Spanish property bargains window for 2010

There is still a “window of opportunity” for some bargain property purchases in Spain as that country’s economy, like that of the UK, shows little sign of recovery at the start of the New Year.

Just two months ago the European Commission assessed the fiscal state of play and stated: "Spain's weaknesses over the developing crisis reflect mainly the reversal of the continuous domestic demand expansion of over a decade, which was associated with high indebtedness of the private sector, large external deficits and debt, an oversized housing sector compared with the euro area average and fast rising asset prices, notably of real estate assets."

Some economists are likening the parlous states of Spain and the UK, the only major economies still officially in recession and deciding that “recovery over the next 12 months will be gradual and drawn-out”.

While the UK housing market remains depressed, due to a lack of buyer confidence and shortages of good mortgages, the reverse is true in Spain. There are many bargains as a result of the recession and this means loan to value deals of up to 80 percent. Many properties are now owned by Spanish banks who just want to get back any outstanding mortgages or the loans to developers and house builders.

House sales in Spain are down 25% from their peak in 2007, but that is still a whopping 300,000 a year and with some 75,000 Spanish bank repossessions dripping into the market place there are likely to be real bargains around during 2010.

There are many Spanish buyers snapping up these bargains because research (see chart) shows, despite the recession hardships, they are pretty hopeful at this point that the worst of the economic crisis is now behind them. Confidence may not be not back to its old pre-crisis level, but it is now well up from its July 2008 low point.

The Russians, Scandinavians and Dutch are in there too, often with ready cash, because they still believe Spain offers good medium term investment returns as one of the world’s leading tourist destinations and is a great place to live for those planning retirement or full-time relocation.

Brits share those views of Spain, but seem to be holding back from the bargains on offer because they somehow think prices will drop even more. Some prices probably will go down further, but only on property in inferior locations or condition. The best deals, as ever, are based on the old maxim, “Location, location, location” and these apartments and villas are going first, often with several would be buyers chasing the same bargain.

Late last year some newly confident developers actually increased prices of their key ready homes after securing a succession of sales. Sometime in 2010 this demand will start to move key ready and repossession prices upwards, widening the gaps between good, bad and indifferent properties and the window of opportunity will start to close…