Assetz® News - Spanish property market remains healthy

Spanish property market remains healthy

24th January 2006 |

The latest statistics from the Spanish government reaffirm the fact that property investment in Spain remains one of the most sensible options for UK residents looking to enter a foreign property market.

Though Spain may no longer dominate the attention of British investors in the way it did in the 1990s, the consistent growth of the market and the inexorable popularity of the country as a tourist resort and second-home haven mean that astute investors are continuing to make enviable profits from their ventures.

Government statistics show that house prices in Spain increased by an average of 12.8 per cent in 2005. This is admittedly down on the 17.2 per cent increase in 2004, but it has been welcomed by government officials and investors alike.

The director general of Architecture and Housing Policy, Rafael Pacheco, has celebrated "more reasonable" increases while property investors appreciate that a 12.8 per cent rise shows that the market is remaining strong and has avoided a crash.

Furthermore, with developing property markets such as Bulgaria providing increased competition, Spain now has to prove it can remain competitive, so the more sensible price increases may prove to be beneficial to the long-term strength of property investment within the country.

Significantly, investment in Spanish property is also likely to be made more desirable because of the decision by the European Commission to refer the Spanish government to the Court of Justice because of allegations of prejudiced property tax laws.

At the moment, Spanish residents are required to pay 15 per cent tax on gains from property sales, whereas non-residents are taxed at rate of 35 per cent. If the Court of Justice rules that this is indeed discriminatory, investors from abroad will look forward to much lower taxation levels which will clearly benefit those hoping to sell on properties in Spain.

According to propertyinspain.net, it is currently an extremely good time to invest in a Spanish house, with high construction standards across the country creating a good reputation and making the process of reselling much easier.

Predicting that the lead price for a typical two-bed, two-bath apartment in a prime location will be around £113,000 during 2006, the company's Terry Walker has said conditions for buying a house or building a property portfolio are ideal.

"That is still very affordable for new buyers as the mortgage interest rate remains around three per cent, which when factoring in the still low inflation of Spain is actually much less in real terms," he said.

"The typical second home development is also better value as they are designed and built better, with specification and standards raised every year to a much higher level. Marble finishes, added air-con, two bathrooms, increased security and smart home technology are becoming the norm, while sunshine space such as terraces, balconies and solariums are bigger by demand," he added.

The likes of Bulgaria and Cyprus will inevitably chip away at Spain's dominance of the market, but UK investors have shown few signs of turning away from their favourite property investment country. With Barcelona and Valencia continuing to attract interest and the tourist industry in the Costa del Azahar growing in popularity each year, it would seem Spanish mortgages will remain prevalent for a long time.