Assetz® News - Inland, but soon to exit the valley

Inland, but soon to exit the valley

25th April 2008 |

Where now for Spain's beleaguered property market? Much has been made of the impact of the credit crunch, a correction that many thought was coming anyway, the ugly overdevelopment of some coastal areas, the demolition of illegally-built homes in areas such as Andalucia and the collapse of some Spanish property firms.

Yet some will wonder if that is the full story. In one sense it definitely is not, for Spain is still selling property to Britons. Figures from the Association of International Property Professionals for last year showed that the market share of British overseas buys had dipped from 31.6 per cent a year earlier to 25.4 per cent, but this still left Spain out in front as the most popular overseas market for UK buyers.

A lot of this will not, of course, have been investment buying. Second home buyers and retirees will have had the same reasons to buy as before, with plenty of sun, sand, sea and golf courses available.

Yet there has been a significant geographical shift in buying patterns away from the coast even when all the above factors are present, according to Paul Bradley from the Spanish Property Owners Guild. He pointed to the example of the Polaris World golf development in Murcia, where the course was designed by Jack Nicklaus, in which apartments could be had for an "excellent value" €118,0000 (£93,000) but where sales had fallen by 50 per cent since last year.

Mr Bradley explained that the coast was no longer where it was at, even when it came to finding bargains. He stated: "More and more Brits are venturing further inland to Granada Province, La Mancha, Extremadura, and the Costa del Luz in the west where values are even lower than Murcia."

For those who are seeking investment bargains, Mr Bradley's advice was clear. Stating that "all property markets go through peaks and troughs. This is just one enormous valley", he said that the best time for investors would be in 12 months time, when, he predicted, the market will have bottomed out and investors with the required cash could "snap up some bargains".

Some may not be so precise about the timescale. Speaking recently in general terms about property markets hit by the credit crunch, Amberlamb director Rhiannon Davies said that "those who buy in very low today and cash in on the financial crisis will reap the dividends over the long term", as an established market in a trough would, because of its string "fundamentals" start to grow again sooner or later.

In either case, however, the rationale is the same. Markets like Spain are not dead, just slumbering, meaning that those who buy before the alarm call will stand to pick up bargains that will turn in a healthy long-term profit when the sleeping giant awakes and marches out of the valley.