There have been many varied opinions aired on the state of the Spanish Property market recently.

In an attempt to set the record straight, two Spanish property specialists have put together a question and answer report that covers the main areas of concern.

Chris Mercer (CM) founded Mercers in 1993 and has over 25 years experience in selling freehold Spanish properties. He has offices in Mazarron on the Costa Cálida and the Andalusian city of Jerez.

Andrew Benitz (AB) is the founder of Titan Properties. He gained experience at Deutsche Bank as a research analyst and on the global equity capital markets team. Titan has offices in the traditional Spanish fishing village of El Rompido on the western Costa de la Luz.

Here are their observations:
CM: “Considering the current economic situation, we are quite surprised as our rate of enquiries is actually increasing. Not only is this very welcome but we suspect it’s bucking the trend for Spanish property in general.

“We made nine sales in the first seven weeks of 2009 which is very encouraging. In Jerez our sales are primarily to the Spanish and in Mazarron they’re split 70-30 in favour of British buyers. Price is most probably the biggest pull-factor in this climate.

On the Costa Cálida we have two bedroom terraced properties on an established golf resort for as little as €50,000. Meanwhile vendors are dropping asking prices across the board in both Jerez and Mazarron – as much as 50 percent in some cases but 20 percent is a general rule of thumb.”

AB: “Interest in Spanish property hasn’t really dwindled, it’s just the type of buyer who’s changed. Investors have all-but disappeared and it’s the lifestyle buyer who has stepped in keen to find a holiday home in the sunshine at a good price.

Everyone wants a deal and they are around but the property bargain hunter must consider the dynamics of the local market prior to purchase.

For example a 10 percent discount on a property in western Costa de la Luz, where median prices have yet to fall, is clearly a better deal than a 25 percent discount on a property in Costa del Sol, where median prices have fallen by more than 30 percent. Having said that, vendors and developers are now at least open to offers, a scenario that never occurred as little as a year or so ago.

In this market prices are very much dictated by the financial circumstances of the vendor - whether an individual or developer - and a good agent will know which properties in its portfolio are up for negotiation.”

CM: “Mortgages are certainly getting harder to come by as the banks have limited funds and want limited exposure to bad debts. However, most banks will still offer up to 60 percent loan-to-value for non-residents which, incidentally, was the average rate of lending for foreigners up until around eight years ago when they suddenly decided to increase that percentage – perhaps to their detriment.

“It should also be remembered that the majority of British buyers up until around six years ago would use UK-sourced finance, usually in the form of a remortgages, which of course now could be very beneficial. Certainly mortgage rates in the UK will be more competitive than in Spain.”

AB: “Even through the boom times most Spanish banks maintained traditional lending practices for individual mortgage lending, with income earnings of the lender being the key factor in the bank’s decision to approve a mortgage application. Buy-to-let mortgages never took off in Spain. These policies still stand and a client with good income earnings – and low debt – can still get a mortgage of 70 or even 80 percent loan-to-value.

It’s irrational exuberance in construction lending to developers that has given Spanish banks a real headache. Many became quasi developers overvaluing and consequently over-lending to whole development projects. Bank repossessions here in Spain are made up mainly from unsold new developments, but I caution clients on buying these types of ‘discounted property’. Even if they are sold at mortgage value these properties are probably still overvalued to the rest of the market.”

CM: “Certainly in the short-term I do not expect much to change, at least not until the third or fourth quarter of 2009. But for those in a position to buy, 2009 is going to be an excellent year. These second home hunters will be able to pick up quality property at extremely attractive prices.

We are not seeing many investors at the moment, apart from the occasional predatory purchasers who see the potential in bargains. I doubt that this will change until mid-2010.”

AB: “We truly believe that the worst has passed. There are plenty of clients out there with both the desire and the cash to buy Spanish property, it’s just a question of restoring their confidence to spend it. With interest rates at record lows in the UK, people with cash in the bank are now looking for alternative investment opportunities and property is at the top of the list for good quality long term investments.

“The main problem standing in the way of us and the British buyer right now is the exchange rate, a stronger pound would certainly help more deals to be done and hopefully that’s not too far off.”

CM: “Many of the emerging markets such as Eastern Europe, Dubai and so on have now been seen for what they really are – something of a fad – and the established markets of Spain, France, the USA and Portugal will once again become the main focus for the vast majority of British buyers. Interest levels in these markets hasn’t necessarily dropped over the past 10 years, it’s just that with the arrival of the emerging markets the ‘pot’ of potential buyers has been spread more thinly.

“In times of economic recession, the stability and familiarity offered by traditional markets - Spain in particular - is highly reassuring. Little wonder therefore that Spain moved up from 14th place in January of this year to 4th place in The Move Channel’s most searched property destination and still ranks at number one in A Place in the Sun’s Top 20 favourite destinations for 2008, just as it did in 2007.”

AB: “Crisis or no crisis, the British buying public still hankers after a warm climate, familiar culture, strong modern infrastructure and clean beaches all within easy access of the UK via low-cost flights as well as overland transport options. Spain cannot be beaten.

“Overseas buyers are finally getting back to basics, reacquainting themselves with the markets they first fell in love with decades ago, and the reasons why, and that means Dubai and Bulgaria are ‘out’ whilst Spain and Portugal are very much ‘in’.

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