Nine reasons why . . .
3. STABILITY AND GROWTH
Where once was brittle order, imposed by a military dictator shunned by the rest of the continent, is now a strong yet flexible democracy; an important part of the New Europe. This is a politically 'safe' place to invest and live in.
It is also a financially stable area. Whilst it may no longer be possible to ride a wave of dirt cheap property prices and gigantic property value increases, the days of the 'skeleton coast', of half-completed building frames abandoned in a property slump, are also long gone. What has replaced this speculative roller-coaster is development, on an impressively large scale, fuelled by sustainable market demand, fiscal prudence and legal safeguards. The latest figures show a 28% year on year increase in resale property prices in Malaga province. 40% of all dwellings built on the Spanish Costas were bought by Britons.
Property Prices
Property prices in Andalucia have seen very significant rises over recent years, in line with Spain as a whole. Although prices may have undoubtedly 'settled back' over the last twelve months, a period of mature consolidation is no bad thing - more price realism on the part of developers and vendors means that there is better value for canny purchasers and investors.
'Settle back' in Andalucian terms still means an annual increase in value of between 15% and 20% however. According to the latest studies, people who invest in property on the Costa del Sol can still expect excellent value for money - 10% more than the average return on property in Spain.
Another interesting statistic is that prices of property in coastal areas are still much lower than prices in the major Spanish metropolitan areas (Madrid or Barcelona, for example). And where Malaga saw a property value increase of 17% in 2004 (figures from TINSA) Madrid saw 26% and Barcelona 21%. So, far from Costa del Sol property prices being unrealistically high, or inflating out of control, they remain quite sensible in comparative terms.
Click here for property price reports by TINSA and Kyero [each opens an Acrobat document] [The Tinsa report is the latest English language one available - mid 2004] [The Kyero - 2006 - report is 324Kb and may take a short while to download]
Spain saw very significant property prices increases over the last fifteen years - 284% between 1987 and 2002, prices doubled in ten years and increased 149% between 1997 and 2004 - the second highest increase in the EU after Ireland. When the euro was introduced in 2002 experts forecast a huge increase (as 'hidden' pesetas were spent and legitimised) followed by a huge slump (as the market corrected itself). This just did not happen - values have continued consistently to rise at 15%-20% each year. Once again one might say that the Spanish property market demonstrated both its attractive growth potential and its solid dependability in the face of both hyperbole and gloomy prediction.
It is true that Spanish property values are at an all-time historic high, taking into the ratio between average prices and average incomes - higher than other EU countries. This does necessarily mean, however, that either Spanish or Andalucian properties are "overpriced". The reliable indications are that current prices are reflecting both demand and capacity to pay - this is true of Spain as a whole and in the particular market situation in Andalucia. It is also the case that the market is continuing to strengthen (in spite of the relative corrections of the last year or so - indisputably evident, but not part of a significant long-term decline) on a foundation of increasing demand and expenditure on high quality infrastructure and recreational projects.
The RICS Report - Low Interest Rates
A comprehensive Royal Institution of Chartered Surveyors report into the European housing market, published late in 2004, concluded that - unlike in the UK - low interest rates in Spain have helped to maintain the rise in housing demand, boosted by a steady increase in mortgage loans. Real mortgage interest rates in Spain were negative last year, averaging just 3.5% in autumn 2004, and rates are currently 4 points lower than mortgage rates in the UK, which is one reason why more and more British buyers are choosing to take out a local Spanish mortgage.
Mortgages and Interest Rates
80% of Spanish households are owner-occupiers, one of the highest rates in the world. Only 20% of these owner-occupiers have an outstanding mortgage on their property. The value of the average property is 97,300€ though this figure rises to 116,100€ when limited to owners between 45 and 54 years of age.
According to a report on consumers and the Spanish economy which was published by Caixa Cataluyna in October 2004 the fact that 80% of Spanish homeowners own all of their property compared to just 20% who are paying a mortgage, means that too much emphasis has been put lately on the financial load of buying a house in Spain. The authors of the report do not expect the property market in Spain to suffer a crisis in the near future, and they think there is no reason to expect demand for mortgages to fall either.
According to a report released by the Colegio de Registradores de España (the Spanish association of house and land registrars), the average mortgage in Spain (111,351 euros) represents a significant 83% of the total value of the property purchased. The average mortgage in Spain extends for 24 years and represents 42% of borrowers' wages. At the same time, the Mortgage Association of Spain has published new figures showing mortgage defaults have dropped to below 0.5% - a record low.
The fact that the overwhelming majority of properties owned by Spaniards are mortgage-free provides considerable stability to the Spanish property market. It also generates considerable resistance to any downward pressure on prices. Even though the 20% of properties that have mortgages, have fairly significant mortgages, the very low level of defaults shows that despite property price increases the ability to meet mortgage payments is more robust than ever.
