12/12/2014 – Expansion
Countless opportunities have emerged in the real estate sector this year. After seven years of doom and gloom, deals in the market began to flourish. Housing sales jumped up by 13.7 per cent year-on-year in September and showed 27.024 transactions in total, reported the National Statistics Office of Spain (aka INE).
Logically, rock-bottom prices might have triggered the upsurge. According to the latest update by Tinsa Tasaciones Inmobiliarias, home values in the country dropped by 41.5 percent on average from the 2007 peaks. Slumps picture different in each region and ‘in some of them adjustment may be still pending’, Tinsa claimed.
Projections remark that prices will continue to fall in areas of a great surplus and no demand. ‘We predict that in 2015 correcting trend will prevail. In big city centers, home values seem to have stabilized and in prime areas some rebounds are expected’, said Dario Fernandez, Residential Head at JLL.
The market analysts agree that this is the right moment to buy a dwelling but it is advisable to study the situation in each region ahead. They also positively value private buy-to-lease deals. Average Spanish home (80 sqm at 1.450 euros each, at a rent of 542 euros monthly) returns 4% annually. The yield may reach 8% in line with property location and type, experts assure.
The Regions of Spain
Real estate market shows fresh traces of stabilization in metropolises like Madrid and Barcelona where huge bargains may soon fall short, above all in their centers and prime areas. In these cities, housing prices dipped by 2.2 percent from the last year, the least among other places in Spain. ‘Still, there exist some interesting opportunities in specific areas demonstrating economic growth potential and referring to pre-owned properties, but their prices are closer to reality’, points out Luis Leirado from TecniTasa.
Resales in Madrid and Barcelona became by 45 percent and 47 percent cheaper over the last eight years, informs portal fotocasa.es.
Vicenç Ramon, executive of RtV Grupo Inmobiliario, maintains the view and thinks the best deals are found in residential zones and mature neighbourhoods of both cities, where the economic level and demand are high, ensuring good, mid-term returns.
But to poach truly discounted properties, one should rush to the Mediterranean Coast, specialists encourage. Average depreciation of houses there in many cases crosses 50%. For example, in Valencia, there is an abundant supply with nice outlook due to tourist flows. The same conditions apply to some areas of Andalusia, above all to those located at the fringe of the coast.
Moreover, in these areas housing supply is usually represented by repossessed units at dramatically low prices which sometimes do not compensate for the cost of construction. In addition, lending terms and conditions are attractive, including 100% mortgages. However, experts warn that such a bargains are often situated far away from prime zones. Discounts applied by banks reach 60 percent.
Before You Buy
Analysts conclude that home buyers should take a selective approach and consider other factors before signing the contract. ‘A private purchaser should dispose of a saved amount equal to 20-35 percent of the final price, especially when it is not a REO unit, as banks usually finance 80 percent of their properties’ appraisal values. What is more, the buyer will have to bear additional costs which may be around 10-15 percent of the final price’, specialists remind.
On the other hand, the investor must be up-to-date with taxation laws currently in force, as although the new amendment which will become valid in 2015 will affect mostly the vendors, purchasers may also feel its impact in shape of transaction costs. Marta Garcia, Product Manager at Tinsa, calls for paying a close attention to energy certificate of the home, which may range from A- to G-class. An average apartment usually has a B-class (second most-efficient), meaning expenses of 400 euros annually, while if the same dwelling had a G (the least efficient), it would generate a cost of 2.100 euros annually.
Original story: Expansión (by D. Esperanza)
Translation: AURA REE