Torcal Estates Fincas and Country property - Málaga, Spain

Fincas and Country property - Málaga Property

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News - January 2008

Predictions for 2008

Preface to our expectations for 2008

Well the first thing to stress about any predictions is that we can only base our thoughts on experience and on the facts that we see on a daily basis. We, at Torcal Estates, have a wealth of property experience, not just in Spain but in the UK as well, so we can certainly offer you a well considered view on the way the market is going to pan out, over the next twelve months.

We gather an enormous amount of information going about our daily business and this helps to build an overall picture of the property market that we work within. This helps us to be informative and confident about the way in which we advise clients and this in itself means that we can be confident about our predictions for 2008.

The other dangerous thing about predictions is that they tend to be broad, sweeping statements. Generalisations in connection with a property market can be extremely misleading because any property market will be localised and therefore each town, in each province within Spain, will have different factors affecting their individual property market.

The problem with newspapers and the media in general is that they cannot delve deeply enough into a local property market to really understand what is happening – this means that we have to deal with dramatic headlines which don’t actually reflect the market in individual areas.

Thankfully, we at Torcal Estates, have the ability to read the intricacies of the local market in conjunction with the wider Spanish, European and Global influences that affect us all.

What is going to happen to property prices?

There is every chance that property prices will continue to fall during 2008. Now, that’s the bad news over with. The sooner we all get used to that fact, the better. Sadly, we (and agents in general) are regarded as pariahs and this is not helped when we have to be the bearers of bad news.

Is this bad news for us all? Well, certainly if you have to sell during 2008 you will need to be more realistic with your asking price to encourage buyers. Many people who bought their current property 5, 10 or 15 years ago will still be making an enormous gain on the price they paid for it. Some, more recent buyers, will not necessarily be able to achieve the 20% increase that they may hope for but then again, many will be able to buy more cheaply so the actual loss is minimal.

“Paper profit” is a phrase that is used for gains that aren’t really seen in the pocket. Many people will be selling and buying and therefore any reduction in prices will be painful on the sale but will benefit them on the purchase. This realistic approach will be needed in the coming year to unlock the market as a whole.

Prices also need to fall to a level which starts to encourage new buyers into the market place and many properties have been “over-valued” within the last 2-4 years so any reduction in price will be a reflection of previously optimistic values anyway.

The fact is that any reduction in price is good news to buyers and that is what makes the market tick. Prices coming down will be seen positively by buyers and therefore the more realistic and “affordable” property prices in Spain, are the more buyers will be attracted to buy.

How much prices fall and how quickly will depend greatly on the individual property itself. The more individual your property is, the better presented it is, the more benefits it has to offer will all help to substantiate your asking price. What everyone has to be careful of, is keeping an eye on the competition. You are unlikely to get €300,000 for your property if a neighbour with a similar property is selling for just €200,000!

Competition is the secret to knowing where to pitch the value of your property. Some people need to sell, some people want to sell and there can be a huge difference between what each owner will ask for their property. Those people who have no rush and plenty of patience can set an optimistic price and see what happens. Sadly, this is what has been happening over the last 18 months and does nothing to encourage new buyers to the market.

Spanish buyers tend not to buy foreign owned properties. Partly this is a cultural issue, however in many ways it is also a reflection of the way in which the Spanish buyers have been priced out of the market. Any correction in house prices in Spain will increase the chances of Spanish buyers entering the market and therefore creating a wider audience to appeal to.

Whilst all of the above tends to deal with local issues and the specific nature of an individual property or area, there are some national and international issues which will affect the market in your area.

The availability of mortgages and credit in general is reducing and this will have an affect on all property markets. Whilst mortgages have been relatively easy to obtain over the last 5 years (and payments have been low), the Global Credit Crunch has tightened the availability of finance and this will start to be seen in a wider sense during 2008.

Mortgages will be more difficult to obtain and the cost of borrowing will continue to increase. Whilst this will affect us all in some ways, the property market along the coastal strip is likely to affected more so than the inland market. In our experience there are few buyers who need to obtain mortgage finance in this area and whilst some buyers do, they tend to require fairly low percentage mortgages rather than 80 or 90%.

Along the coast, many buyers were using finance to buy for investment and this market will continue to struggle. The differences between the market along the coast and inland are enormous and the press simply cannot deal with these intricacies when writing their headlines.

The fact is that people still want to buy in Spain. The weather if fantastic, the culture is varied and laid back and the cost of living is lower – the simple fact is that if you are selling during 2008 you will need to make sure your property is well presented, competitively priced against the competition and well marketed.

If that’s the case, you improve your chances of selling and once you’ve sold you can take advantage of the buyer’s market.



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