I have always thought that the words ‘investor’ and ‘investment’ were two of the most overused and misused words during the hyped-up property fest that was Spain’s property market from 2000 and I tried hard to keep them out of my vocabulary. In the worst of cases, these ‘investors’ were still piling into overpriced tat fully two years after signs were clearly visible that a severe price correction was looming, only most people chose to look the other way and pretend all was well. But it’s a fact that Spain’s property market was in deep trouble as early as the end of 2005 and was always going to be a major accident regardless of what was happening in the rest of the world. The fall-out from the wider global turmoil triggered by the sub-prime crisis in the US just made it a whole lot worse.
Typically, a boom-era investor bought a two bedroom apartment off-plan and waited two to four years for delivery. As the feeding frenzy didn’t really get underway until about 2002 this meant that by the time many people were getting the keys to a finished property the market was already past the peak and heading south. Having got the ‘investor’ bug thousands made it much worse by purchasing more than one unit, buying into the fable that they would have no trouble selling on during construction for a profit so there was no danger that they would ever have to service the mortgage that they were taking on. But in the unlikely event that they hadn’t sold before completion then they could service the mortgage through rental income so either way, no worries. Well, we all know what happened next and for most it went pear-shaped.
And the prices they were paying! I was recently contacted by someone with an apartment in Elviria on the Costa del Sol, one of those locations where everyone prices their properties as if they are two minutes from Puerto Banús whereas they need to be 25% lower. He had paid €350,000 for his unit, had a mortgage of €260,000 so he couldn’t sell for less, but he had had it on the market from day one at over €400,000. He had found it impossible to rent, hardly surprising when there are thousands of identical units in the same area and why would anyone choose to be stuck up a hill in Elviria when they can pick and choose within strolling distance of Puerto Banús. Strange thing was he had really been aiming to buy in the Banús/San Pedro area but fell into the clutches of an agent who told him that east of Marbella, around the Elviria area, was the next big thing and so off he went like a lamb to slaughter. I can’t help being just a tad suspicious that the agent owned the apartment and was desperate to unload. And now, given that it is perfectly possible to pick up good units in a great location near Puerto Banús and San Pedro for between €250,000 and €300,000 I had to tell him that I didn’t think his Elviria apartment was worth more than €175,000.
So it’s great to see properties in prime areas like Marbella and San Pedro now being offered at prices that look so good even I may start using the word ‘investment’. For example, there are some new, never been lived in two bedroom apartments 200 metres from the beach in San Pedro. At the height of the market identical units in the same development sold for €520,000 but since the downturn kicked in the 40 unsold units have been listed at €480,000 and the developer has refused to listen to lower offers. But a couple of months ago his attitude changed and he is now keen to sell out and move on so the price for a ground floor unit has tumbled to €320,000 and he has been selling several units a month. Then there is a small development of only 18 townhouses frontline to one of Nueva Andalucía’s best golf courses. It used to be a timeshare development but the individual freeholds are now being sold and a client of mine has just secured one at €230,000. It will rent like a dream and in a recovered market in the future will make €400,000 without difficulty. Buyers are all over it and in just three weeks half the units have sold. Some are buying for rental yield, others won’t rent at all but like the capital growth prospects but however you slice it deals like this deserve the tag ‘investment’. Future ‘investors’ take note.