In Spain buying property is really a long term investment, especially as the property prices are not rising at anything like the rate they were a few years ago. If you are buying short term, (lets say between 2-4 years) renting may be a better option as with property prices increasing much slower now and the high costs associated with buying in Spain it means that you will probably only recover the costs you incurred actually buying in the first place, unless of course you are lucky or perhaps have improved the property substantially. Capital gains tax can also take a large chunk out of the profit made on a second home especially if you are not a resident and not thinking of buying again add to this that the property may not be your main residence.

A useful source of information for foreign property buyers in Spain is the foundation called 
Institute of Foreign Property Owners

Fundacion Instituto de Propietarios Extranjeros/FIPE 
Apdo de Correos 418 03590 
Altea Alicante

Telephone 00 34 965 842 312

One of the reasons in my opinion behind this so called slow down in the market is that many people have too high expectations of what they think they can get for their property. It is not always them that are at fault but someitmes the people who give them this false hope of obtaining such high prices for their properties in the first place. Many agents who come out and value properties here are not actually qualified to do so, myself included. Perhaps then it might be wiser to get a proper valuation from the bank, this could also help people who are selling when they are dissapointed to have an offer accepted only to then at a later date be told by the bank that the valuation is not enough for the mortgage they need! Often the case here due to the very sudden rise in property prices a couple of years ago when the demand was much higher and so people were over pricing.

I do believe those days are long gone now with the economy the way it is at the moment and also most people know someone here already who can advise them with their own experiences. The days are numbered, where the bigger companies that charge such a high commission are concerned, which is good for everyone. Remember if they are offering to pay for your flight and accommodation and meals etc it has to come from somewhere, nothing in this life is free.

Also with the market being slower in the USA and the UK people need to be able to sell before they can afford to make the move. One of the main reasons people move to Spain is the climate and the cheaper cost of living though this gap is now not quite as wide as it once was, believe me. Most people need to get some equity out of the property that they are selling in their home country to live on here, this is still the case whether they are retired or re-locating as it takes time and therefore a lot of money to set up home in a new country. To add to this situation there is so much building going on that there are more properties around and not so many buyers. Supply and demand has now changed from a few years before and people not being able sell in their home countries quite as quick has to have had a knock on effect.

Since the Spanish property boom of a few years ago many people in the UKhave been on the look-out for a holiday home in the sun. In realizing a considerable amount of equity in their property, they appeared to become property investment specialist’s over-night. The only problem is that effective property investment requires much more than striking it lucky in one market. It’s about calculating risks, estimating growth and return. It is also a different story if you are buying purely for investment purposes or if you want to live there permanentlyFor example if you view a house that you are considering buying, do you see the beautiful view and picture yourself sitting on the terrace with a glass of vino? Or do you see your bank balance going up with the income you can make from this property via buy to let?

Valuations

What should I be paying for my property or better still what’s it worth?

A market valuation is only one person’s opinion and the true value is what someone will actually pay for your property. You cannot really say what someone will buy or pay for a property at anytime in the future as there are so many situations that change and alter peoples ideas. The price which can be agreed at the time depends on the way the market is and that of course can change in the course of time depending on many factors not least being the mortgage rates and economy.

Valuations are personal and therefore relate to the client requesting it. The valuer should know for what purpose the valuation is requested and if it's for a bank loan or mortgage, its needs to be conservative as the bank would be the one selling the property if they foreclose on say the mortgage especially if the market is also hitting a bad time. If the valuation is for a buyer they will want it to be the other way the most important thing is that the value relates to the price of other comparable properties in the same area baring in a mind a buyer will want to pay the least he can.

This is where it gets difficult as no two properties are the same. For example a view is never the same and has a value which can be different in one person’s eyes than another. So how do you put a value on the view? Location and amenities are all big issues that play a part in providing the final value but when it gets to the “nitty gritty” everyone’s opinion is different so a valuation is a very personal thing.

When coming to Spain, the Bank of Spain decided that valuations for Spanish registered banks can only be carried out by a Tassador and they have to in turn be registered. To register, a Tassador company has a substantial bond with the Bank of Spain, which bond the company will probably obtain as a guarantee from a private bank, they are then obliged to that bank.

There are very strict guidelines that the valuers have to follow, which sometimes could have the effect of ignoring each individual property. Adding to that, the guidelines are open to use by the Bank of Spain as part of the Government’s economic policy like everywhere, valuations in Spain ultimately depend upon the professional conscience of the valuer so again ultimately an opinion.

So if you are having a house valued then make sure you know what the banks instructions are and you may know more about valuation differences. Whether buying or selling be there to make sure you do and that they know the reason for the valuation in the first place.

Obviously you have to take factors such as decor into account even if you are buying for an investment as you will need to be able to sell on at a profit to someone who has another use for the property. But you need to look at every aspect and all the pros and cons etc, the profit and loss, the income and expenditure. No investment is without its weaknesses, but you must be able to evaluate these so that you can make an informed decision and only research can help you here. In my experience, the most successful investors will only view the property for a few minutes before deciding to proceed. They have normally already satisfied themselves of their requirements through extensive research before visiting if they have taken my advice form the outset. Remember buy to let is not without its taxes and the tax man is now making progress in locating people that are renting out properties without paying tax, its only a matter of time.

Some tips on how to decide on Budget

Budget many people will tell you that location is the most important aspect. But you have to have the budget for that certain location or there is no point even looking. Do your homework the internet is great source of information.

Tourism is another factor even if you are looking to live there yourself as well as buy for an investment. You may need or want to sell on some point. Why would people want to visit this country in the first place? Obviously, every country has a capital city, but not all have impressive golf courses, exciting ski slopes, and spectacular coast-lines and so on. Choose a location which has wide appeal. Also, bear in mind that some countries have longer letting or tourism seasons than others.

Growth What is likely to happen in the next five to ten years that could have an adverse or beneficial effect on property? None of us can really see into the future but we can really look into all the facts and make sure we do our homework.War and politics can lead to widespread uncertainty and can cause property prices to fall. On the other hand, EU accession, Olympic bids, hosting major events or new tourist attractions will lead to increased so it is important to look at the country as a whole, and not just the property market. What state the local economy in and is there room for further growth?

Why are you buying? If in a new area where there is not much information it’s difficult to accurately predict the money that will come in from rental income. People should only invest in new markets in order to appreciate their capital, not for short-term gain.

Location Every country has good and bad areas to invest in. Buying a house 30 kilometers from the coast just because it’s cheaper is not necessarily a good investment. You need to be able to sell it on, and it must have appeal to a wider spectrum especially buying to let.

Property investment is one of the safest and most profitable ways of making money. Others investment mechanisms ranges from those which offer little return to ones which are pure gambles. Property investment offers a happy medium and an investment that can bring huge gains, but you must do your homework

 

 

It has been a really hectic time for me what with clients and getting my new website ready for its launch….and to be honest I feel very lucky as for me at least I haven’t noticed that the property market has slowed right down and that many property agents, on the coast especially, have closed their doors. Maybe it’s the change in people’s views and/or maybe it’s because people are now happier to move inland away from areas where there are so many ex pats as for some it’s not like living in Spain in some areas?? Whatever it is there are still people coming to Spain (mainly to live here) despite the so called slow down in the property market here and abroad. There are families that have planned this move for a long time and are so far down the line that is that cliché or is it a TV programme, there really is "no going back".

 

I remember when we were planning our move nearly 6 years ago, we were quite close at one stage and I suddenly stopped in my tracks, I was petrified, I thought Oh my god! What are we doing! The thing that got me through this stage was that the alternative which was staying put in a country and in a business where we were unhappy, was in fact, so much worse than the apprehension of stepping into the unknown new life that lay ahead of us…. but what is really happening with the property market now in 2008 and what effect it is having on some of us ex-pats a few years down the line from when we bought here?

 

In my opinion and this is just an opinion! Before I get an ear bashing off someone who knows better! I feel, the reason (forgetting all the obvious overbuilding etc) is that some people who bought a few years ago when prices were much higher are now finding themselves having to sell on (for whatever reason) and then struggling to obtain a price that they have been expecting now that demand has fallen. Add to this, the state of the euro at the moment, which is not actually helping either as of course it means less property for the money for the buyers. It’s this demand rather than the actual value that sets a price and what someone will pay for a property when demand is high is more often than not a higher price than the actual market value.

 

Because of the demand a few years ago people have too high expectations of what they think they can get for their property now. I am not saying it’s the property owners that are at fault as sometimes it’s others who have given them this false hope in the first place. Lets face it if we were told this year we can expect 50,000 euros less for example than we could have expected last year, we then feel we have lost it somehow, even if we never really had it in the first place. It happened to us in the UK, twice, we lost once in the property market and we won the next so it’s not something confined to Spain! Look at statistics.

 

Perhaps it would be wiser to get a proper valuation from a bank, and not always rely on a valuation by a sometimes unqualified person; many people that are giving valuations or opinions, which is what they often, are, as they often are not actually qualified to do so. Market valuation is often only one person's opinion (of course there is a strategy, a price on land and buildings but this often alters due to economical climate as well). The true value is what someone will actually pay for your property at that particular time, remember the demand and value theory. You cannot really say what someone will buy or pay for a property at anytime in the future as there are so many situations that change and alter peoples ideas. The price which can be agreed at the time depends on the way the market is, the individual situation and that of course can change in the course of time depending on many factors not least being the mortgage rates and again the economical climate and in addition the need or wish to sell and at what point and how desperate the need? 

 

Many properties that are on the market in this particular area, (I cannot speak for other places) have been so for maybe two years or more. Is this because demand is not as high or are they overpriced, or is it a bit of both? A proper bank valuation to ascertain a more realistic value could stop sellers and buyers from being too disappointed in the long term, when for example, they have an offer or accept and offer, only to then be told by the bank that the valuation is not enough for the mortgage the buyers need! The then potential sale falls down leaving everyone very disheartened.

 

Banks are getting much tighter now, in fairness to them they have to… they don’t really want the properties that owners cannot afford to keep payments on so they reduce their risk and lend less. This is due to a certain degree that the fact than many people took out large mortgages when they moved here and they are now struggling to repay them at the new increased mortgage rates that have doubled in just 3 years! The banks are now trying to counteract this by valuing lower, as I said, reducing their risk; low valuations by the bank are especially common with country properties on rustic land. In addition many people also apply for mortgages with proof of income from their country of origin, so what happens if they move here without that earning potential, they think it will easier to keep up with inflation and earn enough many can not...what then!! 

One of the main reasons people move to Spain is the climate and the cheaper cost of living, there is still a gap between the cost of living here in Spain and that of the UK, but nothing like the gap of the past, and most people especially if they still need to work need to get some equity out of the property that they are selling in their home country to live on here, and so may take a bigger mortgage to cover themselves. This nest egg is still needed whether they are retired or working to be honest as it takes time and a lot of money to set up home in a new country  (more than your average pension) so if you are retired you need to have some savings too.

It is upsetting at times, when I hear some stories and see some results of the effects of families moving over here, just not prepared or underestimating the cost of setting up. Whether you live in Spain or the UK or wherever! It doesn’t make a difference where you are, you still need to live your life. It may be warm and sunny here but it’s not a permanent holiday when you live here and if you treat it as such and are not realistic, like many people who aren’t then find they have nowhere to turn for help.

 

It is so important to be realistic and honest to yourselves because if you are not, when the money runs out and you have no means to pay the increasing mortgage payments then the really unlucky ones have to return to their country of origin because this is the only place they can get help to live. There is no financial support here like there is in the UK. I often get emails asking can I get this or that benefit, or can I transfer my benefits from the UK to here. Well the short answer is NO under normal circumstances you can’t. If you are not self-sufficient then you will have to work very hard unless you are careful, plan well and do your research and still even if you do work hard, believe me. It will be a while until the confidence in the property market is restored, with all the bad press and the horror stories it’s not surprising! If I were setting out now? I would certainly be doing my homework and using the experiences of others who have done the same.

 

Ultimately my job is help people relocate and I wouldn’t have a job if it weren’t for people still coming and buying property here, so I am not trying to put anyone off, but knowing I had helped people arm themselves the best they can and make them more aware of the pitfalls and what its really like is, apart from earning a living myself, why I do this, Take heart, though its not all doom and gloom, look around though there are hundreds of people here, having a good life, earning a living or retired and happy.  It’s a pity though with regards to the bad press though, funny how they never seem to sensationalize the happy stories on the UK TV and there are many many people here living happily.

 

Really though the turndown has to start in the heart of the country that first caused the problem, people, ex-pats and wannabe ex-pats have to see evidence of some of the bigger problems being sorted. These also effect the market and the amount of people taking the plunge including the massive subject of illegal properties being sold to unsuspecting ex pats. (I feel another topic coming on here).

 

We have brought millions of euros into a country that is now benefiting greatly from all the spending that we do here. Surely, this is plain to see to all who live and work here; we have created jobs, we have made a lot of people in many industries very wealthy and if it is to continue there are many problems to be solved.  There are promises that have been made but it will be a while now before many have the confidence to take the plunge and before we see an upturn in the market again.

 

If you do have a question or want to comment…Thanks for reading…Sharon

What do you think?...

I would be very interested to hear from anyone who has any thoughts on this either so please visit the forum or email me