Spain property market still attracts investors

Spain property market still attracts investors

Spain property market still attracts investors

Foreign investors continue to snap up Spanish real estate assets, even though the market is beginning to show signs of a fledgling recovery. So, are there still bargains to be had? There certainly are in and around the country’s coastal areas, where prices took the worst beating when the massive property bubble burst in 2008. Construction on thousands of houses on the coast abruptly came to a halt as the crisis bit hard. It also took its toll on foreign owners who found themselves unable to pay their mortgage and had to abandon their homes.

However, Spain’s return to economic growth in the second half of last year, coupled with another record-breaking tourism season, has rekindled investor confidence and interest in coastal properties. The government’s decision to offer foreign buyers residency permits has also proved a successful sweetener for wealthy Russian and Middle Eastern investors.

 

FOREIGN BUYERS ON THE RISE

As Spain’s property sector slump deepened, US hedge funds and private equity firms were first on the scene looking for distressed assets at bargain basement prices. These so-called “vulture funds” picked up office and residential properties in Madrid and Barcelona as well as some of the dud real estate loans and assets held by Spain’s bad bank Sareb. They also bought up the property management businesses from local lenders like Banco Popular. This frenetic activity, and the country’s improving economic outlook, has fuelled an uptick in prices in central regions.

Housing prices rose 1.15 percent in the third quarter from a year earlier, according to data provided by Spanish property registries. Since their height in 2007, prices have accumulated a 32 percent decrease. Home sales transactions also improved in the third quarter, up 1.4 percent from the second. Andalucia, in southern Spain, clocked up the largest number of home sales in the third quarter, followed by Valencia, Catalonia and Madrid. The purchase of homes by foreign buyers accounted for a record 13.1 percent of the total.

 

CHANGING INVESTOR PROFILE

But the profile of these foreign investors has changed. There are now more private individuals buying homes on the coast – or on one of the Spanish islands like Ibiza – to have as a second home or to rent. Against a backdrop of sustained economic growth, the residential rental business is an opportunity not to be missed. In 2015, a slew of properties on Spain’s east coast is expected to be sold off by various banks, which repossessed the homes during the crisis. So there are some juicy pickings up for grabs! For information on investing in Spain, contact corporate law firm, Argali Abogados.

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