Investors Still Wary of Spain
December 7th, 2009
Talking to residential investors in Europe these days, Spain is almost never mentioned as a target. Even groups with vulture funds say they’re not quite ready to dive into that market, despite prices down 20 to 40 percent, in many areas.
It happened again last week. I was talking to Stuart Johnson of U.K.-based Experience International. The company is working investments in the U.S., France, Brazil, Panama and even the Philippines. But he said they are steering clear of Spain.
“Spain is a very difficult market now,” said Johnson, project sourcing manager for EI.
The explanations are always the same. No one doubts that people will always buy homes in Spain as a lifestyle choice. But there are so many units available—an ocean of golf course- and beach-adjacent villas–there is no way to expect any rental revenue.
According to Madrid-based consultancy Acuna and Associates, there is something close to 1.6 million housing units for sale, a level of supply that could take years, if not decades, to absorb.
“There is just too much supply and there isn’t the rental demand,” said Stuart Law, chief executive officer of Assetz Plc., a U.K.-based investment and property firm.
Then, of course, there are the issues of corruption, fueled by seemingly daily reports on the latest politician arrested for various development-related crimes. While some of the horror stories may have been blown out of proportion, the tales of demolitions, illegal construction and owner mistreatment are very, very real, especially in the minds of buyers.
In recent weeks, there have been indications that the market is starting to settle, with activity picking up as buyers shop for low prices. But clearly the market has a way to go before institutional investors will return to Spain.
Story from International Propery Journal
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