What is going on with the property market in Andalucia today is very different from the last time the Spanish market collapsed in the early 1990s, says Barbara Wood of The Property Finders.

‘Back in the 1990s, 90% of overseas buyers were British, with an average age of 55 plus and almost all were buying homes on the coast for summer holidays and retirement.

‘The majority bought with cash and only a small minority took a Spanish mortgage as in those days non-residents were offered 60% LTV (loan to value) over 10 years at best. Very few Spaniards had second homes and other Europeans made up the balance of buyers. So when British buyers disappeared very suddenly as the UK economy declined in early 1990 there was little activity from elsewhere to take up the slack.

‘Prices were very slow to fall in response; a long period of denial drifted into four years of reductions at the end of which prices were on average 40% down from the peak. But without big mortgages to service, most owners took the view that if the property didn’t cost a lot to maintain then it made good sense to sit out the downturn and wait for prices to rise again. In the event, while a lot of developers went bust, relatively few individuals were repossessed.

‘By the time the market recovered, it had a very different make up. Other nationalities began to buy, Germans, Irish, Russian among them, giving the market a much broader base. In some coastal areas, the Spaniards themselves became the dominant force. Many people relocated to Spain full-time and inland areas have attracted as much interest as the coasts and the average age of buyers seems to have dropped by up to 20 years.

‘But it is when we look at how people have funded purchases in recent years that we see a significant difference from the 1990s which helps explain why I am already seeing reductions in asking prices of up to 40%: we have gone from denial to swingeing discounts in a matter of months.

‘Throughout the boom years, what was a market of mostly cash purchases has become a market of mostly mortgage-funded purchases; previous restrictions on non-residents loosened to the extent that loans of 80%+ became the norm, and servicing the loan often depended in large part on rental income, which somehow never quite matched the estimates.

‘From 2000, many purchasers bought several units with the intention of selling them during construction and, having failed to do so, now find themselves servicing more than one mortgage they hadn’t bargained for. So, there are now a significant number of sellers who just cannot sit it out and this is producing some quite extraordinary offers. And let’s be clear, we are not talking about identikit apartments in a development of 2,000 units in some out of the way place with no infrastructure. I mean top-quality property in some of the most expensive locations in Europe and in my opinion, the best deals will be found in the resale market, not with developers.

‘For example, a 7 bedroom house on a plot of ½ acre, 200 yards from the beach at Los Monteros, 3ms from Marbella, with a heated pool, cinema and 12 car garage, reduced from €5.6 million to €3.4 million. Similarly, the original asking price on two 2 bedroom apartments, beachside near San Pedro, 2kms from Puerto Banús, was €360,000 each; he would now like to sell them together for €500,000. An identical apartment sold 9 months ago for €400,000. Every day, I hear about apartments near Marbella and Puerto Banús on offer below €250,000.

‘No doubt there are still some interesting times ahead but after 25 years in the Andalucían market, involving several cycles of highs and lows, I have never seen anything quite like this – so many sellers needing to sell so urgently and the buyer with cash, or finance arranged, is now seeing prices that I almost can’t believe.’

Barbara Wood is a buying agent with specialist knowledge of the Spanish property market
www.thepropertyfinders.com
0800 622 6745