Green shoots of recovery?

Green shoots of recovery in Spain properties market..

Last month, I talked about there being too many overpriced properties in today’s market. As we move into 2010 there seems to be some evidence that owners are beginning to reduce their asking price. This may be one of the reasons that the general level of enquires for properties in Spain seems to be on the increase.

Kyero, one of Spain’s major property portals reported that in the first week of 2010 compared to the same period last year:

Overall page views were up by 46%
Unique visitors were up by 63%
Property page views were up by 47%
Property enquiries were up by 34%

OK, we don’t know the actual numbers that are being compared here, however, Kyero probably have in excess of 50,000 resale properties on its site so it can reasonably be expected that the numbers are significant.
If this trend was to continue throughout the coming year, then perhaps we are going to see some green shoots of recovery.

Exchange rates
The demise of the value of the Pound against the Euro is something that you hear many people talking about. There seems to be a general consensus that it is putting off potential buyers here in Spain because they will have to pay more in Pounds for the same property that has been on the market for a couple of years if prices do not come down.

The good news is that the Pound seems to be making a little headway recently, with some foreign currency brokers reporting a significant increase in clients converting Pounds to Euros. What is unclear though, is how much of this increase is going towards the purchase of property in Spain. It could be that folks are taking the opportunity to replenish their living funds whilst the exchange rate is little higher.

If you are thinking about selling and are not in a rush, then you might want to wait and see what happens. However, if you need to sell fairly quickly and plan to exchange the proceeds of your sale into Pounds then you may be able to use the still relatively strong Euro to your advantage.

Here are a couple of examples that explain how it may work.

Owner A bought their property in Spain for 240.000€ in 2007. At an exchange rate of 1.45€ it would have cost £165,500. A change in personal circumstances means that they need to sell as soon as possible. Unless the property is priced below 200.000€ it is unlikely that they will receive many enquires, a reduction of over 20%.

Assuming an exchange rate of 0.90€ to £1.00, the owner could reduce their asking price to 184.000€ and still break even in Sterling. That is a 23% reduction in the price that they paid for their property, however, given the recent worldwide slump in property prices, to break even could be seen as an achievement.

This simple illustration shows that although there has been a significant drop in the value of the pound against the euro, it can work very positively for you when it comes to deciding how much to ask for your property.

For those who bought when the exchange rates were even stronger (euro for pound) then there is a possibility that they could realise a profit. In this next example, Owner B purchased their property in Spain in 2001 for 210.000€. At an exchange rate of 1,65€ to £1.00, they would have paid £127,300 in Sterling. At the highest point of the market in 2007, Owner B´s house was valued at 335.000€. In today’s´ market however, a realistic asking price today would be more in the region of 250.000€.

Owner B also wants a quick sale and finds a buyer at 235,000€ - a 30% reduction of the 2007 market valuation. At an exchange rate of 0.87€ to £1.00 that would give them £204,500, a profit of just over £77,000.

These 2 examples go to show that there are some ways in which sellers can entice more enquires for their property without having to sell at a loss. That can’t be bad in the current market.

Next month, Should I buy a new property or go for a resale? We’ll be taking a look at the pro’s and cons. If you have any questions or items you would like to share with other readers you can contact me on info@remove-thissmartmovespain.com

Stuart