The residential property market in Spain is set to bottom out next year and see a 2% rise in prices in 2016, according to ratings agency Standard & Poor’s.
It is well documented that the fall in prices has been slowing in recent months and the agency is predicting that prices will fall overall by 2% this year compared with 4.6% in 2013.
Property prices in Spain have fallen around 30% since the economic downturn hit the country’s real estate markets in 2008.
S&P says that the positive outlook for the property market is down to a faster than expected recovery of the Spanish economy and a subsequent quicker fall in unemployment.
According to the Spanish Central Bank the country’s economy grew by 0.5% in the second quarter of 2014, the fastest rate in six years, and the latest job figures show that 192,000 people had joined the country’s workforce in the 12 months to the end of June.
Experts say there has been a change in trends in the Spanish property market in the last 12 months with the arrival of British and US property funds who are taking advantage of the offers in the Spanish property market.
But the market is unlikely to recover everywhere at the same pace. It is predicted that properties on the coast, including areas popular with second home owners, will see prices rise first.
However, according to S&P the long term recovery of the property market could be kept on a leash by the high number of properties on the market in Spain and the country’s population decline could also put a brake on the long awaited recovery.
S&P said in January that Spain’s housing market was overvalued by somewhere in the region of 12% to 20%.
According to Mark Stucklin of Spanish Property Insight, Standard & Poor’s is a bit more pessimistic than other agencies, who believe a recovery may begin as early as 2015.
Several reports in recent weeks have spotlighted the slowdown in the price declines, prompting different analysts to predict the bottom of the market may be nearer.
LINK TO BESPOKE SPANISH VILLAS ON THE COSTA BLANCA - VILLAS
A lot of investors simply rely on the price given to them by the agent or developer. But developers can overcharge, they over-design buildings in a bid to win awards and they are forced to overcharge for the buildings simply to break even.
Some savvier investors may base their investments on a search on one of the many
internet property portals to find the average prices for similar properties in the area.
The more experienced might also use sites like Zoopla to see how properties have been amended, re-listed, re-valued since their original posting.
However, these sites only give us the values that the vendors and the estate agents think that the property is worth. This isn’t reliable as the vendor clearly wants to
obtain the maximum price, a strategy supported by the agent who normally works
on a commission basis.
There is only one way for investors to ascertain a property’s value which is truly safe and that is to find a properties residual value. The residual value is based on the amount of net rental income it can generate – anything above 6% looks like a
For example, if a property brings in £6,000 rent per year after all costs have been
taken in to account, that £6,000, based on a 6% net yield would give the property a value of £100,000.
That £100,000 would be the Residual Value of the property and it should be the focus for every investor going in to a deal. But at the minute investors ignore the residual and rely purely on the capital growth of a property which is hopelessly optimistic considering the market place at the moment.
Despite the residual value of a property being £100,000. The investor may pay £125,000 believing that the value of the property will increase and they can sell it for
£150,000. But then if property prices start to fall slightly, he’s suddenly in
negative equity and then the only price someone would be willing to pay for the
property is the Residual Value and the investor will have lost £25,000.
The key to real successful and safe investment is how you derive the 6% net yield which you have used to establish the property’s residual value. By working out the 6% net yield using below market value rent it means that the investor will not have
to contend with tenants struggling to pay rent. As rent continues to rise, there will always be a demand for properties charging below market value rent.
First time buyers will be queuing round the block to save a £100 per month, yet the
investor is still left with a 6% net yield because they have bought the property
at residual value.
It also means that there will always be savvy investors looking to purchase a property at the residual value because they are not only purchasing a strong income stream, but they are purchasing a property at a price that will not be affected by market fluctuations or crashes.
If the property market was to fall again then the investors who have invested
in residual value will be protected from the fall in house prices and when
houses start to get repossessed and more people are forced in to the rental
market, then their yields will go up even though they are still charging below
In the end, everybody will be relying on residual property valuations. It’s inevitably in the future but there’s no reason why investors can’t take advantage of them now.
Invest in Student accommodation with unit prices on average 30% below comparable units and a net rental guarantee of 8% for 2 years - LINK
Families' budgets are squeezed by increased utility costs, soaring food prices and salary freezes.
Five million households currently face increases in their fuel bills of up to £100-a-year as SSE, the UK’s second biggest energy company after British Gas, said that from mid-October the price of an average annual dual fuel bill will rise from £1,172 to £1,274. Other companies are expected to follow suit.
As well as energy bills rising, mortgage payments are set to increase as other lenders follow Santander’s suit in upping its Standard Variable Rate (SVR).
Many individual salaries are being frozen and one in ten employees is being forced to
take a pay cut.
With the combination of increased utility costs, soaring food prices and a
compounding squeeze on salaries, Moneysupermarket.com has found that 80pc of
households are on a financial budget irrespective of income, demographic or family set up.
In order to ease the financial burden many Brits making extensive cut backs where
they can. Almost half of us have had to use credit in order to pay utility bills, while a 25pc of adults have said that they are forced to rely more on credit cards to ensure that the regular household outgoings are covered.
Clare Francis financial expert at Moneysupermarket.com comments: "The fact a rise in outgoings of £50 or less would tip a third of Brits to ‘financial breaking point’ speaks volumes about how difficult people are finding things at the moment."
Article published in the Telegraph follow the link to read the article - http://bit.ly/OXKL1M
The credit rating agency, Standard & Poor’s, believes that the European
macroeconomic crisis will not extend beyond 2012, which will result in a “significant recovery” of European real estate markets in 2013.
“Standard & Poor’s Ratings Services believes that the macroeconomic crisis may not extend beyond 2012. We still expect a new recession in Europe, although we believe it will be mild, with a gradual return to growth thanks to the growing demand from emerging countries, the strength of demand in developed countries and the restoration of investor confidence,” said the company.
According to El Economista, the baseline scenario of S & P considers there will be a flat growth of the economies of the eurozone as a whole, with growth of 0.5% in France and 0.6% in Germany, while in UK the gross domestic product (GDP) will grow by 0.5%.
Stable outlook for construction
“With respect to the housing market, we look forward to seeing the beginning of a significant recovery in 2013, which will improve macroeconomic conditions and reduce unemployment,” said the agency, which they hope “will boost consumer demand and the valuation of real estate.”
As economies start to recover now could be the time to invest in property!
Contact me with your requirements be it a second home or investment property and I will try source it for you - CONTACT
Investment Property Worldwide will try bring to you a diverse range of property, investment news.