Supply
of Properties
First of all,
over 600,000 new properties have been built per year during the last decade.
The population size has remained stable and there has not been the same
number of demolitions. These new properties were mainly built to attract
people looking for a second home, investors and foreigners looking for
a property in Spain.
Demand for
Properties
The economic
situation with the rising interest rates has led to a lower demand for
properties especially from Spanish people that are looking for a second
home. The increase in interest rates has not had such an effect on foreign
buyers who tend to be cash buyers.
The downward
trend for demand has also been influenced by the fact that the stock market
in Spain has during the last 3 years outperformed the increases in property
prices. This has tempted the professional investors away from the
Spanish property sector in the direction of the stock market.
Another reason
for the decrease in demand is the fact that the average time for selling
a property in Spain during the last few years has increased and is today
120 days on average, 34 days more than in 2005 (according to Spanish real
estate agent Don Piso).
The combination
of the above factors along with a decreasing domestic demand for properties
and a huge supply of properties leads to the conclusion that the situation
today in the Spanish property sector can be defined as a Buyers Market.
What does
a Buyers Market Mean for People Looking to Buy Property in Spain?
For the last
15 years (1990-2005) the market in Spain has been clearly dominated by
the seller with sharp increases in property prices (on average 15% per
year) and a very high demand for properties in Spain.
Buyers of properties
during this period where in a disadvantageous position to negotiate
price or terms of the sale and had to decide very quickly if they wanted
to buy a property as there were always another buyer ready in the background.
Today with
the buyers market this situation has changed completely especially if you
are looking to buy a new property where the biggest oversupply is evident.
If you are an investor and are looking for a quick return on investment
the current situation is of course not very favourable as it will be both
more difficult to sell your property quickly and the prices does not increase
at the same level as beforehand.
On the other
hand people that are looking to buy a property as a long term investment
will in most cases be better off in a buyers market.
First of all
there are more properties on the market which means that it will be easier
for the buyer to find the right property. Buyers are also in a much better
position to negotiate both price and terms of the sale and promoters and
real estate agents are becoming more and more creative with the extra services
and incentives offered to ensure a sale. The overall quality of new promotions
is also improved as the days where any type of property could be sold are
over.
What will
happen in the future?
It is of course
impossible to predict what will happen in the future but there are some
indications we can take into consideration.
The situation
with an oversupply of properties in Spain is not very severe and is expected
to be adjusted within a few years.
The main reason
for this is that the oversupply mainly comes from the building of new properties
(not because there is an oversupply of second hand homes) and professional
promoters are better able to adjust to the market situation. In fact promoters
have already started constructing less new properties and it is expected
to keep decreasing over the next years.
