The Spanish property market is not melting down, contrary to what you may have read. In fact, the market for quality property is holding its ground, so forget that fantasy of bagging a nice villa for a song. But it is also a buyer’s market, which means bargains can be achieved, though if you want quality, you have to pay the price

The event that sparked the doom-laden headlines was a fall in the Spanish stock market on 24 May. Jittery investors dumped property company stocks, dragging down the Spanish index and other European stock markets for good measure (London fell 0.77%). The stock market has not recovered its confidence in Spain’s housing market, and most of Spain’s quoted property companies have lost 25% to 30% of their market capitalization since February.

But while the stock market hogs the headlines with bad news, what is actually going on in Spain’s housing market?

According to the Spanish government’s figures, everything is hunky-dory. Average property prices rose by 7.2% over 12 months to the end of March, and a market that was boiling just a few years ago, with prices doubling in 5 years, continuing to glide towards a soft landing.

But official figures are not the whole story and are best taken with a large pinch of salt. Data from some other sources, and the confessions of costa estate agents suggest stagnant or falling prices in many coastal areas popular with British buyers. Speculative investors have disappointed to riskier shores, buyers are fewer in number and more cautious, and a galloping construction boom has led to a glut of certain types of properties in some areas. The big picture is of a struggling market.

But there is also some good news. Although some buyers have lost confidence in Spain, there still appears to be a huge reserve of buyers if the price is right.

To understand what is really going on you have to look at market segments in different regions.


Buyer activity on the Western Costa del Sol peaked in 2003 and has been falling ever since. Corruption scandals, money laundering busts, and illegal building problems in Marbella damaged buyer confidence in the whole region, and a deteriorating price-value calculation encouraged potential buyers to look elsewhere. “Property prices are back to where they were 2 to 3 years ago,” explains Mark Clifton of the International Property Partners in Marbella.

But after several difficult years, there are now some grounds for optimism. Malaga airport is being expanded, and a new rail link under construction along the coast should significantly improve access, and boost visitor numbers. Corruption is being tackled, demand is diversified, and vendors many now realize they have to accept offers. Attractive properties in the right areas and the best developments appear to sell quickly if the price is realistic, and inland there is an acute shortage of the kind of fincas that British buyers with money are after. “Buyers today are savvy people with money, who are well informed and know what they want, not the deranged investors with 100% mortgages who inflated the bubble a few years ago,” explains Barbara Wood, of The Property Finders.

It is now a better time than it has been for years to get a quality property for a reasonable price that represents good value. But there is also still a glut of rubbish 2-bedroom flats in undesirable locations all along the coast. Steer well clear of these properties, as prices may well fall.

At the eastern end of the Costa del Sol, in Almeria province, they are building too many identikit apartments. Expect trouble in this segment, sometimes with exception of beach front apartments and other desirable locations in limited supply.


Murcia is an ambitious latecomer to the property game. There has been an explosion in the region’s property supply, with 10 times as many properties now being built than 10 years ago, much of it on golf course developments intended for foreign buyers.

In recent years relatively high prices on the Costas to the north and south drove property buyers, especially investors, into the arms of Murcia’s developers, with their easy-to-sell off-plan investments. But prices increased too far too fast, and resale prices on many projects have been dribbling down in search of demand for the last couple of years.

“Some developers do not seem to build what British buyers want,” comments Gordon of Blue Med Properties. “When prices rise, buyers expect more in return, so there is now a glut of properties on new developments that do not match buyer requirements at the price.

There are fewer British buyers around than in past years, although the ones that there seem well informed, looking for value, and serious about buying if they can find it. Overall, the number of transactions is down, and given the amount of new property coming onto the market, expect prices to remain anaemic for some years. The few outstanding developments in the region, such as Hacienda del Alamo, which tick all the right boxes for British buyers, should benefit from buyers who like the region and do not mind paying for quality.


The south Costa Blanca, centred on Torrevieja, is a great example of how to turn a lovely coastline into something closely resembling a council estate. Inland, the property market is a minefield of illegally built projects. Big estate agents on this patch happily stuff their financially-challenged clients with outrageous decisions of 20% or more in return for paying for a 200 quid inspection trip (sangria included) If it’s not cheap, then it’s not good value, and if it is cheap, then it’s just cheap. This is a down market area with a bad cement habit, so do not expect prices here to go anywhere, except perhaps down.

The North Costa Blanca, from Alicante up, is a different world, especially the upmarket area around Javea, Denia, and Moraira. The market on the coast is subdued but stable, and many vendors are no longer asking silly prices. “There are few transactions than before, but there is still substantial interest in quality properties in good locations that a core of affluent buyers wants,” explains David Mear of VillaMia in Javea. Even so, there are also pockets of overdevelopment in this area, and prices for the had to sell stuff might need to come down by 10 to 20% to find a buyer.

Inland the market for detached properties with the right characteristics appears in fine fettle. “Detached properties with a bit of land and a pool, within 1 hour of the coast and the airport, and under 300,000 Euros are selling well. I can not find enough of them for my clients,” says Andrew Lupton, head of Stacks Relocation in Spain.


Transaction prices on the Costa Brava, in particular, the Baix Emporda part of the coast (Spain’s answer to Tuscany), have been rising gently in the last couple of years. There is a good stock of upmarket properties, the market has not been flooded with new apartments, and demand is driven by both European and local buyers from affluent cities like Barcelona. Nevertheless, the market is cooler than it was, with more properties on the market than before. Buyers have more negotiating power as a consequence, and vendors will consider offers. “There are still some silly asking prices around, but the opportunities that someone will pay them are lower,” explains Louisa Grundon of local agents PCI.

Whilst Spanish demand holds up it’s difficult to see prices falling, though it is also hard to imagine prices growing as consistently as they have in recent years. There are two factors that could shake up the market. On the one hand, the TGV-fast train will soon connect Girona and Barcelona, which could give demand for property a boost, and further drive up prices. But on the other hand, if the Spanish economy turns down, local demand for second homes could dry up, pushing down prices.


In the last decade, Mallorca has consolidated its position as Spain’s top upmarket destination and the first choice for A-list celebrities. Prices are high, but buyers are affluent, and there is a large stock of high-end properties, so it’s all relative. And in a rare display of enlightened thinking for urban planners in Spain, they even launched new development on the island from a couple of years, so there has been some restraint on the supply of new properties. As with the rest of Spain, the market has cooled down, and asking prices are more realistic. “Buyers are better informed, and vendors more disposed to negotiate if they want to sell,” explains David Novi, of Novi Properties Mallorca. “The overall number of transactions is down, but transaction prices are stable, foreign demand is steady, and it does not look like prices will fall.” Mallorca benefits from diversified and affluent European demand, which reduces the risk of investing in property on the island. Menorca is stable, with low levels of new construction. Ibiza is a bit riskier, as there is a lot more property on the market, and its rave image is starting to get a bit tacky. On Formentera, owners can still ask what they want.


Recent headlines have rung the bell on Spain’s property boom, but in most areas popular with British buyers the boom ended several years ago. In place of the boom’s monoculture now we have a nuanced picture of regional market segments performing in different ways. As with all periods of change, there will be winners and losers.

The real losers are the short-term speculators who over-extended to buy off-plan for short-term gain in the final years of the boom. The lucky ones are breaking even, the rest are losing some or all of their deposits. The overhang of troubled investors will soon be gone from the market.

Potential losers include anyone dumb enough to buy an obviously unattractive apartment in an overdeveloped area in the present market, or anyone ill-informed enough to pay a silly asking price.

Loses may be more widespread if Spain goes into a construction-lead recession in the next couple of years. Unfortunately, this is not out of the question, given the amount to which Spain’s economy depends upon the housing sector for job creation and economic growth. A recession would hit Spanish demand for holiday homes hard, and prices could fall across the board. But even in this worst-case scenario, which is hard to imagine when Spain’s economy is growing so rigidly, a quality property that appeals to foreigners will suffer least, and the market will recover in due course.

Winners include anyone who bought an attractive property in a good area 5 years ago or more. These properties should still sell in today’s market for a reasonable return.

And potential winners also include anyone prepared to make the effort to find good value in today’s market. The market for a quality property has not collapsed, nor will it, so forget about getting quality on the cheap. Bargains are not about cheapness, they are of good value, and now that the boom is over, this is the best time in years to find a bargain in Spain. Over the long term, the right property in Spain should deliver reasonable financial returns, to add to a great quality of life.

Featured Image: Spain
Source by Craig Mclaughlan