Two years ago if I had been asked to find a large, top quality villa in the prime location on the Costa del Sol – the area that runs for about 15 kms from Los Monteros on the east of Marbella through to San Pedro on the west – for €1 million or less I would have said it was an impossible task. At the top of the market 4 bedroom, 4 bathroom houses, with pool and close to the beach and golf courses, sold without difficulty for €1.6 million plus.
But at the end of March I was asked to find just that for a family relocating on a permanent basis from Moscow, the perfect opportunity to prove that what I have been saying for months is true: that buyers are able to negotiate 30%, and more, off asking prices, some of which have already been substantially reduced, if, a) the buyer has cash or finance already agreed, and b) the seller just has to sell.
If both these conditions are met, then wonderful things can happen, much better than official statistics seem to suggest, depending on which ones you look at, prices on Spain’s coast have fallen by only about 13% in the twelve months to April.
During April, I viewed 32 properties on behalf of my clients and the choice and quality was so high I was able to screen out those with even the slightest defect: if I could hear a car, ever so slightly, I rejected it, ditto if the house was just a few degrees too easterly facing, thereby not getting the best of the afternoon sun. I often remind buyers that whatever they buy, one day they will want to sell it so the fewer defects it has the better and in today’s market they don’t need to make any compromises. In the end 18 properties were shortlisted, the longest shortlists I have ever worked with and all of them ticked all the boxes.
Once we had viewed everything we drew up a preference list and made offers about 40% below asking prices on five houses and the vendors were made aware of this. we were sure that if they knew they were in a competitive situation at least one would make a counter offer that indicated they were ready to deal. And that’s exactly what happened – one counter bid was so much better than the others we knew they meant business. My client raised his bid to nearly meet them and bought a house which started out at €1.45m for under €1m, with lots of lovely furniture included. What sealed the deal was the fact that he had the cash and was able to sign the contract within the week – and that we had winkled out the seller who just had to sell.
Several of the original 32 houses I saw in April have since sold but it’s not just in the luxury house sector that such reductions are occurring and if anything, even greater discounts are being achieved in the apartment market in the same prime area, including the most desirable beach side and golf course locations. For example, a beachfront apartment, with a bank valuation of €785,000, recently sold for €460,000, with a bidding war breaking out between three buyers. And I have come across a handful of distressed sales in good golf course locations, brand new two bedroom apartments at around €190,000, which previously sold between €275,000 – €300,000.
So while published statistics about the Spanish property market make grim reading, they are only a snapshot of what has already happened and don’t reflect what is going on in the present. And what seems to be happening is that house price falls are bottoming out 30 – 35% down from the high point and apartments at 40 – 45%; at these levels the buyers are dealing.
But it’s a very different story when it comes to those properties that make up the bulk of Spain’s unsold stock, maybe as many as one million units, those mass-produced, poky apartments in high density developments in the wrong locations, for which demand has all but disappeared and, apart from one or two gems, it is this type of property that dominates the lists of banks’ repossessions. But just like they did after the 1990 property crash many of Spain’s bank have set up real estate divisions, complete with web sites, to shift this stock, packaging the product with very favourable mortgages that are enticing buyers in and, at the same time, giving struggling developers a real wake up call. As reported in the Spanish press recently, for developers to match the banks’ offers they are forced to reduce their prices by as much as 60% although I do question whether the worst of what’s on offer has any value at all. Whether this will be enough for this sector to bottom out only time will tell but it does show that talking about Spain’s property market as though it were one thing is misleading, that statistics aren’t that useful and that averages are meaningless; different things are happening in the various sectors and regions and the only reliable way to find out what is going on is to talk to someone who is actually at the coal face, doing deals today.
If you have cash and can find a serious seller, and not every one who has a property on the market right now in Marbella falls into that category, then you should be able to buy at 30% – 40% below 2007 prices.
Barbara Wood is a buying agent for The Property Finders in Andalucía (www.thepropertyfinders.com; 0800 622 6745)