Spanish Property Market: Heal Thyself
March 31st, 2009
It’s been a very strange week for Spanish property. It all started (from my point of view) with a story about CAM Bank in last week’s newsletter.
If you’ve already registered to receive more information about their cheap, distressed and repossessed properties, you’re in good company, because hundreds of other people did too.
What surprised me was how quickly so many people responded to CAM Bank’s offer. I think it surprised CAM Bank too.
Aren’t we supposed to be in a recession? Isn’t Spain supposed to be one of the worst-affected countries in Europe?
I also received emails of concern from estate agents saying that, while the CAM Bank campaign was good news for buyers and vendors, it was definitely bad news for estate agents who were being cut out of the loop.
I replied saying that I believed anything which stimulates activity in the Spanish property market must be welcome – and would eventually trickle down to benefit every participant. As it turns out, I didn’t have to wait too long to find out if I was right.
Last Tuesday – the day I issued the CAM Bank announcement – was the biggest traffic day ever for Kyero.com. In terms of property page views and general enquiries made to estate agents, it was the biggest ever since we opened our doors in 2003.
Then Wednesday was even bigger. Thursday was bigger again, and Friday was the biggest Friday ever ..
This isn’t a Kyero-only phenomenon. Earlier this week, Rightmove.com reported that Spain topped their charts for property searches in February.
Here’s what I think is happening: The speed and volume of response to the CAM Bank campaign demonstrates that there are people able and willing to invest in Spanish property.
What they’ve been waiting for is a clear demonstration of property being made available at prices significantly below market value – because ‘market value’ in Spain could mean almost anything.
Once buyers became convinced that genuine distressed and repossessed properties were being made available, interest returned to the market in general.
Let’s be clear: I’m definitely not saying that everything’s all OK now and the Spanish property market has turned the corner. I’m saying that when the market provides what buyers are looking for, buyers respond. Hardly rocket science, I know – but the flurry of interest in CAM Bank demonstrates to me that buyers’ needs were not being met before.
This hypothesis is pretty much echoed in the OPP article: Spanish Property: Discounting Works, and if true, sends a clear message to everyone involved in the Spanish property market: Now, more than ever, buyers demand value.
As I advised buyers in What will you pay for a Spanish property in 2010?, “Find a property you’re interested in, find a vendor who will work with you, do the maths and try to arrive at a consensus on the value of the property. Not every vendor will be willing to do this. That’s fine – just walk away.”
In this buyers market, the only way to persuade a buyer of the value of a property is to share the basis of the valuation with them. In the CAM Bank example, the price of the property is the debt value. This simple declaration was enough to start a feeding frenzy of buyers.
On a slight tangent, hats off to Mark Stucklin for his reporting on the recent findings of the EU Parliament: Spain Guilty of Property Abuses.
This will come as no surprise to anybody who has any involvement with Spanish property – but at least a verdict has been recorded and the lumbering process of justice can lurch forward.
I have no doubt that Spain’s reaction will be one of “da igual” – loosely translated as “so what?”. However, I hope that the EU puts some action behind the threatened financial sanctions against Spain.
No doubt, it will be lost on many of Spain’s policymakers that the sins listed by the EU Parliament are largely the cause of Spain’s current financial predicament.
Now that virtually every country is suffering from some kind of financial meltdown, it’s easy to forget that Spain was heading for calamity – entirely of its own making – long before the US subprime mess involved everyone else.
The lessons from this week’s events and the EU ruling seem clear: Spain, clean up your act in the property market. Implement legislation and publish metrics to restore value and faith. Buyers will surface, property market activity will increase, and the Spanish economy will pick up.
Martin Dell, Kyero.com
