All this Spanish property crash talk!

Yes, we have been hearing about it and you may have heard stories of it as well, a property crash in Spain.

 

But is it really going to happen and is it going to affect the future of Real Estate in Spain?

 

The past five or six years have seen Spain flourish from the arrivals of foreigners pumping money into their economy through their main source tourism and of course through real estate – with the trend set to continue over these years the obvious was going to happen with huge price increases on Spanish property.

 

However, there is only so much you can sell a property for and with the demand not being as great as the supply, the market has taken a turn for the worse (if you are a property owner).  Back in the year 2000 the story was quite different as the supply was simply not keeping up with the demand, how times have changed.

 

The economy in Spain has been quite strong due to the development in Spain, however – households in Spain are taking on record amounts of debt, property prices in some regions are over inflated, Spain in general is over developed and the building simply does not look like stopping. It also has put a huge strain on homeowners as interest rates continue to rise.

 

And we have seen a drop in prices – in some regions and areas such as the Costa Blanca which has suffered due to the continued construction across the coast, the resale market has taken a knock, new and off plan properties in the region have received a massive blow in the UK media sparking a slow down in property sales and interest.

 

But places such as Granada, rural Murcia and inland Alicante have still enjoyed a successful spell through all the uncertainty of the market state, this is due to the continued movement of current residents moving further inland and the difference in building in terms of quantity. Inland towns and villages simply have not expanded like coastal resorts have, which is purely down to greedy constructors and poor management amongst the local town halls – over building coastal towns and destroying the once beautiful coasts.

 

So will prices continue to fall?

 

Well, inland property is still continuing to rise, but not at a stupid rate – and you will always find a bargain as there is always someone needing to up sticks and move quickly, the coastal regions and areas are being hit much harder and knowing first hand from clients of ours – prices will continue to fall due to supply and demand.

 

What is also happening is potential property buyers have been holding still waiting to see if prices will drop even further, slowing down the market once more as people catch on to the situation.

Places such as Granada and Murcia are still very popular locations and prices in general are much cheaper, with investment opportunities and restoration projects being high on people’s wish lists as the supply for properties like this are generally more difficult to come by. Properties in Granada can still be picked up for as cheap as 20,000 euros!

 

Now the average house price in Spain has hit 185,000 pounds sterling which is double what it was only 7 years ago!

 

The future of Real Estate in Spain

 

So what lies ahead in the future? What will happen to the real estate market in Spain?

 

Well Spain has had problems before but has been able to come back and benefit from the property boom which took Spain on an economic ride from 1997 onwards, hopefully with the UK becoming increasing expensive and a bigger divide on the social scale – Spain will recover as the love for this country has never been lost.

 

When the market evens out again, potential buyers will not want to miss the boat again and us property agents will all be dreaming of a boom again.

By Spanish Country Property - August 7th 2007