Pain in Spain leads to superb bargains
It was the dream of countless sun-deprived Britons: a villa on the Costa del Sol where they could pop over for holidays, or retire to.
Spain offered so much to so many - almost year-round sunshine, glorious beaches, a laid-back lifestyle, yet with all the services, infrastructure and economic stability of a developed country. And, for years, it was cheap, until the decade beginning in the mid-1990s that saw prices rise by nearly 200 per cent.
Suddenly, a major correction loomed. Experts warned of an oversupply from developers who had jumped on the bandwagon, that prices were unsustainable, and interest rate increases were inevitable.
But it was to get worse as corruption scandals erupted, resulting in the arrest of the mayor and deputy mayor in the resort city of Marbella, and the dissolution of the municipal government.
Builders went bankrupt, and 'dream turns to nightmare' stories abounded, as thousands of hapless investors found that their villas were either never built, or built illegally, to be subsequently demolished.
According to Lynn Clark, direct sales manager of Personal Property Finder, the fallout was inevitable given the speed at which the Spanish property market boomed. But she says times have changed post-2007, noting the 'significant governmental change in the Costa del Sol' where responsibility was transferred from local to regional levels.
She says publication earlier this year of the new Marbella PGOU (Plan General de Ordenacion Urbana) classifies the legality of every building in the region, and outlines future use planning and development of public spaces. 'Certainly, the laws regarding property ownership on the Costa del Sol now mean that property can be purchased with total legal confidence.'
Elsewhere, issues such as the 'land grab' in the Valencia region and the demolition of properties bought by foreigners despite being assured of their legality by local authorities are being challenged in the European courts, Clark says. 'After the fervour of corruption scandals around 2006, it would appear that the abuse of the past is now being slowly but systematically rectified,' she says.
Since the wheels fell off, prices have fallen by up to 40 per cent in some areas. It's been estimated there are about a million empty new-build homes in Spain and, according to the Financial Times, 'most experts say it could take another three to four years to absorb surplus stock'.
Yet those villas in the sun continue to be in high demand for summer rentals, especially in the Costa del Sol, dubbed 'the California of Europe', due to its 300 days of sunshine a year, temperate climate and quality of life. No real surprise, then, that agents are reporting a return of investors looking for a bargain at the bottom of the cycle.
As Clark notes: 'Property on the Costa del Sol in particular is currently as inexpensive as it's been for the last decade, and likely to be priced as low as it's going to get. If you can buy and hold a property on the Costa del Sol for the next five years you can almost certainly expect a good return on investment as the region recovers and flourishes once again.'
Mark Stucklin of Spanish Property Insight, who writes The Spanish Property Doctor column in The Sunday Times, agrees that 'people who can afford to buy are going for the prime spots'.
He says properties that 'tick all the boxes' - including frontline properties with good sea views - have dropped by 20 per cent in Majorca, while at the lower end, Torrevieja on the Costa Blanca offers 'really well priced' properties at below Euro100,000 (HK$1.08 million).
Stucklin concedes Spain is no longer cheap and cheerful, and its reputation has been 'undoubtedly damaged', but he believes buyers are much better informed these days.
'If you want to buy in Spain, now is a great time,' he says. 'If you do your homework, [and] make the effort to get it right, you can have a fantastic life here.'
Anecdotal evidence of a return of investor interest in Spain includes inquiries from Chinese buyers. Propertyshowrooms.com's figures suggest a 6.3 per cent increase in Web traffic from the region from the second and third quarters.
Terry Hobbs, the website's agent and media manager, attributes this in part to a flow-on effect from recent efforts by the Spanish authorities to promote its tourist industry across the Far East.
He says: 'Local observance on the Costa del Sol would certainly suggest a thriving Asian community, with industrial estates often dominated by Chinese merchants and high street operations constantly emerging.'
Clark agrees that the Spanish coast is hot. She says: 'In Spain there is still a situation of oversupply and consequently there has been significant correction in prices, but it would appear that the market has now levelled out and it is being reported that prices and interest in certain areas have started to rise again.
'Now, despite the market being fully developed, there are good deals available provided you know where to look and who to ask.'
Properties in Majorca that 'tick all the boxes' - including frontline properties with good sea views - have dropped by: 20%