An up-to-date report as of 1 June 2010 on how the worldwide economic crisis affected the property for sale in Spain Market in Marbella, the London of Andalucia
By Nick Stuart, Managing Director of Spanish Hot Properties, Spain’s number one virtual and established Real Estate Agency
Marbella Property in 2010
JUNE 2010
Whilst we are now out of recession with the possibility of actual price rises by the end of 2010 we need to go back to 2007 which was the real beginning of the Spanish real estate recession a good year before the critical events of September 2008 and the following months, the property market in Marbella was suffering severely, as throughout Spain and the rest of the world, especially in the lower end of the market, and especially with newly built properties.
In Costa del Sol, the market for new build “off plan” touristic properties peaked in 2004 and has been on a descending curve since then, reaching crisis proportions last year. Nationally, the demand for new homes hit its peak in mid-2007, according to national statistics, (with reliable statistics still lacking from the Government) the Bank of Bilbao Vizcaya Argentaria estimates that at the end of 2008 there was a glut of between 800,000 and 1,400,000 new unsold homes in Spain (19/12/08, http://prensa. bbva. com), including the Coastal properties, with an estimated 24,000 living units on the Costa del Sol (Diario Sur Domingo, 04/01/09), which will take years to be absorbed.
The World Financial Meltdown, starting in mid-September 2008, changed the scenario
The rapid slowdown commencing in September 2008 began to affect buyers of Luxury properties not only in Marbella but globally. This had a very adverse effect as up until this point there was still a demand for luxury property even though the Spanish property recession had already begun back in 2007.
How much have prices dropped from their peak prices?
Properties most severely affected are the least expensive (under €700,000), comprising principally newly built properties but not excluding resales, in the less consolidated areas. They have gone down in price from their peak values in 2005-2006 (defined as real sales values, as compared with asking prices, of similar properties at their highest historical point) by generally 30% to 40%, but in some cases, even up to 50%.
As they say location is everything and properties in this price range achieving the best prices in a shorter selling period are located in better areas, and are usually resales, have descended in value from 15% to usually not more than 25%.
Real Estate priced from €700,000 to €2,000,000 have seen a 22%-27% decline from their peaks (again, less so in the best areas) while those priced at up to €3. 000. 000 have suffered a lesser drop of 15%-20%. In the higher price brackets: fewer properties are for sale and although owners may be receptive to reasonable offers, in general they have the financial wherewithal to “hold out” if necessary. There are and will be some very good buys as, in some cases, even very wealthy owners simply want to “move on”. Very special “one of a kind” properties, with unique characteristics, qualities and location, have not been substantially affected by the crisis, provided their asking prices are sensible and now things are leveling off.
The pricing of Marbella property by their owners, in most price categories, is now far more realistic than in the past. This process has been complicated, as usual, by some agents who tell owners what they want to hear, rather than explaining the realities of the market. Most sellers, however, have already sharply reduced their original asking prices, but many potential buyers do not take this into consideration when they place an offer.
What is selling?
In the quality resale market it is not so much about over-supply but more a factor of how badly and how quickly does the seller need to get out that is driving the market. The reality is today we have far less so called distressed owners than we did in 2009 “
There have obviously been sales since last September, but generally at substantially reduced prices, with the notable exception of truly unique properties which cannot be easily reproduced, or which a buyer has not wanted to risk losing by delaying. Many potential buyers think that vendors will drop their already reduced prices an additional 25% to 50%, without careful analysis of either the current market, intrinsic value, historical value, reproduction cost, or comparable sales being made right now. The result is that such offers simply throw a bucket of cold water on most sellers, and do not engage their interest to negotiate.
Other sales have been made between reasonable buyers (looking for a very good deal), and reasonable sellers, (looking to make a sale and move on, often to another property). Â Further sales are being made by those willing to trade up or down. Â These types of sales will continue throughout this difficult period.
Quick Overview of 2009
For me Kristina Szekely called the market exactly right in an article she wrote in late 2009 when she asked the question are we at the bottom of the market and she basically said were pretty close to it but if you wait to be sure that we have hit rock bottom then your choice will be limited. That is the reality of 2009 with the best properties and most distressed sales been taken from the market and in 2010 the amount of choice is much less even though you probably can still buy at 2009 prices.
Experiences of 2010 and the future for the rest of the year
The serious buyer is out there striking a deal but unfortunately we have a serious problem with unrealistic buyer and before too long 2010 will have passed them away. As stated earlier in the report we now have less choice than we did in 2009 which makes buying much harder to come to terms with and there is also the reality that the best deals are certainly not seeing a Spanish Hot Properties website and are being sent out to those people who are in a position to buy and who have already registered there interest. On properties above €700,000 we expect to see price rises as early as October this year and probably 6 months to 12 months later for properties under that figure. One other factor that the recession has done to the international property market in Costa del Sol has changed the focus of the international property buyer with a lot of working class Irish and UK citizens returning home and more middle class UK citizens deciding to come and live in Spain and in the main they are coming to Marbella whereas before the large percentage of these Internationals were based in Mijas Costa so much so that the registered number made 47% of the total population for the Municipality of Mijas and in reality it was probably closer to 65% but that is now changing.
So overall cream always rises to the top and Marbella is set to come out of this recession stronger than even and your Marbella property buyers on a tight budget has 4 months to buy or probably miss the boat for a considerable amount of time.
