In my Andalucía Market Report 2011 (still available as a podcast here) I raised the issue of relative prices, looking at how too many properties are priced for somewhere they are not and I believe this issue needs sorting before the market can move forward in what I call secondary locations. The price would be fine if the location was one of the very best but not fine when it is second rank and here is an example of what I mean.
In 2009 I viewed a new house on the Costa del Sol built by Dutch developers to the highest of standards, couldn’t fault it, on a 1,500m2 plot, four bedroom suites, under-floor heating, in-vogue minimalist interiors and a modern exterior with a hint of Andaluz. The house had been on the market since at least 2007, originally priced at €1,950,000 and it is still for sale today. It is unsold because during all the time it has been on the market it has been priced as though it is in one of the best locations when the actual location is Elviria. I can’t help wondering if those Dutch developers didn’t do their homework properly and thought that prices on the Costa del Sol were all the same thing but when I am advising clients on prices I want to see about 25% difference between locations such as Elviria and El Paraíso and the prime areas of Marbella. While there is nothing intrinsically wrong with Elviria, in fact some of the best beaches in the area are on this stretch of the coast, prices must take into account the fact that it is 10kms from Marbella and 20kms from Puerto Banús and when one makes a direct comparison with Nueva Andalucía in terms of housing stock there are big differences which have an impact on relative prices. In Nueva Andalucía property is located around three of the best golf courses on the coast, plots tend to be bigger and houses tend to be larger, less than four bedrooms is unusual and five or more being common. Even if it had been located somewhere between Marbella and Puerto Banús or anywhere in Nueva Andalucía the original asking price of the house would have looked over the top by 2008. In fact, in 2006 I located a house for clients in one of the best gated urbanizations in Nueva Andalucía, it was bigger, with six bedrooms and the asking price was less, €1.7 million and my clients bought it for €1.35 million. That’s when I knew for sure the market was on the slide.
When I saw the house in Elviria 2009 it had been reduced to €1.4 million but even then it was still more than my clients had paid for a bigger and better located house in 2006. And in 2009 I helped relocate clients from Moscow to Marbella and secured a purchase of a similar sized house in a similar size plot, but again better located in Nueva Andalucía, for under €1 million. Admittedly it was an older house but it had been renovated to a very high standard, at least on a par with the house in Elviria. So in 2009 I would only have felt able to introduce a client to the Elviria property if the asking price had been around €750,000 as I need to see a differential of around 25% before I am happy that the price is right relative to better located houses. I noticed another price reduction a few months ago, this time to €1.2 million, still way too much, and then just this week I spotted it at €889,000 so at last, for the first time in its life it is now being offered at something vaguely resembling its value, both relative to other properties in Elviria but, most importantly, relative to what houses are selling for in the prime areas of Marbella. I still think the price needs tweaking and I don’t think I would advise any client of mine to go higher than €800K but if someone manages to deal at €750,000 or thereabouts I think they can feel quite pleased with themselves.