It may be winter but things are looking brighter for the Spanish property market for sure. Years of darkness are over and we are now beginning to see prospects of a bright future of sun-filled days. This projection isn’t based on some friends who were recently buying a villa in Spain and are now planning a comfortable life in the sun. We’re talking more generally about the Spanish property market, which saw a crash in 2007 after the financial crisis, and is now finally showing signs of recovering. Real estate agents Costa del Sol say that it is a well-known fact to many that Spain has had a particularly bad time of the recession in the last decade. In Spain the residential real estate bubble caused prices to rise by 200% from 1996 to 2007, which meant the damage and consequential suffering was much greater than that experienced by other European countries when the crash hit. But it is certainly not all doom and gloom, now is that time to start looking for villas for sale on the Costa del Sol and here’s why.
New figures from the Spanish Registrars’ Association show an increase in national house prices by 6.6% from September 1014 to September 2015. While other sources of house price data tell a different story, such as data from the notaries that claims a 3.6% decline in house prices for the same period, most sources shown an increase. The relative indices can be seen on a useful house price index tracker compiled by Spanish Property Insight. According to the Spanish Registrars’ Association, the 92,786 residential sales in the third quarter of this year represent an increase of 16.6% on the previous year, a promising growth and a sign that the property market is on the road to recovery.
Brits are taking advantage of a strong pound
The same report also shows us that 13.52% of the sales in the third quarter involved a foreign buyer. This is an increase in foreign demand of 20% on the same period in the previous year, which compares with an increase of 12% in local buyers. The far greater proportion of foreign interest was from British buyers, which make up 23% of the total. A fact that is probably due to the strength of the pound against the euro. At the time of writing, one pound is equal to 1.42 euro, as compared with 1.26 euro one year ago. This is after a seven-year period in which the pound has steadily increased on the euro since the crash, a clear advantage for Brits buying in Eurozone countries.
One of the reasons for the recent growth in the Spanish property market is changes in Spanish mortgages that make it easier for investors. The 12,048 new mortgages granted in September this year showed a 17.4% increase on the previous year, and a new interest in mortgages in Spain. There has been a slight increase of 0.1% in the average loan capital offered by banks to €122,993. In September 39.7% of property sales used mortgages, of which an average 77.1% of the purchase price was covered by the mortgage. Potential property owners in Spain should also be reassured by the recent news that the EU intends for banks to return excess mortgage payments to borrowers if minimum interest rates are stipulated in their contracts.
With the recovery of Spain’s economy and the increased demand for property in local and foreign markets, it would seem that now is the right time to make an investment in Spain. But what are some of the considerations that need to be made before making the plunge?
In need of professional help?
Finding a lawyer specialising in Spanish land law (urbanismo) is recommended, and buyers should check that the lawyer is registered with the local bar association (Colegio de Abogacia). It is also advisable to check that the lawyer has professional indemnity insurance and to take independent legal advice before signing papers or making payments. Non-Spanish speakers may also need to enlist the assistance of an independent translator to make certain that they are up-to-speed with all the ins-and-outs of the transaction.
Buyers are required to register the property, a service that may be provided by a notary for a fee. When buying a property the services of a notary are not a legal requirement, but may be made an obligation by mortgage companies.
For most foreigners buying property in Spain it makes more sense to choose a mortgage lender in Spain. Having the property and the mortgage in the same currency can avoid possible losses through currency exchange. Spanish interest rates are also currently lower than other countries such as the UK. Also, foreign mortgage lenders are less likely to be familiar with the Spanish market and less willing to offer a mortgage on a property in a different country.
A safer market for foreigners
There are more than 200 banks and savings banks (cajas) offering mortgages in Spain. Since the crash, Spanish banks have undergone IMF-led reforms that have meant more regulation and less lending. This means that although the interest rates offered are not as low as they used to be, the whole process is safer for the buyer than it was before 2008 when property scams were not unheard of.
Mortgage lenders in Spain have recently become more flexible by offering interest-only mortgages in which borrowers only pay interest on the loan and return the capital at some point in the future. They also now have expanded the lifetime of the mortgage to 30 years or longer, where previously only 10 to 20 year mortgages were available.
For more advice on Spanish mortgages it may be useful to refer to the guide offered by Spanish property insight, or seek advice from an independent mortgage service.