I just visited Spain this week on a non-property related business trip but could not resist the opportunity to look at what their property market is currently like. As many of you know, when asked about the Spanish market over these past few years I have issued warnings and have strongly recommended doing your due diligence. Having been down there this week – my I can confirm that my warnings were correct.
Remember:overseas property investments require due diligence and a clear evaluation of the Market.
Alicante – Benidorm
These two cities are still a popular spot for the British, and it would appear that to combat the recession, the hotels and restaurants have dropped prices in an attempt to attract the masses. It seems to have worked. However, the property prices for investors have been hit hard. Whilst the restaurants and hotels may benefit by reducing prices, the property investors are struggling. Talking to locals and investors in the area, it was clear that prices in Alicante (in specific areas) had dropped by up to 60%. In the areas where there are less tourists and more owner occupiers, the drop was less radical, around 30%+. In Benidorm the figures were similar, maybe more in the region of 40% drops. Speaking to locals, they felt it would be a long long time before the prices get back to what many of the new-builds were sold at.
For investors that have bought, if you do not sell, then you simply have to take it on the chin and rent out. One penthouse (three bedroom) apartment I saw had been purchased by an investors for around 600,000 EUROS and it was being rented for 800 EUROS per month. If you do the numbers you will know that would be a NO NO back home!
If you were to take a long term view and accept that your occupancy rates are going to be lower, there might be some opportunities to pick up heavily discounted properties from severely distressed sellers. Even then, you need to do some serious due diligence to make sure that you are happy with the numbers.
South of Benidorm – Costa Del Sol
I did not get that far south, but from what I could see, they have suffered worse drops in price. Remember that this whole length of Spanish coast line experienced excessive over building, and developers & investors getting greedy. Prices were inflated, buyers overstretched, interest rates rose…and hey presto – the bubble burst.
In a word – my message remains essentially the same. Get to know your market. Ensure the occupancy rates are there. Check the real value. Get good management. And then offer a silly price for the property!!!!