Take advantage of price reductions

Property Price Reductions

As the Spanish property market enters a significant slowdown, in which many incomplete new build developments may be affected, some buyers are already taking advantage of price reductions and making sound long-term investment choices. As always, careful thought should be applied to any purchase.

Essentially study of the market and different areas, combined with good taste and basic common sense, will all help to make a good purchase decision, which in the long term should ride through any recession. The variety of property available in Spain is vast, from fantastic luxury villas to little one bedroom characterless boxes, and making the right choice can be a difficult process. Most buyers must face up to the challenge in order to improve their lifestyle and financial security. (Playing the waiting game ‘stepping off the ladder’ has historically proven to be all too risky when it comes to taking money out of the property market, no matter what the scaremongers may say). To make the buying process  a little easier, here are some top tips for property hunters:-

Visit different areas

If you are in a position to buy, the Spanish property world is currently your ‘oyster’, but before you purchase, make sure you look 1hr North, South and Inland of your ‘chosen’ area. You may just find that you can get a property that suits you better for less money elsewhere, or even a lifestyle that suits you better for a bit more, worthwhile money. Yes you can always move again if you don’t like an area, but that will cost you around €30k in taxes and fees (more for higher value properties) and the same €30k could get you the next 10 Christmases on an all inclusive break at the Riviera Maya in Mexico. In my experience most of the biggest investment mistakes are made by people that did not search wide enough.
Price is not everything

In a buyer’s market there will be some truly exceptional (AND some not so truly exceptional) deals. Never be blinkered by price alone. Unique selling points that generally appeal to normal people and good location are the key factors that will maintain and increase value in the long term. As a simple rule if the property seems cheap, ask yourself if you would still be interested in your chosen property if the price was 30% more (even if financially you can’t stretch that far). If it still makes sense it’s time to check the structure and legal side. Cheap alone is not sufficient reason to buy and a low price could even be due to some serious legal or structural issues. Cheap + other key qualities, deserves a closer look. Many vendors are not in a hurry and will not be reducing prices, this does not mean that such properties should be avoided. For the long term, investing carefully in Spain makes sense and buyers may well have to pay the asking price to secure a good property. (Knowing whether or not it really is good is therefore an important part of the evaluation process).


Avoid basic and ugly

Unfortunately, for the first time since the 70’s some Spanish architects are churning out very unattractive ‘minimalist’ apartment blocks and higher density housing. At the same time, as the architectural mistake of Croydon back in the UK is being revamped (they are even going to reinstate the river where people once fished for trout) some Spanish town planners and Architects are making serious errors by building ugly cheap and ‘low maintenance’ housing. Typically apartment blocks are of 1 and 2 bed units, with no external balconies and grey external finishes (poor roof overhangs, flat roofs and minimalist detailing can actually add long term maintenance issues, as most features and details on buildings normally serve a valuable purpose). Working on the assumption (or pretence) that they are doing first time buyers and other bottom end purchasers a favor, developers and architects are actually devaluing the immediate area, while minimizing the long term investment potential for any buyer’s, at a time when quite realistically, the (drab and below average) property might be worth less than the mortgage in 12 months time (especially if the developer themselves drops prices of other local units or a recession results in local repossessions).

 

 

Any architect worth their salt should recognise that while grey will indeed help to hide initial staining of the exterior, it looks hideous from the start and in the wonderful Spanish climate with plenty going on outside, and of course a love of BBQ’s, everyone wants a balcony, which has been a tradition on virtually every domestic Mediterranean building for hundreds of years, forming part of the whole outdoor and sociable essence of Spanish life. Should car manufacturers use the same design and marketing principals, we will all be driving mud coloured cars with basic tractor seats and no radios.

 

 

If Spanish youngsters were interested in low maintenance and no frills, they would all be driving old Fiat Panda’s, but instead they opt (at considerable added cost and financial burden) for rather flash motors, which says a lot about their likes and dislikes. In a family focused society most youngsters will also consult their parents in a purchase decision and the opinion of a more experienced generation is likely to be one of ‘No vale nada!’ (worth nothing). In short, skimping on the extras, style and design tradition (which do not have to be expensive) is a serious architect/developer error that will serve as an eyesore for many years . If you are buying in Spain DO NOT be tempted to buy basic and ugly. Indeed boycotting such developments may help to faze them out.

Avoid buying ‘a nose’

Everyone has one, and that can be bad news when it comes to sell or rent. No matter what the developer says about land that can ‘never be built on’, it’s his business to build more houses and the chances are they will be exactly the same as yours. Many buyers on large scale developments have found it almost impossible to sell on their second hand home, when the developer is flogging new ones on mass close buy. (Again repossessions from owners or even failing developers could hit values hard in such areas). Seek out smaller more exclusive and preferably unique developments as a safer long-term bet.


If you’ve seen one Golf course you have not seen them all
Just because it’s on a golf course or one is ‘planned’ does not mean instant success. The quality of courses, attractiveness of surroundings and provision of amenities (preferably established) will add significant capital and rental value, as well as a genuine enjoyment factor to the property. An apartment at La Manga (Murcia) or La Sella (Denia) is a much better bet than one on an unfinished development in the middle of virtual desert land or backing onto a motorway. It’s human nature to be intrigued at what’s around the corner instead of being able to see all that the flat landscape has to offer from any one point. Gentle rolling hills nearby mountains or at least some form of attractive natural landscape (which developers simply can’t recreate) will add to exclusivity and make a big difference to long term value. ‘The next La Manga’ may not happen for many years. So why not buy the real thing and get on with enjoying or making money from it. As a simple rule, even if buying off plan, visit the property or plot and ask yourself if you would be happy to holiday or live in such an environment. If the answer is no, most people will think the same.
Analyse New and Resale

Don’t just focus on new or old, preferably keep an open mind to both. I personally advise most buyers to opt for a structurally sound established resale on unrbanised land, as in my experience, the buyers of such properties encounter fewer unexpected problems. Also buying new only serves to fuel the issue of over development and at the end of the day is not good when it comes to sustainability. However there are some sympathetic, well designed and built new developments that are well worth considering and I am all for the quality legal developers being supported, while the less conscientious unethical developers are left to spend more time and money in court cases and bankruptcy actions than on their clients properties. Remember in the current market, some larger scale newbuild projects may take years to complete, or potentially never actually be completed as planned.

Re-sale properties over 10 years old may prove to have stood the test of time and will often feature extras that have been added since completion. ‘Teething problems’ may have also been ironed out, legals are more likely to be in order and expensive landscaping and local amenities may be well established. (Replacing two bathrooms and a kitchen along with in and out re-decoration for the average re-sale villa will roughly equate to the cost of landscaping and planting the garden of a newbuild). Contrary to common belief the 10 year Decenal ‘Guarantee’ for newbuilds can be very difficult to claim on and generally only covers elements that affect the structural stability of the building.


Use a good financial position to your advantage

If you have a deposit and cash available for the purchase, stress this to the agent. Make sure you have 10% in Spain (in a bank and not in your pocket!) so that you can secure a bargain if it crops up. Despite a downturn there are often still a number of buyers fighting over the very best properties. ‘10% next week’, when compared to a delayed mortgage agreement may get you a relatively easy 5% reduction off the price. ‘Distress Sales’ which often represent the very best deals, are normally subject to a quick transaction. In short, if you are not in a good position to buy, you are unlikely to be able to drive a hard bargain or take advantage of a genuine opportunity. Some agents are fairly desperate for sales too and more likely to give you added service and attention if they know you are in a good position.

 

If you can’t purchase immediately, you can still do a deal.

If you are sure you have found your ideal house, don’t miss out just because of time delays. Many vendors may extend the completion date by weeks or months, if for example you pay 15% deposit instead of the standard 10%, this way the property does not cost you a penny more, but you have more time e.g. to sell up in the UK. Alternatively you might consider literally buying time and offering more than your competitors subject to extended completion terms.

Don’t get personal

Even if you start to despise the vendor or agent during the transaction. You should only be exiting the deal if the property is not right for you. Don’t let the personalities or actions of other parties result in the loss of a good investment opportunity. If you are a good negotiator, the only time you should be walking away is just after your initial offer following which, (if the structural and legal issues prove to be sound), you are best to stick with it and make that house yours!

Seek independent professional advice: Yes ‘I would say that’, I’m a Surveyor, but I have never encountered a client that regretted having a survey or using a thorough independent lawyer. Knowing the structural condition and legal status of a property can help you make the right offer, avoid a liability or even jump at a true opportunity.  ‘If only we had known about you before’ is the most common statement I hear from clients that consult me post purchase. In house developer/agent solicitors are not all bad, but it makes sense to appoint your own lawyer. Bank ‘surveys’ are valuations by a Spanish ‘Tasador’ (a valuer trained in valuation and not structural defects), involving around 20 minutes at the property, whereas a structural survey will involve 2hrs+. Further to this a bank valuation may well not highlight significant structural issues. If the bank can recoup their money on repossession, they may still grant a mortgage on a property with serious damp, insect infestation or subsidence, which has probably gone unnoticed. Don’t let the bank or agent ‘sort all that out’, good agents will be able to point you in the direction of truly independent professionals.

Remember with all investments, the most astute people entering the market buy in the troughs and not on the peaks. A property market downturn will see some losers but presents genuine opportunity for most buyers.

 


NB:- Information for advice purposes only. Proper legal procedures should be followed when carrying out all purchases.  Information provided by Mark Paddon BSc Hons Building Surveying. MCIOB. Structural Surveys in the Valencia Community. WWW.SURVEYSSPAIN.COM T: 962807247 M: 653733066 . Free 17 page  property buyer’s guide and free initial advice available via e-mail request to This email address is being protected from spambots. You need JavaScript enabled to view it.">This email address is being protected from spambots. You need JavaScript enabled to view it.

ã Mark Paddon 2008

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