The summer selling season 2012 is just about to end for Spain, and surprisingly for some it is ending on rather a high note. According to a recent report sales in August were 4% higher than July and 7% higher than the previous year. Surely this indicates that we may be heading for a brighter start in 2013, but unfortunately when you dig a little deeper you realise this isn't the case.
The rise in sales can be attributed to the government incentive of a 50% vat reduction on new properties. The part about new properties proves the relationship between the up-tick and the incentive, because the rise in sales was limited solely to new properties – there was absolutely no growth in resales.
However, market expert Mark Stucklin says that while the rise hardly "signals the start of a heroic housing market recovery", it could be seen as further evidence that the market is finally finding a floor. It could well be that the Spanish housing market is at or near bottom.
Spain was one of the most overdeveloped markets in the world. In fact, the only market that comes close to it in this respect is Dubai. But now we must say was Dubai, because Dubai is well on the path to recovery. Dubai house prices fell by 50-60 per cent before bottoming. The only other market that fell as hard was Latvia and it also bottomed at around the 50% mark. According to a recent report, Spanish house prices have fallen by just over 50% since the peak. The report, by the University of Pompeu Fabra in Barcelona and property company Tecnocasa is regarded as being one of the most accurate because it was based on actual sales across a number of cities, rather than estimates or valuations like the other indices.
While it is unlikely that the Spanish recovery will be a quick one, 2013 should be the best year yet. I say this because on top of it looking like having found a price floor, it also looks like the Euro crisis is running out of steam as well. In that respect Spain has been its own worst enemy, holding off on the bail-out request to avoid further austerity measures has only made the markets punish Spain, while political problems worsen and only make the decision harder.
According to a consensus in the markets, the crisis has already proven that Germany and the IMF won't let the Euro fold. It is just a case of everyone trying to make sure they come out of it as well from their own voters' perspectives as they possibly can. I believe that if the crisis isn't definitively resolved by 2013, it will be before too far into it, and an end to the EU crisis, however it plays out will be massively beneficial to the Spanish property market.
Investors are already showing their faith in the bottom, with the latest figures from the Ministry of Development showing a 12% increase year on year in the number of foreign buyers in Q2. According to the data more homes were sold to foreigners in Q2 2012 than has been seen since 2008. Because of the nature of the beast no one can even verify a market bottom until well after it has passed, and by that reasoning investors jump in when they feel a bottom is nearing. If you are an investor waiting for that time, it may well have arrived.
Liam Bailey is a UK based property expert, he follows the situation in Spain closely, including the bargains to be found in Polaris World resorts including the Terrazas de la Torre development offering frontline golf view apartments from €60,000.
- Friday 19 October 2012