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Home values across the nation have dropped by an average of 12.5 per cent over the last year. Although not all regions are suffering to the same extent, the Mediterranean coast was one of the worst affected areas with a 14.3 per cent decline in property prices in April 2012 compared to the same month a year earlier, according to recent figures by Tinsa.
At the same time tourist expenditure reached 13 billion euros at the end of April 2012 and generally speaking the Costas’ tourist boards are expecting to see at least 37 per cent more tourists arriving in 2012 than last year. This is good news for international investors scouring the Eurozone for distressed property sales and rock-bottom prices.
While Spain’s housing sector may be a long way off a full recovery and decent capital growth, the holiday lettings market is buzzing. Spain receives more enquiries about holiday lets than any other European short-haul holiday destination, perfect for purchasers looking to invest in buy-to-let real estate in either Marbella or in the Granada province.
The general credit crunch across the Eurozone has already borne fruit on the Spanish rental market. Rents in the country rose by an average of 0.7 per cent in April of this year and by 0.8 per cent in Andalucía, according to the National Statistics Institute. The province of Granada saw rent increases of 1.6 per cent, making the city of Granada as well as the whole province a potential target for buy-to-let investors.
Property in the Granada province is considerably cheaper than in Marbella or other Costa del Sol resorts. This means an investor with around 250,000 to 300,000 euros to spend has the option of buying one Granada property as a high yield holiday let, say at the Costa Tropical for example or near the Sierra Nevada skiing resorts, and another one as a long term rental in the city of Granada, which is one of the most visited historic cities in Spain thanks to its stunning ancient monuments.
Spanish banks are announcing losses from toxic real estate assets on almost a daily basis, which means they have to rid themselves of such portfolios fast. The market is seeing more and more distressed properties coming onto the market, yet many Spanish people are not in a position to buy because they lack the savings and many are out of work. The Spanish government is expecting foreign investors to step in, but isn’t offering financial incentives other than the current 4% tax reduction on new builds.
It is hard to know, how much further the residential real estate sector is going to drop over the coming months, when one of Spain’s largest banks, Santander, is forced to make provisions of 3.1 billion euros against toxic real estate assets and must announce first quarter declines in profits by 24 per cent. Making the decision to buy in Spain is not made any easier by thousands of British people still waiting for compensation over the land-grab and planning permission scandal that has dented UK consumer confidence with regard to buying in Spain.
While German, Scandinavian, Italian, Russian, Chinese and Middle Eastern buyers are coming in increasing numbers to Spain to snap up bargains, the British investor has become a rare sight at Spanish estate agents’ offices. Although numbers are up compared to the last few years, they are nowhere near as buoyant as they were, when the Spanish housing boom lured thousands of would-be UK buyers over on Fly-to-Buy visits every month.
Many potential investors, who either cannot decide to buy or who are unsure, if the Spanish life will suit them on a permanent basis, simply rent before making a home purchase. Others, who want the relaxed Spanish lifestyle and warm climate, rent because they cannot get a mortgage or are unable to meet the deposit and costs required to qualify for a mortgage. They have in part contributed to the boom of the rental market, but so have the swelling tourist numbers.
Buying a property now means taking advantage of this trend, which is set to continue until at least 2015.