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Landmark month for Spanish real estate may signal swing away from buyers’ market?

With two important developments in Spanish Costas selling out within a month of being offered for sale by controlling banks and the wholesale offer of €1.2 billion for 1,200 properties being rejected by a leading bank, potential international buyers remain unsure on the true state of Spanish real estate.

Increasing numbers of buyers have been seeking out Spanish bank owned bargains for 18 months and sales last year reached the dizzy heights of the boom years 2004-2007. Purchases in the first half of 2013 have accelerated right into June – despite Caixabank, one of Spain’s strongest and most conservative banks, rejecting an €1.2 billion institutional offer for a 1,200 property portfolio.

That works out at an average of €100,000 per unit, 20% below the average price obtained at one of the sell-out development, owned coincidentally, by Caixabank. The other sell-out was owned by rival Banco Popular, where discounts averaged 60% and selling price was €45,000 on average.

Caixabank’s international brokers, Walker Property Spain offered a Caixabank repossession priced at €117,000 on an upmarket development in Costa Blanca for just a couple of days last week before submitting an offer from an international buyer of €104,000.

This was accepted by the bank and the successful bidder flew home to Scandinavia happy with his bargain, having seen that the original developer was still offering the same properties at €199,000. He had managed an 11% discount from the bank’s repossession price and 48% below current developer price. Again a total discount of around 60% on his all-cash purchase and half of the average price paid by buyers from Norway, as indicated in the chart above.

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Q3 2013 Indicators on the Spain property market

  • Well located apartments priced around €50,000 to €150,000 will continue to sell readily.
  • 60% discounts last month exceeded the peak to present averages discounts of 44%.
  • Spain’s Sareb “Bad Bank” holds sub-prime property stock devalued by 65%.
  • All-cash buyers can gain further discounts from Spanish banks
  • Scores of summer deals end on 31 July 2013 and may not be repeated.
  • Mortgage-required buyers can compete better with a pre-approved mortgage and NIE.
  • Buyers should extensively benchmark likely properties before and during viewing trips.
  • Mortgages rates this summer from 60% LTV at 6.2% to 110% LTV at 1.25% first year.
  • Buyers are securing their mortgage in advance and viewing that bank’s bargains first.
  • Best overall mortgage is 60% LTV at 4.18% via Walker Property Spain brokers.

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Walker Property Spain sales manager, Ben Walker said: “The big discounts and generous mortgage deals on new, key ready villas and apartments are likely to continue to the end of July. After that we expect a swing away from the current buyers’ marke with prices hardening as indicated by that €1.2 billion offer rejection and that so many purchases have been achieved with a 60% discount – a level that buyers and sellers seem happy with.

“Serious buyers will have to be ready to grab the best of the remaining deals by having their funds and legally required paper like visas and NIE numbers organised in advance.”

A breakdown of buyer nationalities and average buying prices on Spanish Property Insight.

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