Torcal Estates Fincas and Country property - Málaga, Spain

Fincas and Country property - Málaga Property

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The Spanish Property Market in 2007 – Just what is happening?

Well, the first thing that most of us have noticed during 2006 is that there are fewer buyers looking for properties and therefore fewer sales are being made. This is having a direct affect on prices and the speed at which any sales are being achieved. Many properties can stay on the market for months without seeing a potential buyer.

The timescales for selling a property in Spain have always tended to be longer than we would expect in the UK (for example). With an increase in competition, prices dropping and a reduced number of potential buyers, the way in which you approach the sale of your property from the start is vital.

We will deal with the issue of price later but first we want to explain what is happening in the property market to affect your chances of selling

Why is the market slow?

The Spanish Govt. statistics for 2006 are showing a national increase in property values of 12% although this is a national average and (as has been seen in the UK) the differences between the property market in London and Wales can be vast. Whilst statistics can always be used to argue a point in either direction the news on the ground is more obvious.

As with any property market there are a number of factors involved which will (and have) affected the market. These can vary from micro economical changes (changes to borrowing costs for example), to pan European influences (such as the new EU states which are creating cheaper destinations for foreign investors).

As you may see from newspaper articles and TV shows, the market for overseas properties is still very strong, buyers from many northern European countries are still viewing, buying and moving into foreign property and this is certainly not expected to drop off in the next few years.

Unfortunately, the established markets of Spain and France have seen an increase in competition from the new eastern European countries together with some of the more exotic destinations across the world. This is likely to continue with the increase in the number of EU countries as well as the globalisation that continues to reduce the fear and increase the attraction of owning a property abroad.

Thankfully, Spain and especially Andalucia, is still a popular destination for buyers – the weather, the proximity to their home country and the availability of cheap flights all helps to maintain a certain level of interest.

Unfortunately, there are a couple of issues closer to home that are having an affect on the market locally.

The coastal market

You only have to take a drive along the coast to see the huge numbers of new developments being constructed to understand how the market can be affected by an oversupply of properties. There are incredible numbers of apartments, townhouses and villas being built. Many of these properties are now dropping in price and remain unsold. In addition to this, there are many buyers who are now considering withdrawing from their agreed purchase and losing any deposit monies that might already have been paid.

This creates a downward spiral of prices and it is sometimes very difficult to differentiate between those areas that are suffering and those that are more resistant to this change in market conditions.
Sadly, this is a trend that we see continuing for the next two years. Many buyers have been attracted by the promise of profitable returns on their investment and in reality this is never going to be delivered when there is so much competition in close proximity.

Coupled with this oversupply, is a worrying emergence of illegally built developments that are being investigated by the local authorities. This creates further concern amongst buyers, thus affecting the overall appeal to foreign investors.

The Inland market

Over the last 8 weeks we have seen many of our current properties drop in price anywhere from 5% to 20%. Many of the remaining properties that we had on the market were withdrawn (by us) if the asking prices were unrealistic.

Many properties have been on the market for some time at over inflated prices due to the boom in the market (some as long as 5 years!). Many vendors have not realised that the market has changed and therefore prices (and there own expectation levels) have to drop.

Vendors’ expectations have to be more realistic to stand any chance of selling. Thankfully this is starting to take effect. Those vendors that need to sell are now realising that to attract the more limited number of buyers, they have to be extremely competitive to secure a sale.

On a more positive note, the problems that are occurring (most obviously along the coast) do mean that there are many more buyers currently considering inland Andalucia. Both existing residents along the coast and new buyers entering the market are now realising that the benefits of living inland far outweigh those of the coast.

Many existing residents are considering a move inland to free up capital, or to simply benefit from a better environment. Sadly, many of these potential buyers still have to sell their existing properties to enable them to buy and this in itself is one of the causes of a saturated market on the coast.

Generally, the price level at which many buyers can afford to purchase has dropped. We think there are two reasons for this – firstly the availability of cheaper properties in the emerging markets has increased buyer’s expectation levels (they are therefore expecting much more property for their Euro) and the second is that the quality of buyers has dropped along with their spending power.

We feel confident that the number of estate agents within Andalucia will drop in the coming months and years. This fallout from the drop in activity has already started to take affect and this will continue (perhaps most significantly along the coastal strip).

We, at Torcal Estates, have experienced a depressed market before and we understand how to improve the chances of selling. This can be a painful process for all involved but if you can be realistic with your price, ensure that your property is well presented and work with your agent your chances of selling will be improved.

Why buy in Spain during 2007?

There are still many reasons why northern Europeans and especially the British find the idea of a property in Spain attractive.

An established and safe market – many of the new destinations for buyers are the new accession states of Eastern Europe. These countries do not have an established market place and there are already concerns that investment returns may be much smaller than once estimated. These countries do not have the same infrastructure that more established countries, such as Spain and France, benefit from and therefore many older buyers are showing concerns about future healthcare and services.

Spain has been a destination for many millions of British over the years and this has created a background of security, stability and service that will continue to benefit newcomers.
The climate – well, what more do we need to say?

The climate in Spain, especially Andalucia, continues to attract holidaymakers, second home owners and, of course, permanent residents. Sunshine, warmer winters, better air quality and a general absence of SAD (Seasonal Affective Disorder) improves health, improves our outlook on life and can dramatically influence people’s view on the future.

The differences between the weather in Spain and Britain is fairly obvious to all that have experienced both countries – what is also to be borne in mind is the climate in some of the new Eastern European countries which are, in many cases, similar to that (or even colder!) than the UK.

Cheap air travel – New destinations (such as Bulgaria & Romania) may offer cheap flights at the current time although how long will this continue? There are growing concerns over the affect that air travel has on the Ozone layer and the future of Global Warming.

Low cost airlines may well suffer in the future due to the environmental threat and increased pressure from Government and the public – they may have to withdraw services to some of their newer destinations and increase costs. Which destinations will they continue to offer? – The established markets such as Spain and France will continue and the more recent additions will be under threat.

Torcal Estates – a new approach

Torcal Estates is changing the way it conducts itself and this is very much a reaction to the current market trends and directly linked to the changes in ownership of Torcal Estates over recent months.

We are being much more direct with vendors and this is sometimes very difficult for a vendor to accept. Whilst any property creates differing views from people we are using much more comparable evidence to justify our thoughts and to help us identify the accurate selling price for a property and also to identify the best way of selling it.

This new approach from Torcal Estates also includes the offering of a new Sole Agency Agreement that attracts a discounted commission rate of 3.5% (plus IVA at the prevailing rate).

We have had a large amount of interest from our current vendors regarding the Sole Agency agreement, as this saves them money and also benefits them in other ways.

The number of agents that are used to sell a property in Spain can be huge. Some of our vendors had as many as 10 estate agencies offering their property! This is terribly detrimental to the chances of securing a buyer. Not only does the larger number of agents create a sense of desperation, it also creates greater confusion on the part of a potential buyer.

Quite often each agent with have a different fee level which means that the property is advertised at quite varying prices – some as much as 10% different!

We have had buyers actually stop buying a property because they have seen it advertised at different prices through different agents. They may be buying the property for the cheapest price but they become cautious that the property might actually be available at a lesser price – this leads them to question their decision and will inevitably affect their desire to proceed.

We continue to offer a Multi Agency Agreement however we would always recommend that you consider choosing one agent to act on your behalf. Those properties that we offer for sale in conjunction with other agents will be charged at 5% (plus IVA) of the selling price.

Property in Spain has been a relatively easy sell over the last 5-10 years. Affordable properties, plenty of interest from potential buyers and a steady flow of Spanish vendors wishing to sell their old farmhouses to benefit from this new market.

Sadly (or not so sadly), the market has changed and therefore needs a new approach. We now need to concentrate our efforts on seeking new buyers, ensuring that we understand a property completely and create marketing opportunities to secure potential buyers.

A new website for Torcal Estates is being created and this will enhance our chances of securing interest from the UK and other northern European countries.

We aim to take advantage of the confusion of many of the agents in Andalucia by focusing on reducing our property register (rather than increasing it as some agents are doing!), targeting Villanueva de la Concepcion and surrounding areas as the place to live (rather than dealing with a number of different villages in far flung areas!) and going back to the basics of property sales – understand your market, vendors and buyers.

A new website is being created for Torcal Estates and this will be more “visible” to potential buyers who are surfing the Internet for properties in southern Spain. We will have the ability to provide much more information on any given property (with additional pages) over and above the standard entry for a property.

The important factor about websites is that they need to be found easily by the people that they appeal to. The new Torcal Estates website is using cutting edge techniques to ensure that your property will be seen by many more people.

Pricing Strategy

The pricing of any property is a sensitive subject – we all think our property is more attractive than another. We all think that our property is worth more than another. We all think that it should sell quicker than another.

Sadly, our own expectations can be misplaced.

The facts are –

  1. Less people are buying in Spain

  2. More and more properties are competing against each other

  3. Prices are falling

  4. This market is set to continue for the next two years

If you need to sell, the important factor (and the only one you can really influence) is getting the price of your property correct from the start.

To start with it is always advisable to obtain 2 or 3 valuations (this does not mean that you invite an agent round to see your property and tell him what price you want!) and always ask the agents to justify their valuation.

If you do have 3 valuations it does not mean that you have to instruct each of them. Choose the agent that you feel most comfortable with. Ask them what fee they will charge and what they will do for that fee.

When you have chosen the agent, you then need to (with the agent’s help) decide what price to advertise your property at. If you do instruct more than one agent, make sure that each agent has your property on at the same price.

There is no problem with starting at a figure that is “optimistic”. Nobody can guarantee exactly what price you will sell at, so there is no harm in “testing the water”.

Please do not be un-realistic with your asking price, because your best chances of selling are when the property is new to the market. If you place your property on the market at an un-realistic price this may seriously affect your chances of a sale later.

So how do we, at Torcal Estates, arrive at an accurate price for your property?

Firstly, we are aware of which properties are selling and which are not. We know which properties are generating interest and which are not. We know what price properties are selling for (the old saying that “a property is only worth what someone will pay for it” is old but true).

We know the properties in this area intimately – we do not spread ourselves thinly across wide areas of Andalucia. We concentrate on the area around Villanueva de la Concepcion and we therefore understand the area, the variances between villages and the benefits of living in this part of Andalucia.

We spend a lot of time understanding the statistical data available to the property industry. This helps us to understand trends - we are probably the first (and possibly only!) estate agents in this region that has recognised the change in market conditions and reacted to it quickly.

When we value a property for the first time we will consider a number of factors which can affect price. Obviously, the size of the property, the amount of land, the location and condition of the property will all have an affect on its value. We take all of these factors (and more) into account when we give you our opinion of value.

We also take into consideration similar properties - what they are offered for sale at and, of course, what they eventually sell for.

We have an incredible amount of this information available to us. We deal with property every day of the week. We understand the market and how to deal with a difficult market.

And the best thing is? - We can share all of this information with you to help increase your chances of a sale.

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