Why Buy in Spain in 2008?

If you buy carefully selected property in the right location, I think that Spanish property could present a great opportunity in 2008 and the foreseeable future.

Predictions are that average prices for coastal properties will rise 12% this year, and for the market as a whole by 15%.

This is following the trend of the last few years; in 2002 there have been hefty gains in many places despite the pause in the market after September 11 2001. It is estimated that average year on year growth to September 2002 will have been just over 18% and 15% year on year to December 2002.

We have therefore seen an increase of over 100% in the last 5 years on the Costa del Sol.

The exciting thing is that as with any average, this suggests prices in some areas have grown even faster. And if you buy in the right areas this year, you can easily beat the averages again.

**EXCITING**
So why is the Spanish property market such a consistently exciting performer?
Since 1996 there has been a property boom in Spain, fuelled by low interest rates, low unemployment and the introduction of the Euro. The combined effect of a strong domestic market, and a buoyant second home market, has sustained appreciation in capital values.

Of course, a lot of the demand has been from abroad. It is estimated that around 1.6 million non-Spaniards own holiday homes in Spain, of which around 750,000 are British. A lot of the benefits are obvious: of course there’s the sea, sun and sand. However, as development around the coastal areas has reached its limits, continued demand has started to push property prices and values higher.

A report commissioned by the German bankers LBS, and published in October 2002, concluded that by 2005 a further 1.1 Million European Union citizens will purchase a property in Spain.

An even more optimistic forecast by the Spanish organisation ANTUR suggests an extra 1.4 million non-Spanish buyers by 2005.

**DEMAND**
I predict we’ll see this general demand from buyers across Europe increase particularly from UK and Ireland. Anticipated purchasers from these regions will be 500,000 or more per year being fuelled by, and sustained by:

1) Continued low interest rates in Europe making property in general easily affordable. The European Central Bank base rate is just 2.75% (Lowest for over 50 Years and anticipated to remain low, if not lower for the foreseeable future.)

2) The single market application of the Euro which allows price comparisons across Europe, and the practical application of facilitating and speeding up borrowing, and cash transfers, across Europe.

** COSTA DEL SOL**
I think the Costa del Sol will provide an interesting buying opportunity this year.

This is definitely a region with ‘previous form’. For example, it is estimated that prices rose by 30% - year on year - between May 2001 and May 2002, and a growth of over 8% to date this year (June 2008)

However, at the moment there are still plenty of opportunities in all areas.
o There is an opportunity to negotiate on prices
o There is an opportunity to shop around
o There is a premium value for property with unique features, if you can find them.

But don’t wait too long. Turnover of properties is quick, demand is extremely strong, Prices rises may slow but it is estimated that we should see price average increases of around 15% in 2008.

**COSTA CONFIDENCE**
Why am I so confident of the future of the property market on the Costa del Sol?

1) Facilities and capacity are to be expanded at Malaga, where a new runway is due to be operational from 2005. Ten million people flew into Malaga in 2001 - a number expected to have increased to 12.5 million in 2002. This is continued evidence of a booming area.
2) The European Union has identified the Costa del Sol as the fastest growing area in Europe, in terms of population, with the number of people living there expected to grow from 2.5 million to 6.5 million by 2011 (figures supplied by Hamptons International).
3) It is estimated that around Nerja on the Costa del Sol, prices rose by around 30% during the 1999 construction of a motorway link to Malaga. A new motorway link to Sotogrande, in the west, has recently opened and I predict that this will continue to fuel prices increases in this part of the region.
4) A new rail link from Fuengirola to Sotogrande is also being considered, which will increase accessibility - and therefore demand - on the west of the Costa del Sol.
5) A high-speed rail link is being constructed between the Costa del Sol and Madrid and should be completed by 2007. This will reduce journey times to 2½ hours.
6) A large proportion of Spanish residents have, or aspire to, a second home on the coast. Increased accessibility will increase demand from the ‘home’ market, and this will impact on all property prices on the Costa del Sol.
7) It will also make the area more accessible to Spanish holiday makers who rent property, which will in turn increase demand for properties from investors.
8) Irish buyers re-entered the market strongly in 2002, mainly as a reaction to tight fiscal measures at home introduced by the Irish Government. This trend is likely to continue throughout 2008 as the Irish Government is set to introduce additional legislation to make investing in property at home far less attractive. I predict an increase in Irish buying on the Costa del Sol, where Irish buyers already account for some 16% of all property transactions.
9) Rumors are extremely strong with regard to a new Disney theme park being built in Malaga which is again very attractive for the rental/investment market on the costa del sol.

Information provided courtesy of Andalucia Real Estate