Spanish Property: Discounting Works
March 25th, 2009
Despite a glut of unsold property hanging heavy over the Spanish property market, a rising number in the industry believe that the bottom of the market could soon be in sight as discounts start to attract buyers.
Agencies such as Andalucian Dream Homes (ADH), Atlas International and GEM Established are just some of the latest companies to offer their database price cuts of at least 30%.
“We do feel that the market is bottoming out now as customers are attracted by the large discounts on offer,” said ADH’s David Honeyman.
GEM’s MD, Andy Welland, added: “There are now around one million new unsold homes in Spain. Just as this stock needs shifting, the credit crunch has stifled mortgage applications thus reducing consumer demand – meanwhile the same credit crunch has forced banks to put pressure on developers to sell their unsold properties. All of this points to some incredible price reductions.”
While discounts are not enough to attract buyers alone, some data suggests that an end could be in sight to the plummeting property prices in Spain.
Planning approvals for new build projects were down 58% in 2008, standing at 253,000 and are predicted to fall to less than 150,000 this year according to developers’ associations. On top of this, demand for new housing still runs at an estimated 400,000 units per year, meaning that discounts and natural demand should eventually remove all but the worst unsold stock.
“I believe that there will be enough volume of sales this year that people will start to wake up and think that they better get in now before prices rise any further and the bottom of the market is reached,” said Chris Clover, founder of Marbella-based agency Panorama. “This means that the beginning of a recovery can commence, with total recovery happening within three to four years.”
Clover believes there is still lots of money out there that buyers are sitting on while waiting for prices to fall further, but with more agencies and developers offering price cuts of between 30% – 50%, the bottom could be reached this year once the public recognize the growing levels of sales.
Spanish property analyst Mark Stucklin agreed with Clover’s point of view, adding: “I think that the bottom is in sight for the quality segment of the market, but not where there is a big glut of unsold properties. Prices in certain areas will stablise, particularly where there is quality stock that is discounted. This is not to say that prices will fall further for the bad quality units, just that there won’t be any buyers for them.”
Victor Sague, sales and marketing director for Taylor Woodrow de Espana, believes the bottom is fast approaching in the markets of Marbella and parts of the Balearics, but prices need to fall further in some areas before the beginning of the end is reached nationwide. “We have been offering good discounts across a selection of our developments and as a result sold the same number of units in 2008 as 2007, despite the increasingly tough economic situation,” he said.
While large discounts are attracting small numbers of credit-crunch weary Brits, Scandinavian buyers, which are not as affected by the Euro exchange rate, are making the most of these substantial discounts. A spokesperson for estate agency Spanish Hot Properties said it was fielding strong levels of calls from Nordic buyers, with marketing and operations manager Susana Suspenda adding: “We have always known that investors were going to come into the market in 2009, but our best guess was around September time. Now it seems that a few groups want to make sure they get the best properties and plan to move in very soon, with one group looking to buy as many as 200 units at the best price. This will be a positive move for Costa del Sol as a whole with around 2.8m in stamp duty alone helping the economy in such depressed times.”
Estate agency Masa International also said it has recorded strong levels of enquiries via its Scandinavian offices for discounted property. To reach out further to the UK market, Masa has partnered with UK estate agency group Countrywide which is promoting a selection of Masa’s properties throughout its offices across Britain. This, according to marketing manager Simon Morris, is producing results.
“If the property is at the right price, there are Brits out there that will buy, it just has to be attractive,” said Morris. “The leads have gone through the roof since we started running this promotion with Countrywide, we just need to convert these into sales now. A lot of people have a fair amount of cash available in the UK and if they can see value, they will buy. Although sales are not fantastic, I think that with global buyers taking advantage of price reductions that the bottom is approaching.”
While cash rich international buyers are finding the discounts attractive, the domestic market is still a long way from recovery according to domestic-facing developer Hercesa International. “Yes we are making sales, but the only problem is that the banks aren’t offering credit,” said UK manager Miguel Janin. “We have adjusted our prices and there are investors willing to purchase as there are products that are near the bottom, but prices probably need to fall by another 10% before a full recovery can take place.”
Story from OPP (registration required)
Related Posts
- Public Works Save Spanish Economy
- Spanish Property Auction at 2005 Prices
- Spanish Property Sales: Discounting Works
