Due to many years of sharp price rises in Spain prices now have levelled off. This is due to a number of reasons but the main ones appear to be the following:

1. It is generally viewed that the prices of properties in Spain are now high and so buyers now longer see the possibility of making large gains over the next few years. This has taken out of the market the speculative buyers who thought they could make quick profits and often intended to on sell new properties before completion at a profit.

2. The remainder of UK buyers who are genuinely interested in buying a holiday home or a permanent home in Spain are now being affected by a number of negative factors:

(a) They fear that prices may start to fall back and so many may be delaying Spanish property purchases to a future date when they believe they may be able to buy at a lower price.

(b) Some see the news on the TV and in the papers of some foreign buyers properties being demolished and become scared of buying in Spain, and therefore look to another country.

(c) Others may need to sell a British property first and in order to finance their Spanish purchase and due to the British property market cooling off may be finding more difficult to sell their UK property.

(d) Mortgage rates in Spain and the UK are higher than they used to be and so along with the credit crunch caused by the US sub-prime loan crisis people are finding it more difficult to arrange the finances to purchase a Spanish property.

(e) The Spanish authorities have allowed developers to build a huge number of new developments in Spain. This flood of new properties on the market mean that there are now far more properties on the market than buyers and this makes it difficult for prices to rise, as well as encouraging sellers to reduce their sale prices in order to get a buyer.

These factors understandably scare potential buyers but should not prevent people from buying in Spain. In order to be safe buyers should be very careful to look for properties that they buy with a negotiated discount so they can be sure that they are not buying above the market rate. They should buy properties in the sought after areas of Spain which have good local facilities and infrastructure so they can be sure that people will always buy in those areas.

Positive Factors for the Future

This will increase the probability of gains in future years and minimise their risk. They should only buy a property if they are going to actively use it or are sure they can rent it out. They should not buy a Spanish property at the moment only with the objective of making a quick capital gain as this is very unlikely at the moment. Although they should be confident that over the long term the values of properties in Spain will continue rising and so should prove a good longer term investment.

In the Costa del Sol Malaga airport due to increasing numbers has been struggling to cope with 12 million passengers a year. The new terminal and second runway being built are designed to cope with an expected increase over the coming years up to 20 million visitors a year. Also in addition, the high speed train being extended to Malaga from Madrid will cut the travelling time down to less than 2 ½ hours.

A new railway line is going to be built along the coast from Malaga to Algeciras (near Gibraltar), which will for the first time make the coast between Fuengirola to Marbella and Estepona accessible by train with new stations all along the coast. This extensive investment will expand the already good communications infrastructure and make the coast even more attractive to buyers, and this only have a positive effect on property prices for the future. Also the increase in low cost airlines flying from the UK to smaller regional airports in Spain is opening up new “quieter” areas of Spain which have far lower property prices. These are just a few examples of the improvements to infrastructure and communications that are happening all over Spain.

The last property boom ran from around 1998 to 2003, and so for the last 3 years the Spanish market has already been “cooling off” taking pressure out of the potential “bubble that had been building up to 2003. During the last 3 years developers and private sellers of resale property realised that they would have to offer their properties at more realistic prices if they were going to find buyers. Therefore there has been a flat market and sellers have been forced to market their properties at more realistic prices. Sellers are also more likely to be responsive to negotiating discounts on the properties that they are selling. The market has already been correcting its, and in the places where developments or properties have been overpriced they have been adjusted down accordingly.

If you are looking to buy a property to use and enjoy as a holiday home, or if you are moving to Spain, then investing in a Spanish property should be a good investment for the medium to longer term. Of course you should research carefully the current market prices in the areas you are interested in, so you avoid paying above the market rate, and negotiate a discount where possible. Now Spain is very much a “buyers’ market”.