On the other hand, Spanish real estate agents are, by contrast, claiming that now is the best time to buy a property in Spain.

But what are the facts and background of these statements? What is really happening to the property market in Spain?

What is a Buyers/Sellers Market and What are the Consequences?

The property sector, like all other none regulated sectors is influenced by many external and internal economic factors which will dictate the demand and supply in the market.

A sellers market is, as you would expect, the opposite. There are more buyers than there are properties available putting the sellers in the advantageous position.

When there is an oversupply in a market the potential buyers will have more properties to choose from and will in general be in a better position to negotiate price and general terms and conditions of the sale.

It is also possible to have a market which is not clearly dominated by either the seller or the buyer which would be defined as a market in equilibrium.

If the situation of a buyers or a sellers market persists for any length of time it will eventually affect the property prices. The normal tendency in a sellers market with an over demand of properties would be that properties prices increase (as there are not enough properties on the market the sellers will be able to raise the price).

Facts about the Spanish Property Sector 

Below we have listed a number of facts explaining the current situation regarding to the supply and demand in the real estate sector in Spain.

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).
 

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.

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.

What about the crash? First of all there has not been a crash in the Spanish property market and prices are on average still increasing although at a much lower rate than previously (this year properties in Spain are expected to increase about 3-4%).

Nearly all experts agree that in the near future there will not be a crash but at most an adjustment in prices of new promotions and mainly in areas with a clear oversupply of new properties.

As a long term investment it is therefore a very good time within the next year or so to buy a property in Spain. 

You can on this site find examples of the quality of new property in Spain.