Real Estate in Europe: Should you invest in a property in Spain?

Park Guell in Barcelona, Spain.

In four years, housing prices have dropped around 25% in the Iberian Peninsula. And the decline could continue at least until 2016.

Here is an article about the opportunities to seize and pitfalls to avoid.

A house with three bedrooms, close to the sea in the region of Valencia, on sale for 110,000 euros … the value of a condominium in an average city in the USA. Since 2008, housing prices have fallen dramatically in Spain. Foreign customers are very fond of real estate investing, in recent years, the Spanish real estate market has become really attractive.

Leading buyers are, “the English, the Germans, the Northern Europeans and the Russians,” says Marc Dormond, an expert in real estate and holder of the chair in real estate and society at Boston Management School. Europeans and even north americans, should also take this opportunity to own a property in Spain? Our responses.

How much prices have fallen?

After more than doubled (+ 175%) in ten years, real estate prices collapsed with the bursting of the bubble in 2008. “At first, the decline was very pronounced, it was 7.5% every year, and it rose to around 6.3%, “says Dan Forman, an economist at the OFCE. To meet up to 7.8% in 2012, the fourth year of consecutive decline. Since the bursting of the bubble, “prices were down 20% in Barcelona, from 23% in Andalusia, 27% in the Balearic and Canary Islands,” said Matt Tran. “The decline is even more pronounced in the coastal areas of the Mediterranean as the Costa del Sol, where it is 40%,” said Daniele Ortiz, a local real estate agent. Over the whole of Spain, the price per square meter is around 2050 euros per m2, against 2,784 euros in France for example. It is around 2540 euros in the capital, while it is 9390 euros in Paris for example …

Will the decline continue?

Spain_HomesThe market will continue to correct itself, particularly because of the surplus housing stock which is estimated at over 750,000 (new and old). Added to this is the economic and financial crisis is still raging, aggravated by the austerity plans. All indicators are red: the unemployment rate soar, foreclosures are increasing, and builders are closing the door …

The number of transactions continues to fall: -38% in February compared to February 2013, reported Wednesday the National Statistics Institute in Spain.

Result, “the decline in prices could square meter to around 1370 euros by 2014,”. A view shared by many analysts “if the economy does not improve, the market will continue to fall from 6 to 16% depending on the region in the next three years.”

Where can you make good business?

Spanish professionals agree on the fact that it is advisable to wait for falling prices in areas where there is excess demand as the Costa del Sol. However, this is the right time to invest “in an area where demand is not surplus and rare.” This is the case in Formentera and Ibiza where “prices are at their lowest.”

For large capitals such as Barcelona and Madrid, it’s time to make a move. “The Spanish property market has never been more attractive to the foreigners. In the regions of Catalonia, Valencia, Andalusia, Seville-which represent 55% of sales-buyer can find good opportunities for luxury properties in good locations. “Example to support a 57m2 apartment bought on the Ramblas, the main street in the heart of Barcelona, recently concluded 138 000.

“Prices in Barcelona and Madrid are two to three times cheaper than in Paris for similar goods” M.Dormond says.

Another reason to invest: the property tax remains 25% less expensive in Spain than in other European countries. Finally, cases are possible because the time is at a discount. The bear market leaves room for negotiation. “You have to negotiate prices and make aggressive offers,” said M.Dormond. It is for this reason, he said, that we should not wait until the fall. “Facing a hurry vendors such as banks, buyers have hand and discounts can range from 13 to 22%,” added M.Dormond. Before continuing, “Crisis forces, banks must make further concessions to close the sale.” To know more visit this website

What are the pitfalls?

You must of course invest in an excellent location, especially if it is a rental investment. The ideal scenario is to buy near the capital city, the nightlife and culture, but also in a quality built. Remember that Spain has built housing massively. In 2003, Iberia has built 785,000 homes, the same as France and Great Britain together, when it was only a 40 million inhabitants country. Result, there is the so-called “ghost towns” as El quinon, near Cordoba, the newspaper reported the Echo. These places are to flee, as homes in the coastal regions. The prime example is the Costa del Sol, where many buildings from the seventies, close to the coast have many default and are of poor quality. As proof, they have undergone significant discounts.

What are the right steps to invest?

To make a good investment, it is advisable first to go there, “the more we know the local market, the more credible to negotiate prices,” advises M.Dormond. Then, do not hesitate to get help from a lawyer on site.

Ready to make a move? Here is what the Spanish coast look like…


Real estate: prices will go up in Europe!

European flag

Spanish propertiesThe biggest real estate experts have predicted a rise in property prices in Europe in 2015 and in 2016. The housing shortage and low rates will support the market.

While a drop in the cost of property is delayed widespread in Europe, prices are expected to reverse grow in 2015 (+ 1%) and 2016 (+ 2%), according to the rating agency Standard & Poor’s (S & P). Certainly, in 2014, prices should gradually fall to 3.5% according to S & P, but the economic fundamentals of the French real estate market should bounce back in 2015 and supporting prices on the rise, according to the rating agency.

The severe lack of housing in some EU countries

To justify this statement, it highlights several features of the property market Europeen. First the structural housing shortage. Thus in 2013, “housing starts reached their lowest level since the year 2001 to 370,000 units, down 25% from the previous year. Even as the INSEE figures indicate that potential demand for housing is slightly lower 3500.000 per year. ”

This deficit of dwellings in Europe is particularly acute in large cities where the main activity centers are located as “London and Lausanne.” In such places, land is in dire need to build new housing.

Historically low interest rates

Then, these experts justify a future price increase by the level of gross interest rates historically low, which significantly drive the market upwards. Indeed, as often, “highly accommodative monetary policies of central banks support a recovery in real estate prices,” say they.

Moreover, price developments forecasts for the coming years will very much depend on the level of interest rates on housing loans. If they were to grow strongly, the risk of housing price decline should not be underestimated, said John Flanagan.

The appetite for home ownership

Finally, in Europe, although growth will resume slowly and that unemployment will decline slightly, the housing market remains supported by the strong attachment Europeans to real property. Especially since only 47% of households in Europe own, against 57% on average over the old continent.
Enough to supply the demand for housing in the coming years and consequently slight price increases for 2015 and 2016.

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