Guide to Buying Property in Spain
A Guide to Buying Property in Spain
Average Spanish property prices increased by 2.9% in the 2nd quarter of the year and by 10.8% in nominal terms over 12 months to the end of June 2006, according to the latest figures from the Spanish Ministry of Housing.
This raises the average cost of property in Spain to 1,942 Euros/m2, up from 1,753 Euros/m2 at the end of June 2005. After the latest increases, Spanish property is now 102% more expensive than it was five years ago. Despite the latest double-digit price increase, the underlying trend is towards a slowdown in Spanish property price inflation. Similar to a number of Western Nations, there is a real drive towards a ‘soft landing’ for the property market. Consequently, real property price increases in Spain (after adjusting for inflation) will be close to zero in a year or so. As always, there was a considerable difference in performance between autonomous regions. Having been one of Spain’s star performers between 2001 and 2004, with price increases of over 20% per year, Madrid spluttered to a feeble 7.5%; well below the average of 10.8% and only just above the consumer inflation rates.
8.3.1. Market feedback
Whilst government figures show property prices increasing by around 10% on the popular Costas, property professionals in these areas report that prices are stagnant or even falling for most types of property. According to professionals working in the business, the price expectations of vendors are now unrealistic, and until these come down the market will stay flat. There are now signs that vendors are starting to accept substantial discounts in order to make sales, and that this trend may continue in the short term. So despite the government’s figures it appears to be a buyer’s market. Buyers can shop around, take their time, and make aggressive offers.
The buyer’s market, however, only applies to properties in second or third tier locations. For the small number of properties in the very best locations, for instance beachfront walking distance to shops and restaurants, and on golf courses, the market is still relatively warm. Properties in top locations appear to be still selling fast, and prices for these properties are firm. Sales of super-luxury properties costing millions of Euros in exclusive areas of the Balearics and the Costa del Sol are also going well, as Europe’s growing number of multi-millionaires still choose Spain as the place to buy their holiday homes.
The other factor that to consider is that of Interest rates. Base rates in the Euro-zone have now risen to 3.5%, a significant rise over the last 12 months, and this has had a significant impact on variable rate mortgages.