British property firms feel the pinch in Spain

21 July 2008

SPAIN – A home on Spain’s sunny coastline is still the dream of many British people, but fears of a sustained economic crisis, a collapse in house prices, and problems securing mortgages have brought the property market to a virtual standstill.

Taylor Wimpey, the United Kingdom’s biggest property company, describes the Spanish market as "very weak".

The company’s sales in Spain, where it is offering discounts of around 25 percent, fell by 20 percent in the first quarter of 2008 compared to 2007, when they fell by 44 percent on the previous year. The company is closing 13 of its 39 regional offices and Taylor Wimpey says that the value of its assets in Spain has fallen by EUR 50 million.

Other players such as Barrat Developments and Redrow have announced thousands of job losses.

Booming house prices in Spain, particularly on the Mediterranean, were considered a secure investment for British buyers as recently as three years ago.

But a combination of factors, such as the credit crunch, negative publicity about property speculation in Spain, problems with local authorities over illegally built houses, and a stronger euro – the pound has fallen by 12 percent in the last year – have put many people off buying.

In the first quarter of the year, purchases of Spanish properties by non-resident foreigners (60 percent of whom were British) fell by 46 percent compared to 2007.

The British-based Association of International Property Professionals says in its latest report that many buyers are now turning their sights on emerging markets such as Bulgaria and Morocco.

But it also insists that established markets like Spain still have some fight in them: the country still made up more than 25 percent of British property purchases abroad in 2007 (although that figure is six points down on the previous year), followed by France (17 percent), and the United States (9.75 percent).

Some analysts are applying the old adage of ‘buy when the markets are down’ to Spain, suggesting that now is a golden opportunity, given the fall in prices.

"We are seeing a growing number of astute investors coming back to Spain because they are able to find real bargains here: in some cases, prices are down by 40 percent," says John Howell, a partner at International Law Partnership, a company with long experience in the property sector.

"Spain is no longer the market for speculators looking for a quick return on their investment, but it continues to be a good place to buy if you are looking to live here full time or part of the year."

Property analysts at another British company specialising in overseas investments, Shelter Offshore, add that the crisis in the Spanish market has presented new opportunities for British buyers looking for a home in Spain.

The fall in prices means that locations like Marbella – once considered beyond the reach of all but the super – rich-are now open to more modest buyers.

[El Pais / Patricia Tubella /Expatica]