Torcal Estates Fincas and Country property - Málaga, Spain

Fincas and Country property - Málaga Property

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News - October 2007

The pain in Spain is mainly on the coast

More headlines about the Spanish property market are hitting the press, both in the UK and here in Spain.

Many of them are worrying when you see them at first glance – “4,000 estate agents to close”, “construction levels down by 40%”, “prices fall for the first time in 10 years!”

These headlines ate grabbing a lot of attention. Sadly, the facts behind these headlines are extremely confused. In some areas, prices are still rising; in some areas prices are falling. What is truth and what is fiction?

Let’s deal with the fact that many, many estate agents will close their doors in Spain over the next twelve months. Well, the fact is that many estate agents opened up off the back of an extremely buoyant property market. Many of these agents were ill trained (if at all!) and were unconcerned about the long-term future of their clients and in some ways, their own businesses.

The fact that so many agents will close is perhaps more a reflection of the quality of those agents than an insight into the Spanish property market.

The second headline deals with the drop in construction starts during the first 6 months of 2007 compared with those in 2006. This is fantastic news (unless you are the builder!) as this means that the over-supply of properties along the coast is slowing down.

There has, for a number of years, been a concern that the levels of building along the coastal strip are simply un-sustainable. Both in terms of the demand for property and also the environmental issues over waste management, water supply and general pollution levels.

The fact that demand has fallen over the last two years has simply lead the builders, developers are promoters to slow down their rate of production. This creates a more balanced supply and demand scenario for the future and therefore the market will react to this reduction in supply, in due course.

The third headline is that prices are falling – yes they are, in certain areas, with certain types of property and this cannot be ignored. Anyone buying a property in Spain needs to be aware of the competition and needs to be aware of the relative value of the property that they are considering buying.

Where there is still an over-supply of property and a drop in demand the most obvious thing to happen is that prices start to fall. This has happened along the coastal strip of Spain over the last 18 months.

Many new developments that were targeted towards the investment market and holiday home markets have one fundamental problem. As soon as the development is finished you have 20 or 200 similar properties to compete with. If you decide to rent the property out or sell it, you can bet that at least 10% of your new neighbours have considered doing the same!

Add to this fact, that the developer may well be selling a future phase of the development and you start to see just how much competition can influence your decisions.

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