Market slide leaves glut of new homes
The Spanish real estate slump was one of the worst on record and, to date, private-equity investors, property analysts and even Spain's prime minister agree that the decline in the country's economy and weakening of the property market isn't over yet.
In a survey of 154 real estate professionals by property analysts at JP Morgan Cazenove, 77 per cent of those polled predict Spain would be the worst-performing property market in Europe this year - with the best performers expected to be Britain, Germany and France.
The Bank of Spain estimates that banks have non-performing, or at-risk property loans of about Euro181 billion (HK$2.02 trillion) on their books, which includes a glut of unsold second homes.
It is particularly bad in the Costa Blanca and the Costa del Sol regions, where it is estimated there are up to 800,000 new builds sitting empty.
The Spanish Secretary of State for Housing, Beatriz Corredor, claims that the oversupply will have disappeared by 2014. She appears to be banking on the Germans and has been travelling there trying to convince them that now is a great time to invest in a holiday home in Spain.
As for home-grown demand, the latest official figures for new mortgages in Spain show a decline of an eye-watering 24 per cent from the same month a year ago, while home sales fell 18 per cent, the lowest level on record.
With such a slew of bad news it is not surprising that, according to the leading Spanish property portal, Idealista, vendors are dropping their asking prices in record numbers, with the tags being slashed by an average of 8.2 per cent nationwide, but by more than 10 per cent in Almeria (Costa Tropical), Tarragona (Costa Dorada), Avila and La Rioja.
The most positive comment is that some investors may return to the market by the tail end of this year, with Edward Farrelly, head of Spanish property research at CB Richard Ellis, saying they may wish to 'pre-empt the expected recovery of the market in 2012'.
International agents, such as Frank Knight, are also looking ahead to next year, but are limiting their exposure to a very discrete market - second homeowners in just two areas, Marbella and Sotogrande, in the Costa del Sol, where they say business is stable.
It's a better picture in Barcelona, where leading real estate agent Lucas Fox says the 'Barcelona effect' is underpinning prices, particularly at the top end of the market.
The city has always had a reputation as a gastronomic and artistic hub, but it is also appealing because it is safe, beautiful and fun.
Now, the city is adding to its portfolio by presenting itself as a technology hub and, with the help of the Generalitat de Catalunya, the city has attracted the attention of Microsoft, Yahoo, Computer Associates, SAP and HP to the region.
Those investors were further encouraged when Spain and Hong Kong signed a comprehensive double-tax agreement in April.
But it's the old world which is also leading Barcelona's appeal and on the company's books at the moment is a very traditional and stunning country estate on the Marseme coast, just 30 minutes drive or train trip to the city.
Lucas Fox has it as 'one of the finest homes in Barcelona, if not all of Spain'. A masia (the Catalonian word for rural villa) was originally constructed in 1490 and it has nine bedrooms, nine bathrooms, three tennis courts, a swimming pool and parking for more than 50 cars. The price is Euro10 million.
The company is very bullish about the market for property in Barcelona, with Lucas Fox marketing director Anthony Leaton saying: 'There's been a lot of negative speculation of the Spanish property market. What the press has overlooked is that each region of Spain is different. In Barcelona, the limited supply of high-end and luxury properties in the region makes properties more price resilient than those from other parts of Spain.'
Moreover, perhaps the bad press about the Spanish property market has inadvertently led to a more open market. Stijn Teeuwen, one of the directors at the company, explains: 'The drop in confidence of the Spanish market has brought about a wider selection of properties.
'Traditionally, in the Catalonian market, properties have been passed down from generation to generation. Previously, a buyer would never see certain property types on the market. Now these properties are on the market and can be a great opportunity for the overseas buyer.'