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Spanish Property News RoundupDecember 2013

Crystal Shore Properties is a leading real estate agency with offices in the prestigious area of Gua-dalmina in Marbella, on Spain’s Costa del Sol. With 25 years experience helping our clients buy, sell and rent property here on the Costa del Sol, we keep our finger on the pulse of every development and news story re-lating to the property market in order to ensure we are able to offer our clients the very best opportunities.

2013 has been a difficult year in many ways, but there are plenty of positive signs of recovery in the economy, signaling that now could be the best time to invest in Spanish property. Here we bring you a selection of significant recent news items.

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Growth in construction returns, wealthy investors show interest in Spanish property

The landscape today is very different to the forest of cranes that could be seen all over the Costa del Sol before the property bubble burst, but neither does it resemble the desert that followed that crisis. The construction industry is beginning to show signs of life again, thanks to the high-end property sec-tor, which so far this year has experienced a growth which is even greater than that achieved in 2012.

According to figures from the DOM3 association, which encompasses 23 companies related to the construction of this type of property, 60 houses costing more than one million euros were built in 2011 in the triangle formed by Marbella, Estepona and Benahavís, with a global investment of 250 mil-lion euros, while 2012 ended with 75 houses built and 300 million euros invested. That was a 20 per cent increase in the number of properties, but this year, growth in this sector is even higher.

The president of the association, Sofía Polo, attributes this growth above all to flourishing foreign markets and greater confidence in the Spanish economy from those who are considering investing in this country.

For José Antonio Muñoz, of Analistas Económicos de Andalucía, this sector in Marbella is beginning to per-form well because it is an atypical market, with an important presence of foreign clients who tend to be very well-informed, so the fact that they are purchasing properties is a good sign for the province overall.

“In areas where the operators have a greater than average knowledge, they perceive the start and also the end of a crisis earlier than most,” he says. This explains why, just as has occurred on previous occasions, Mar-bella was one of the first places to go into the crisis and is now beginning to show signs of coming out of it. In José Antonio Muñoz’s opinion, the perception is that the bottom has been reached and the only way now is up. Also, he says, a market with better information than average may be detecting interesting investment opportunities, and this could mean that recovery is not far off. (1)

Wealthy Investors

For some wealthy investors, Spain is beginning to be seen as a place of opportunity. Many may be aware of Marbella’s reputation as the St.Tropez of southern Spain. As well as its old-world charm, the city is also a mag-net for the world’s rich and famous - George Clooney reportedly just bought a villa here. Millions have been poured into the area’s infrastructure, including €400m into the new port Al-Thani at La Bajadilla, Marbella, which plans to rival Puerto Banus as the most desirable place to be seen.

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Whilst optimism for the country’s economy remains cautious (its GDP increased for the first time since 2011 during the third financial quarter, though only by 0.1 per cent), eyebrows were raised recently when Micro-soft founder Bill Gates invested $155m in Spanish construction giant FCC (Fomento de Construcciones & Contratas). Particularly in the Costa del Sol there is some real value in the market, with Real Capital Solutions – Spain (RCS) leading the way by way of development. The American Investment Fund launched 53 beach-front apartments to the Marbella property sales market this November. This is just the first property release from the fund that intends to invest a significant amount of capital into the Costa del Sol property market over the next 10 years. (2)

Billionaire investor George Soros, and Pimco – the largest bond investor in the world – are reported to be looking for opportunities related to real estate. With such illustrious names from the investment world now considering Spanish property, you can bet the rest will follow, says Mark Stucklin of Spanish Property Insight (3)

Signs property market has reached bottom

In an article published in the business pages of El Mundo (4), the CEO and managing director of CBRE Spain, Alfonso Galobart, is repored as saying that the Spanish real estate market has reached the bot-tom, and next year will see investment of around 4 billion euros, levels not seen since 2004 before the “crisis”.

“The arrival of big investors such as Goldman Sachs and Blackstone to buy large portfolios shows that the real estate market in Spain has bottomed and that it is the time to invest. Spain, as a country, no longer has the risks it had five years ago and that makes it much more attractive,” explained Galobart.

And according to Tecnocasa, a leading chain of Spanish estate agents, property prices in prime areas in Spain have finally stabilised. Prices are holding steady, and even beginning to rise again, in prime areas such as Marbella and Puerto Banus. The Spanish housing market has clearly moved beyond the phase of across-the-board price falls, helped by foreign demand for homes in popular destinations like the Costa del Sol, where sales increased by 33% in the first half of the year, according to figures published by notaries and regional authorities.

In their latest report on the housing markets of the Eurozone, Deutsche Bank also claim “house prices in Spain could be touching bottom,” indicating that Spain could be one of the best property investments in Europe over the next five years.

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Foreign buyers leading demand

Elías Bendodo, President of the regional Tourism body and the Provincial Council in Malaga province, has revealed that foreigners bought a total of 3,260 homes on the Costa del Sol in the first six months of the year, 812 more than the same period last year, based on the number of deeds witnessed by notaries in the province.

The biggest group of buyers, as always, was the British, proving that Spain is as popular as ever with visitors and residents from the UK. Bendodo presented the figures at the World Travel Market (WTM) fair in London, during the presentation of a recent initiative called ‘Living Costa del Sol’ – a joint venture between the re-gional tourist office and the local builders association to promote residential tourism in the region.

US investment bank Goldman Sachs also reported that the Spanish housing market should be near a turn-ing point, based on data from other countries that experienced the boom and bust. Citing US house prices which bottomed out when unemployment reached its peak, confirming a basic economic reality that people need jobs to pay for houses, and the case of Ireland, where house prices have risen 4% since unemployment peaked in March, the report suggests that Spanish unemployment has bottomed out, with unemployment falling in October for the first time since May 2007. If the US and other countries are any guide, the Span-ish housing market is that bit closer to turning a corner, say Goldman, who recently spent €200 million on a portfolio of rental properties in Madrid.

Spain still number one

Spain still tops the list as the most popular destina-tion for investors buying overseas property, accord-ing to research by Rightmove Overseas (5), which revealed that over 60% of property investors buying overseas said that they had received a higher return on investment than they had expected. Nearly half of all the investors surveyed said that high rental yields were the most important factor behind their decision to purchase an overseas property.

Good weather and short flights keep Spain as the number one destination with UK holiday makers, which combined with property price reductions of up to 50% compared to 2007 in the South and East coastal regions is why investors are are jumping in

now, before the economy improves and property prices begin to rise again. Properties in the Costa del Sol and the Costa Blanca seem to be the most sought after with Rightmove Overseas receiving an average of 500,000 searches each month for properties in those regions alone.

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Spanish property sales to foreigners surged by almost 25% in the third quarter of 2013. Spain’s low property values have made the country an affordable place to snap up holiday homes in the popular Costas. Foreign buyers now account for 17.2% of the market, notes Spanish Property Insight, the highest level since the Gov-ernment began releasing these figures.

Sterling strengthens against Euro

With sterling experiencing an upturn, increasing numbers of expats are looking to buy property, according to an article published by the Telegraph. (6) Sterling has strengthened in recent weeks relative to other curren-cies, which presents Britons with one of the best times to buy property abroad.

Clare Nessling, director of Conti Financial Services, said: “Prospective buyers are playing it safe when it comes to location, with France and Spain still topping the popularity stakes. Confidence is picking up, with many buyers who have been putting their plans on hold deciding to take advantage of the favourable conditions open to them. Buyers in Spain are in a strong position due to the number of homes available and the possibil-ity of negotiating prices down with some very motivated vendors”

And according to Luke Trevail of TorFX, Sterling now looks to end the year as one of the better performing currencies, making purchasing property in Spain even more attractive.

Buy-to Let market presents opportunities

New legislation passed last year by the Spanish gov-ernment de-linking rental rates in the country from inflation and allowing rents to be increased by land-lords more frequently has made the buy-to-let sec-tor much more attractive. A further enticement for landlords to invest in Spanish property has been the reduction in lease durations, and legislation which reduces the time taken to evict non-paying tenants.

Tax breaks allowing foreign property owners who rent out their property to working people under the age of 30 to claim tax relief of between 60% to 100% on rental income have been introduced as an addi-tional incentive to invest in Spanish property. And as Spanish banks begin to offload their distressed and repossessed property stock at bargain prices, residential rental yields achievable for buy-to-let investors are very attractive. Sareb, the state’s “bad” bank, is set to sell distressed property worth 1.5 billion Euros this year, offering a wealth of opportunities for Spanish property investors.

The Spanish holiday rental market is also looking healthy, with tourism numbers remaining buoyant and demand for modern contemporary holiday properties high in places like Marbella on the Costa del Sol. (7)

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“Golden Visa” for non-EU property investors

In one of the most significant developments to the property market this year, new legislation allowing residency visas to non-EU citizens investing half a million Euros or more into Spanish real estate has now come into effect. Investors spending a mini-mum €500,000 on residential real estate or a portfo-lio of properties making up this amount will gain a residence visa often referred to as the “Spanish Golden Visa”.

The visa, which can be renewed for five years initial-ly, grants Spanish residency and Schengen-area ac-cess to non EU investors. After five years permanent residency can be applied for, and after a further five years permanent residents can then apply for citi-

zenship and a Spanish passport, giving holders the right to live and work elsewhere within the EU.

Other European countries have introduced similar schemes, but the Spanish Golden Visa scheme is one of the most affordable and flexible in Europe. There is no minimum stay requirement to renew the visa, mean-ing there is also no initial requirement to be a tax (fiscal) resident in Spain – although granting of permanent residence after five years will require a minimum residence period of 183 days per year.

According to Mark Stucklin of spanishpropertyinsight.com, (3) “this new law will help attract some fresh capi-tal to Spain, and will certainly be good for business in up market niches in prime areas of Barcelona, Madrid, and the best-known coastal resorts like Marbella”.

For more information on any of these stories, please see the following sources:

(1) http://www.surinenglish.com(2) http://www.aplaceinthesun.com(3) http://www.spanishpropertyinsight.com(4) http://www.elmundo.es(5) http://www.rightmove.co.uk(6) http://www.telegraph.co.uk(7) http://www.globalpropertyguide.com

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