SIMA Spells Opportunity?
April 15th, 2008
With the fog of gloom surrounding the Spanish property market, I was quite surprised to find the mood at SIMA distinctly upbeat and vibrant. Although exhibitor numbers were down 20% on last year, the developers who did exhibit did so in force and style.
A handful of large empty spaces at SIMA left by ‘no-show developers’ spoke silently of how some have clearly fallen foul of their creditors. It seems, however, that this will not be the fate of all.
Many developers we spoke with, while admitting the severity of the current market, said they had the foresight to diversify their businesses and take a more conservative approach to their borrowing.
Even so, there was some deep, deep discounting evident on some of the developer stands. Others are reluctant to publicise the extent of their discounting but, I strongly suspect that if you came to Spain ready and able to purchase, you’d be pleasantly surprised by your negotiating power.
With new properties coming on the market every day, the unfortunate choice facing some buyers is to default on completing the purchase and lose their deposit. In some cases, this can be as much as 40% of the property value.
In these cases, many developers are passing these savings directly to a new buyer – effectively offering the property for sale at 60% of the original price. Even with the pound at an all-time-low against the Euro, this is a huge discount.
With the Pound currently worth around 1.25 Euros, Spanish property now appears to be 15% more expensive to UK buyers than just a few months ago. Currency specialists, Moneycorp, say that the hope of 1.4 Euros per Pound is a distant dream. Right now, the rate improving to 1.3 would seem like a significant revival for Sterling.
Incredibly, this particular cloud does have a silver lining. Imagine a British family selling their holiday home in Spain with the intention of reinvesting the proceeds in the UK. Let’s say that they’re hoping to realise 100,000 GBP from the sale of their Spanish property.
A few months ago, with the exchange rate at 1.45, they would be looking to sell at 145,000 Euros (ignoring taxes and selling expenses). Now, they can afford to sell at 125,000 Euros and still achieve their goal of netting 100,000 GBP.
On top of that, if you can find a motivated seller, on a fixed timeline who wants Sterling, you have the makings of a very good deal.
Developer discounts, distressed sales, motivated sellers and currency fluctuations all spell one thing to me – opportunity – but not the same kind as in the boom years. This time, the opportunity requires research and patience.
Seasoned property consultant, John Wolfendale of Property Investment Management Spain says “Now, for the first time in ten years, we are entering a buyers market. Astute investors will be able to make money and also enjoy themselves hugely in the process. .. In my view we will look back in 5 years time and say that 2008 was when the smart money went into Spain.”
Yes, you’ll need your wits about you. Yes you’ll need to exercise caution. No, the stories you read in the UK press about Spain don’t tell the whole story. The buzz at SIMA spoke of opportunity and a property market able to reward the patient, savvy buyer.
Martin Dell, Kyero.com
