Statistics from Kyero.com, Spain’s largest English language property portal, for Q3 2011 show that the national average asking price for property in Spain increased to €266,100 in September compared to €263,000 back in June this year, suggesting a shortage of quality properties in the most popular regions.

Of course, as prices rise and tourism booms with some Costa hotels enjoying 100% hotel occupancy over the summer months, potential buyers will be on the hunt for attractive opportunities. In fact, property professionals across the nation have already witnessed an increase in inquiries and inspection trips, with overseas mortgage specialist Conti recording a 7% rise in enquiries about Spanish property in August this year.

Marc Pritchard, sales and marketing director of leading Spanish developer Taylor Wimpey España, comments,

“The price rises in certain parts of Spain is an encouraging sign for investors with locations such as the Costa Blanca, Costa Calida, Alicante and Murcia experiencing marked price increases.

“Alicante, for instance, has experienced improvements in its infrastructure, seeing a second airport terminal open, which is always good news when it comes to attracting more visitors.”

Indeed, Alicante is one such region that has seen average property prices rise steadily since the end of last year with average asking prices of €220,000 seen in December 2010 gradually rising to €231,000 last month according to the latest figures from Kyero.com in Q3 2011.

With prices in Alicante province below the national average it is hardly surprising that it experienced the biggest number of sales to foreign buyers between April and June 2011, however of the 22% increase in Spanish property sales in Q2 2011, a total of 90,746 properties sold according to the Spanish government, Malaga hit the top spot for sales to foreigners with 1,110 sales taking place in the second quarter of this year.

Interestingly, despite the price of property in Malaga standing at €299,500 (September 2011), above the national average, buyers seem to have taken a shine to this Costa del Sol region thanks to its important cultural infrastructure and rich artistic heritage. Malaga has even been nominated as a candidate for the 2016 European Capital of Culture, destined to boost future tourist numbers as well as property sales.

Meanwhile, further statistics from Kyero’s Spanish House Price Index (Q3 2011) highlight that the Balearic Island of Mallorca has the third highest average asking price in Spain at €416,300. Perhaps the golf courses, infrastructural developments, glorious beaches, year round lively atmosphere, celebrity residents and world recognised events such as the Global Ocean Race 2011-12 account for the high asking price compared to other Spanish provinces.

Indeed the Spanish government’s 4% reduction in IVA (the equivalent of VAT) on new stock properties until 31st December 2011 offering a potential saving of €8,000 on a €200,000 home combined with Taylor Wimpey España’s additional 4% contribution is certainly a big factor at play in attracting more buyers to the country. And, whilst property on Mallorca is more expensive than many of its counterparts, savings such us this can make a real difference, offering a quality property in a popular location at a discounted price.

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According to TheMoveChannel, Murcia was one of the most searched for locations for Spanish property in August 2011 – with La Manga, Caragena and Mar Menor being the areas with the most interest.

Spanish property has always been popular with foreign property buyers and Murcia appears to be fast becoming one of the property hotspots in Spain. Given the price of the better known destinations of the Costa Blanca or the Costa del Sol, it is no surprise that investors are looking for cheaper alternatives – and the Costa Calida in Murcia is one of the areas. There is a wide variety of property available and with plenty of bank repossessed stock on offer, there are plenty of property bargains around.

According to the latest Spanish House Price Index from Kyero.com in July 2011, the average asking price for property in Murcia was €163,000. This figures is 62% below the national average of €263,000. Prices have also fallen over the last 2 years from a high of €185,000 at the end of 2009.

In the past, the Costa Calida had a massive oversupply of properties and this had a negative effect on property prices. Now, the local housing market is more stable and combines with a 50% reduction in IVA (VAT) until the end of the year, it is no surprise that property investors are keen to snap up property in and around the area.

Tourism in the area is expected to increase thanks to an approval for the Paramount Theme Park due to open in 2015. The Corvera international airport is due to have it’s upgrades opened next year meaning more footfall through the airport – again helping boost tourism in the local area. Increased tourism should help boost rental prices which in the long-term should help boost property prices.

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This IVA reduction will apply until the 31st December 2011 and will hopefully boost the flagging new build Spanish property market,

Minister of Development Jose Blanco explained that the IVA cut was to help revive the Spanish construction sector and help to create jobs in an area hit hard by the recession.

Property purchasers have welcome the news – as the Spanish IVA reduction can mean a large saving. Buying a €200,000 property will see €8,000 saved.

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Spain has long been a popular destination for British expats who have looked to the country for their retirement years. The strong demand for housing led to a buoyant Spanish property market.

However there is now a massive oversupply of new property. The Spanish government has estimated there are around 700,000 unsold new-build properties across the country, 400,000 of whch are thought to be on the coast and in the south, where the majority of expats reside. Of all Spanish properties sold to foreigners in the past few years, a third were sold to Brits.

On top of the new builds, there are around the same number of older homes currently up for sale at the moment. These depressing figures mean that some homes are now worth as little as 50% of what they were worth four years ago – and there is massive competition amongst those looking to sell.

It comes as no surprise to discover that Spanish property experts believe that the average house price is set to fall even further – with some estimating that prices will fall by as much as another 20pc.

The Spanish property nightmare reinforces the fact you should always purchase property with resale in mind. Estate agents have said that well maintained properties in prime locations will be sold quickest; those that are identikit in not-so-great locations are finding the property market difficult.

If you have cash, you may be able to pick up a bargain in Spain. With the massive oversupply of houses, now is a great time to bargain over the price. However don’t expect to see returns quickly – Spanish property in general should definitely be seen as a long-term investment and not a place to flip a house quickly.

It is as important as ever to do your research. The problem of Spanish properties being built without proper permission is thought to have affected as many as 100,000 homes on the coast so ensure that everything is 100% legal before buying.

Posts you may also be interested in:
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- A free guide to buying property in Spain

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Many overseas property investors have traditionally looked to Southern Spain when investing in Spanish property. However Northern Spain is starting to gain in popularity because it is a world away from the built-up, owercrowded areas in the South and is full of spectacular scenery, a laidback, friendly culture and fantastic food.

Santander is the capital of the area and still retains some of it’s old charm thanks to it’s former role as a summer retreat for the rich. The climate is another plus point for the area as it doesn’t suffer from the heat of the South. Summers tend to be sunny and warm without the cloying humidity and summers tend to be fairly mild. The only downside is there is more rain than in the South however this means that the countryside tends to be green and fertile leading to some spectacular scenery in the surrounding areas.

Despite not having the boisterous reputation of some of the Southern property hotspots, Canatabria is far from boring. Activities range from sports such as skiing and golf, through to more gentle past-times such as fishing and bird watching. The infrastrucutre is also good with plenty of airlines, including budget ones, flying to the area on a regular basis. There is also a 24 hour ferry that travels between Portsmouth and Plymouth making it ideal for the UK property investor.

The seafront is probably the most popular area to buy in and is also likely to be one of the better areas for rental income. However don’t expect to buy new – there are few new property developments in the area however this means the area retains much of it’s natural charm. Because of this area’s of Spain’s history of attracting the aristocracy and rich – many of whom still retain second homes – property prices are relatively high however this can be offset with slightly higher rents.

The peninsula is one of the more sought-after areas and this is reflected in the price. Any property with a sea view is also likely to be expensive. For Spanish property investors looking for a slightly cheaper option, look for villas or apartments on the outskirts of Santander which tend to be a more reasonable price. Properties which are around half an hour’s drive inland can be up to 50 percent cheaper yet still eminently rentable. There are also plenty of properties ripe for renovation and restoration so as long as the property investor is prepared to do some work, there are Spanish property bargains to be had.

Property prices in the area have not been immune to Spain’s property price problems over the last few years however the market does appear to be recovering and stabilising. Some property agents have reported that searches in Cantabria are up by about a third with many buying foreign propertys looking to buy in Europe whilst attempting to steer clear of the more overdeveloped areas.

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The potential capital gains windfall for British expats who sold property in Spain before 2007 comes after the scrapping of a discriminatory Spanish tax law.

Now with the pound weak against the euro, and the clock ticking on securing refunds, all claims must be filed by 21st November this year. The Currencies Direct experts say there is no time like the present for expats to get their refund and repatriate the money.

Mark O’Sullivan, director of dealing at leading currency exchange firm Currencies Direct, said: “With a weakening pound and a steady euro, this welcome tax refund can be maximised by British expats who can make a claim and exchange their money as soon as possible.

“When yearly interest is taken into consideration on property sold as long ago as 1997, we are talking about considerable sums of money. It will be great for expats to get their cash back, but even better if they can use the current exchange rate to their advantage and get the most from their unexpected windfall.”

Capital gains tax paid by British expats who sold Spanish property before 31st December 2006 was charged at a ‘non-residents’ rate of 35%, compared to just 15% for Spanish residents.

The Spanish government changed the law in 2007, after the EU declared it discriminatory, but an estimated ten thousand British expats had already overpaid. Now they are entitled to a refund.

The claims deadline for those who sold property between 1st Jan 1997 and 31st December 2006 has been set for 21st November 2010, under a one year statute of limitation.

Dimas Cuesta from Lexland, a law firm that has already secured rebates for British expats, added: “The legal process requires expert advice, which is fundamentally important to the chances of a successful claim. British expats looking to be reimbursed should act now, before the claims deadline.”

Expats who think they have paid too much tax on their Spanish property sale should visit www.spanishpropertytaxrefund.com and use the online tax rebate calculator to see how much they may be owed.

About
Currencies Direct is one of Europe’s leading non-bank providers of foreign exchange payment services. Since it’s formation in 1996 Currencies Direct has evolved and positioned from being an innovative service provider of foreign exchange for consumers and high net worth individuals into a dynamic and pioneering ‘business to business’ fully integrated treasury solution service provider. Head quartered in the City of London (United Kingdom) with operations in Europe, Africa, Asia and the United States, Currencies Direct is part of the Azibo Group, a privately owned investment company.

Lexland provides legal services to English citizens living in Spain and for Spanish firms in the UK. Legal services for private clients and corporations covering practically all areas of the Law are also available.

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Broadly speaking, there are three main types of benefits that UK citizens moving to Spain need to think about: benefits that must be applied for whilst still in the UK, benefits that should be applied for after they have moved to Spain, and benefits that they are not entitled to.

Benefits to apply for before moving to Spain
The Foreign & Commonwealth Office (FCO) recommends that there are a number of different benefits that should be applied for before emigration.

These benefits include statutory maternity pay, contribution-based jobseekers’ allowance, statutory sick pay and severe disablement allowance.

Winter Fuel Allowance is also available if you apply before you move however in order to claim this, you must have been a resident of Great Britain or Northern Ireland during a specific week in September of that year.

Benefits to apply for after moving to Spain
UK child benefit will still be paid however you should be paying contrinutions by being employed or self-employed. However people who were on other benefits before they moved may find they are still entitled to child benefit even without being in UK-based employment.

Maternity allowance will still be paid provided 26 of the 66 weeks leading up to the due date were spent living in the UK.

Benefits for disablement due to industrial injuries and the Disability Living Allowance, contribution-based incapacity support and bereavement benefits are all also usually paid to emigrating Britons.

However there may be restrictions on the type of benefit and how much is paid therefore it is advisable to seek professional guidance before emigrating to find out what benefits you are entitled to. The FCO is a good place to start.

Benefits that stop on emigration to Spain
Benefits such as income support, housing benefit and council tax benefit will not be available to anyone who has emigrated to Spain. Spain has a contribution-based healthcare system which means that you usually must have paid into the social security system before you can claim medical treatment. Thus, it may be a good idea to take out medical insurance.

However, if you are on bereavement benefits, you may still qualify.

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The pair of Spanish homes in question are near Albox in Almeria in south-east Spain. The local town hall had initially issued building licenses for the properties however court action by a higher regional government led to the licenses being nullified.

The Spanish homes under threat are owned by British expats who have vowed to fight for their homes. Many claim that both them and their builder were totally unaware that their building license had been revoked and that if bulldozers turn up, they will barricade themselves in their homes to attempt to stop the demolition.

The demolition order is not the first in the area – two years ago, another British couple had their Spanish property bulldozed nearby after their building license was revoked. The couple are now said to be living in a converted garage nearby and have yet to receive any compensation over the matter.

The Spanish government are currently cracking down on Spanish properties that have been built on green-belt land. Although several properties were bulldozed in early 2008, a court has ruled that demolition is illegal and so homeowners are now being notified of the issues with their houses. Around 500 miles of Spanish coastline are currently being targeted leaving many Spanish property investors concerned over the status of their investments. Celebrities and ordinary home owners alike have been caught up in the Spanish property bulldozing saga.

(Photo Credit: Mat C)

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Naturally, the problem of defaulting tenants is not one that is unique to Spanish property investors – Spanish landlords are also seeing the same issue. However many expats moved to Spain for a better lifestyle and were then bitten by the recession bug. Without wanting to lose a fortune on their new Spanish properties, they turned to the rental market in a bid to keep their property until prices started to rise again.

Half of the problem is that expat landlords are often unaware of some of the mechanisms that can be put into place to secure rental income. Without these safeguards in the rental agreement, they can be unprotected if the tenant defaults on their rental payment.

The most popular way to safeguard the rental income is to buy some form of insurance which will cover loss of rent for up to around six months as well as helping with legal costs. If the tenant fails to pay, the landlord should then look for the legal route however it can take up to 18 months for the case to work its way through the system and in the meantime, the landlord still has to pay their Spanish mortgage and associated bills. If the landlord refuses to pay for electricity and the electricity supply is cut off, the tenant is actually able to sue the landlord.

The moral of the story here rings true for any rental property, whether in Spain or elsewhere – take out insurance to protect yourself in case the tenant defaults. The insurance will not only pay for the mortgage over a pre-agreed time frame (usually six months) but will usually also include some legal cover.

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The Madrid research group RR de Acuña & Asociados has said the collapse of Spain’s building industry will cause the economy to contract for the next three years, with a peak to trough loss of over 11pc of GDP. The number of properties unsold still on the Spanish property market are said to be over 1.6 million, dwarfing the annual Spanish home demand of just 218,000. If no properties are built in the next few years, this means that it will take around seven years before the excess number of properties are sold.

Experts have said that Spain’s unemployment levels may rise as high as 25 percent. Spanish workers usually receive around half of their annual pay for 18 months if they lose their job, however the Spanish government have seen there is a potential crisis coming and has rushed in new laws giving 420 Euro a month to the long-term unemployed to help see them through. For those lucky enough to keep their jobs, many believe that wages will be squeezed down in a similar manner to the wage squeeze seen in Germany after the reunification.

Many property experts have said that now is a good time to buy property in Spain, as long as you are there for the medium to long-haul. However, we at BuyingForeignProperty.com disagree.

Yes, Spanish property prices may have dropped around 20% over the last year or so but this isn’t necessarily a reason to buy. The backlog of unsold or unfinished homes in Spain is tremendous and even without new homes being built will take around seven years to clear.

UK buyers probably represent the highest number of foreign property purchasers in Spain. However the UK is going through a housing market correction with the number of UK properties being repossessed increasing. This means that UK Spanish property owners may have a higher chance of defaulting on their holiday homes – and repossessed properties are often sold cheaply at auction, pushing down prices in the local area.

The high levels of unemployment in Spain may cause tourism to suffer in Spain. For anyone hoping to rent out their Spanish property, this will be a problem as less tourists means increased competition; and this usually pushes rents down and therefore return on investment will also fall.

The ‘credit crunch’ may also not yet be over – and this means Spanish property prices may fall even further. When the Spanish economy does recover, property prices are unlikely to rocket like they have done in the past meaning it may be several years before your Spanish property reaches the price you bought it for, let alone a price which will bring you a profit.

Overall, talks of a Spanish property recovery and a Spanish property market full of ‘bargains’ appear to be a lot of spin and a lot of false optimism. If you are planning to buy property in Spain now, it is advisable you only do so if you are planning for the very long haul – and you need to ensure you buy in a good area as backwater properties are unlikely to be a good investment. Whilst we wouldn’t say don’t buy Spanish property full stop, caution is most definitely advised.

In conclusion, the oldest advice in the book is more true now than it has ever been: Observe the market and do your research – look for unbiased opinion and don’t rely on marketing spin for your facts and figures.

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