Villa in Spain – Best Opportunity for Individual Investors? |
Posted: October 21, 2014 |
In the past year the real estate market has gained much attention from individual investors. As terrible as the world financial crisis was, one man’s crisis can be another man’s opportunity. Many countries experienced collapses in their real estate market. Spain was certainly one of those countries. However, the market being down is not necessarily bad news for everybody. Just the opposite, many individual and institutional investors welcome these market movements preparing for the moment when the specific market hits the bottom and the cycle begins a move up to a new high. In this post we asked Mr. Gary Gabriel – Operations manager at 320 Sunny Days, LLC, an estate company based in Costa Blanca, Spain with representative offices in Belgium, Germany and Netherlands, what he thinks about the recent stage of the Spanish property market and what an individual investor should consider when purchasing a property in Spain today.
Question: How would you characterize the Spanish real estate market now? Has recovery begun? G.G.: The Spanish real estate market is picking up but is far from 2007 levels. It is in the very early stage of recovery after approximately seven years of retraction. Moving forward, recovery will be strongest in the coastal regions with foreign buyers representing approximately 40% of sales. The top five countries in terms of property purchases are UK – 14%, France – 10.5%, Russia – 8.4%, Germany – 7.5%, Belgium and Scandinavia – tied at 7%. As of June 2014, the average price paid by foreigners was 1.486 €/sq m. 2014 looks to be a milestone or turnaround for the imbalances created between supply and demand created during the financial crisis which began in 2007. However, restoration in the balance will be slower than most people expect. Speaking from an investors’ point of view this is good news.
Question: Why the fact that the Spanish real estate market is in early stage of recovery is good news for investors?
G.G: We have all heard the old saying, buy low and sell high. Each investor wants to buy at the moment the positive trend in a recovering market begins, but the process of recovery is still in an early phase and prices have not taken off too dramatically. As I said, based on analysis and reports on the Spanish real estate market, it looks like the expectations for 2014 to be a turnaround point are proving correct. The forecast for slow dissolve of the stock of 155,000 unsold homes at the moment combined with the expectations of 24% growth in sales until 2016 means that there are areas which are less damaged by the housing crisis in Spain and which are serving as hubs for recovery. The region of Costa Blanca South, where 320 Sunny Days, LLC is based, is one of these areas. Torrevieja is one of fastest growing regions in Spain. Investing in a property in this region, at this particular moment looks to be a smart investment.
Question: What type of property you would recommend as a good investment in Costa Blanca?
G.G.: In this conversation we are focused on individual and not on institutional investment. I stress on that because the investment strategies of these two types of actors are quite different. While the institutional investor looks for maximum profit, the individual investor calculates the pleasure of owning a good size, well located, nice looking property in Spain which besides the typical elements of good investment offers the opportunity for a high quality lifestyle. Many of the Costa Blanca properties could qualify as a good investment, but not so many of them are responding to the last criteria – high quality lifestyle. Clients who are looking to purchase a property in Spain which they want to use as their second home near the sea, a place making them feel relaxed and secure, usually want to see some of the villas we have in our portfolio. They vary from 170.000€ to several million euro. While the ones on the upper end of this price range are custom designed projects with all elements of extraordinary properties, the villas in price range 170, 000– 230,000 Euro are more affordable but still offering the lifestyle a villa owner can enjoy. They are located in areas where the resale potential of the property is reliable and today’s new construction offers high quality material and workmanship.
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