the land with that plan then being approved and attached to the title document and used as the basis for the Catastral. Given our experience of the majority of properties having such discrepancies, it is anticipated that the requirement to carry out this work will only become evident to many sellers close to the exchange date, thus causing delays and additional costs, some of which may be negotiated to be a liability of the purchaser. We anticipate that this could slow down the market to some extent.
We have not noted any significant effect upon demand due to the current political uncertainty within Spain, but should there be a radical change in either political direction this again could cause some pause in demand. As it is perceived that the government sees property as a relatively ‘soft’ target for money-raising, there is concern that a more radical governmentcould increase transfer and running costs, thereby risking a diminution of demand.
We also refer you to comments made in the last quarter statement, many of which still apply.
Survey Spain is recording prices and valuations throughout our Network. Due to the limited number of properties and the even fewer number of reliable sale figures, we are only able to provide a meaningful analysis of prices and values for some Provinces this quarter. However, as before, we have commented on the majority of the areas relevant tothe Bank, with the opinion sourced from our valuers, agents and other sources in the areas.
In addition, where we have sufficient information, we have subdivided provinces into smaller areas.
As this is the area with most activity, we have been able to provide more information on the Costa del Sol market.
Analysis of Statistics
Note that the rates per square metre may be averaged from a small number of properties in some cases. We have continued to supply these as we believe that they will show a trend over a number of quarters, whilst the variation between one quarter and the next may be ‘out of step’ with the perceived trend
Value per sq m for this quarter.
There is a substantial range over the whole area.
The highest is an apartment in Marbella valued at 10,000€ euro/sq m, although there were considerable doubts as to its size and description. Lesser values of approximately 6,500 to 6,800€ euro/sq m were recorded also for apartments elsewhere in Marbella and on Majorca and Ibiza.
At the other end of the scale, the lowest value of just less than 500€ euro/sq m was registered for a townhouse in poor condition in Alhaurín el Grande, Costa del Sol.
Analysis of all the Asking Prices, Buying Price and Valuations over the period from the start of our record for you in 2014 has shown a steady decrease and currently indicates the following-
The % difference between Asking Prices and actual Buying Prices –
3rd Quarter 2014 -15.80%
4th Quarter 2014 -11.41%
1st Quarter 2015 -18.64%
2nd Quarter 2015 -10.73%
3rd Quarter 2015 -8.72%
4th Quarter 2015 -8.93%
The % difference between Asking Prices and our Valuations –
3rd Quarter 2014 -20.65%
4th Quarter 2014 -19.43%
1st Quarter 2015 -16.55%
2nd Quarter 2015 -17.09%
3rd Quarter 2015 -14.26%
4th Quarter 2015 -22.64%
(The variation in the trend is most likely due to its relating to only 4 properties where we have carried out valuations AND are aware of an asking price. One of these properties had substantial problems, which may not have been reflected in the asking price, but was in our valuation.)
Over the entire period our valuations average 93.29 % of the Buying Prices, which is a poorer result than we would have hoped. It may be that it is a reflection of increasing market demand, with our valuations continuing to be cautious.
We are of the opinion that the above two records showing the difference between asking prices and buying prices and valuations are the most significant information relating to the market. As last quarter, it appears to confirm that buyers are less able to obtain significant discounts from asking prices, combined with the probability that sellers are becoming more realistic in their prices in order to see a sale. Again, we are of the opinion that the falling values overall in the international market in the Costa areas of Spain has come to an end, but there are still many areas where value reductions are continuing with buyers still expecting to obtain ‘bargains’.
The market in individual areas.
San Roque and La Linea, including Sotogrande.
The evidence only relates to villas within Sotogrande and the surrounding areas.
Rate per square metre for all property types – 2,056 euro per sq m.
Within this ranging from 1,464€ euro per sq m to 2,626€ euro per sq m.
There has been an announcement that the owners of the high prestige urbanisation of La Zagaleta are proposing to carry out a development within Sotogrande. This will maintain the prestige reputation of Sotogrande in general. It will increase interest at the top end overall, but blight areas near the construction for a few years and add competition for sellers of existing properties, with subsequent forced reductions countering any perception increase.
Gradually, the substantial amount of properties available both on and off the market are being taken up, with competition for the better locations.
Other than those mentioned above, we believe that interest in property in Sotogrande will continue with it eventually causing prices to rise slowly, though this will happen more quickly in the fashionable areas.
Insufficient evidence for statistics and the properties here have been combined with Estepona and Casares.
See comments last quarter as they are still appropriate.
This general area contains a wide variety of locations, property types and values. The area east of Estepona is known as the New Golden Mile and contains many valuable properties, and principally between the coastal road and the shore. The area west of Estepona gradually reduces in value, with the exception of one or two pockets of development, one being from the aforementioned Taylor Wimpey. Manilva has been seen as a lower value area, principally due to over development during the boom years. However, the Puerto Duquesa and Sabinillas areas, with a good supply of essential shopping and leisure services, have recovered their popularity and could be growth points in the future.
Rate per square metre – 1,655€ euro per sq m from a relatively small number of properties.
Ranging from 857€ euro/sq m for a studio apartment to almost 3,000€ euro/sq m for a hotel suite.
La Zagaleta is the prime location and there appears to be a continuing strong demand gradually taking up surplus property.
There are also indications that individuals are proceeding with developing new properties on vacant sites within the urbanisation.
Obtaining comparisons for properties at this location can be very difficult due to the difficulty of obtaining detailed information required to justify a very wide range of rates per square metre, which has been found to be from 2,000€ euro/sq m to 10,000+€ euro/sq m.
Elsewhere within the municipality, whilst there is still a substantial amount of property available, due to the prestige of the addresses, there is a steady supply of buyers who are reducing the supply overhang.
Rate per square metre – 2,149€ euro per sq m. From a small number of transactions and therefore not comparable with previous quarters.
The market in Marbella had been proceeding steadily until it was dealt a savage blow by the Spanish Supreme Court declaring that the general plan for the town was null and void and that all planning arrangements being negotiated in order to regularise planning in the municipality could not take effect. The core of this decision is that developers and investors cannot be held liable for any payments required to bring illegal developments into line, and that it is the current owners who have the liability.
This decision is likely to have far-reaching effects upon planning within Spain as a whole, indicating that any general plan for any municipality to which there are objections that are likely to proceed to the Supreme Court, cannot be held to be 100% reliable.
The immediate result is to have frozen sales in contentious locations, but to have possibly increased the value of legitimate properties being offered in a reduced total supply. However, it is too soon to have any reliable evidence of this effect.
Rate per square metre – Villas – 2,457€ euro/ sq m. Apartments 3,439€ euro per sq m. This would appear to show a significant increase over values in the previous quarter. An increase is the general impression though this is bound to be affected by the planning decisions mentioned above.
Mijas is a large municipality and covers a wide range of locations. Accordingly, average values can be misleading when related to specific addresses.
The best addresses, which tendto be uphill towards the Pueblo and overlooking the wide coastal plain of Fuengirola, have been developed over many years and have the continued popularity. Similarly, the coastal area is a steady interest, but in both locations there is a substantial amount of property available for sale, which is reducing the effect of any continued purchases. As elsewhere, popular properties will see considerable demand and possible price increases, whilst others in less desired areas and styles will still struggle to achieve a sale unless at a discounted price.
Rate per square metre – 1,880€ euro per sq m. This returns the rate to approximately the level seen in the quarter before last. There is a relatively narrow range from 1,501€ euro/sq m to 2,659€ euro/sq m.
Fuengirola, Benalmádena and Torremolinos
The properties in Fuengirola are on the east side and therefore have been included with those of the adjacent two municipalities, which are of a similar character.
Rate per square metre – 1,662€ euro per sq m for a mix of villas and apartments. The range is from 1,202€ euro/sq m to 2,021€ euro/sq m
Graada and Costa del Sol East
There are too few properties to provide relevant statistics.
However, we continue to see enquiries for building surveys for these areas indicating that there is continuing demand.It also perhaps indicates that buyers are becoming aware of the ground and planning problems especially in the area around Lake Viñuela leading to increased prudence in carrying out due diligence prior to purchase.
Almería and South Murcia
This is traditionally a relatively low value area, which is part of its attraction to purchasers.
Rate per sq m 1,192€ euro/sq m, ranging from 603€ euro for a country villa to 1,600€ euro for a villa within the modern urbanisation near the Mar Menor.
Comment by local valuer for Almería and Murcia –
Prime areas now going up, but secondary areas still in limbo.
What to watch is the Pound versus the Euro. Currently 1.36, which is Ok, but the threat of a Brexit, could affect the market, as the Brits are the predominant buyers. Also, the Spanish political situation could change the climate, so, watch out! We are in very unpredictable times!
It would only take a terrorist attack in Spain to change the whole environment!
Discounts depend on area, could be anything from nothing to up to 10%. It’s all a question of supply and demand and location.
Murcia and South Costa Blanca
The average rate is 1,146€ euro/sqm, varying from 815€ euro/sq m to 1,429€ euro/sq m.
There is a substantial amount of property available, much of which is in intensively developed low rise urbanisations without beach frontage. In addition, there are a number of resort developments which have only been partly completed and many without the promised common area and leisure facilities. This all provides a large overhang on the market and for any property to sell it has to have a significant unique selling feature and/or very attractive comparative price.
The higher values are seen in properties close to the beach and amenity and leisure facilities.
Costa Blanca North
As stated in earlier quarters, this area has a significantly different character to that of the municipalities south of Alicante city. This is reflected in the values.
The average rate is 1,962€ euro/sq m, varying from 706€ euro/sq m to 3,667€ euro/sq m.
Comment by the local valuer for Costa Blanca North –
Definite further improvement in the market over the last three months, but very mixed with some prime locations (especially those popular with buyers from the UK such as Javea (between 4% and 8% increase) and Denia (4% increase)) showing price increases, whilst prices in tertiary locations still falling slightly.
A good description might be ‘bouncing along the bottom’, if we were sure that this is the bottom and future economic problems don’t cause further market falls.
Overall prices in the Comunidad Valencia remain relatively stable with slight increases of between 1% and 2% over the last 12 months. Murcia, however, has seen decreases of around 4% over the same period.
One notable indicator of improved market sentiment is the number of new estate agents offices, with around one a week opening in the Marina Alta area, Costa Blanca North.
Another obvious sign of increased activity are the crane towers on the skyline, predominantly on private, individual builds.
Any recovery, though, is delicate and very dependent on the economic recovery Europe wide.
As always, the islands of Mallorca and Ibiza, and to a lesser extent Menorca, have a consistently high level of value, with steady demand. Due to the previous strong planning policy, there is much less of a property overhang here and thus increases in value are probable.
The average rate is 3,791€ euro/sq m, varying from 1,070€ euro/sq m to 6,890€ euro/sq m.
As in the previous quarter, above statistics and comments appear to confirm cautious optimism in the market, with the better properties beginning to show a slight increase in value due to buyer competition and greater confidence among sellers.
If you are planning to invest in property in Spain make sure you don’t leave your brain on the plane but follow these essential steps.
Assume that you have to do all the things in Spain that you’d do back home. The most important is to keep your wits about you and don’t take anything for granted. Question all the time and ask again if you don’t understand the answer. Also ask the same questions of other people and get a feel for what’s right.
Set yourself a research budget. That money should cover all the costs of looking and getting reliable advice and must be treated as an investment. It’ll cost hundreds, but it will save you thousands.
After all the Internet research, go to Spain before you commit yourself to anything. The web is marvellous, but it can’t tell the sights just off the edge of the photo or the noise and smells, pleasant and unpleasant! The cost of a few quick weekend trips looking at different areas and repeated visits to the same area once you have decided on a place will give you a real feeling for the atmosphere of places and people.
Remember that not all agents are bad and not all are good. However, they are paid their fee by the seller and will only get that when you buy so don’t faff around too much or they will lose faith in you and move onto more decisive clients. On the other hand, don’t be rushed and make sure, if you are buying the property with a partner, that you both have given full and frank opinions on the property and the information you’ve been given. If one isn’t happy with it, they could make life miserable for themselves and the others by “I told you so”, at every minor future problem.
You need a good lawyer who can talk fluently to you in your own language and understand fully what you are saying too. Make sure that he or she has support as sometimes at crucial moments they can be away on holiday or dealing with court cases and such like. You don’t want to be left ‘hanging’ without assistance. They don’t have to be local to the property, but must give you the feeling that they can empathise with your thoughts and problems and that they have a professional conscience, by getting answers to the questions that you don’t know need to be asked. Also, the art of communication does not always come high up in the profession’s priorities, so don’t wait for a report on what’s happening, ask for it too. Often you’ll be pleasantly surprised that there has been significant progress, but somebody just hasn’t thought to tell you.
Have the property inspected by a knowledgeable surveyor who again will have gone through all the situations you find yourself in and have the experience of years of finding solutions for clients problems. They too have to be able to talk frankly with you and give impartial advice, again answering those questions you don’t know to ask, as well as those you do. Remember that they are perhaps the only professional that actually visits the property and looks at the paperwork and so, whilst the lawyer can give you 100 percent perfect paperwork, it’s not much use if it only covers half the property you think you’re buying or the place is crumbling about you as you sit regretting in the sun. Being able to take a survey report into negotiations on the price of the property can easily save you many, many times the cost of the report
Last and most important is to enjoy the process and the country, while keeping your wits about you. After all that’s what you’re here for, to enjoy a better life!
Written by Campbell D. Ferguson FIRCS, RICS Registered Valuer
First published in The Local 5th October 2015 www.thelocal.es
This is a brief summary of a report by an EU funded body into the issues surrounding the valuation of energy efficient sustainable buildings.
As an RICS registered valuer associated with Survey Spain I have a professional interest in this material.
The report says that valuation professionals across Europe need to be trained so they recognise the effect energy efficiency and sustainability has on values. Although valuers reflect the market rather than make the market, in practice they are involved at every stage of a buildings life cycle, and their opinion is used in negotiations between buyers and seller landlords and tenants. Valuations professional are “information managers” in an intransparent market. Continue reading →
Whilst Spain may be behind UK in introducing the requirement for Energy Certificates for property, it gives us to benefit from their experience. Here is a recent article that was aired on the RICS Chartered Surveyor’s website. Author is a specialist in Energy Performance Certificates in England.
The 10 years from 2008 to 2018 are seeing a profound transformation of the regulations relating to energy efficiency and, importantly, their impact on properties. Sam Parkes explains: Continue reading →
Survey Spain’s Campbell D. Ferguson, FRICS, recently gained his Legal Experience Training Advanced Professional Award in Expert Witness Evidence (LETAPAEWE) at Masters level BTEC. Study for the award is recommended by the Royal Institution of Chartered Surveyors, which is the premier worldwide property professional organisation.
In order to gain this qualification, Campbell studied three modules in Expert Witness Evidence – Law and Practice; Written Evidence – Advanced Report Writing; and Case Preparation and Court Skills. Accredited by Edexcel, which is the UK’s largest awarding body offering academic and vocational qualifications and testing in the UK and over 85 other countries, the course is designed to equip professionals with a body of legal knowledge that is valuable in everyday practice as well as during court representation. Continue reading →
RICS stands for the Royal Institution of Chartered Surveyors, an organisation of property professionals that sets, maintains and regulates standards in the property industry. This illustrious association can trace its roots in the UK all the way back to 1792, when the Surveyors Club was formed. Continue reading →