We all know houses are cheaper here than in northern Europe and that prices crashed quite spectacularly in 2007 with the worldwide recession and have been falling ever since. However are house prices going to continue falling? If you buy a house now will it be worth less in a year’s time?
If you looked at the facts, unemployment in the Canaries is currently sitting at a cool 33% (60% for the under 25s), you’d probably assume it is still not a great time to buy a house. However recently there have been whispers of a recovery and people are starting to talk about an imminent end to the crisis. So does this mean that now is the time to buy your house in the sun?
The raw data
Although local estate agents and even the guy next to you in the bar will have their opinion, there’s nothing better than a load of numbers to tell the story.
Every month Tinsa, the property valuations agency, publish the trends in house prices throughout Spain, split into regions. If you bought your house in 2007, the latest report will make for difficult reading. Prices now in the Canary Islands are a huge 31.1% less than they were when you bought it. However there is some good news on the horizon, in the last year prices only dropped by 2% and at certain points during 2014 prices actually increased a little for a while. And while prices are still decreasing, the decrease is much lower than previous years seemingly showing that the slump in the Canarian property market is bottoming out and in the near future prices may actually start to go back up again.
In fact Tinsa states that in 2015 people should expect an annual price change of around 0% throughout Spain. Although the Canary islands historically do not exactly follow the price trend in Spain, they tend to be very similar, so maybe 2015 is the year to start looking to invest.
Many believe that the recent turnaround is mainly driven by foreign property buyers snapping up bargains while they’re available. This could well be true, yet, while the world’s media would have you believe that Chinese and Eastern European oligarchs are buying up western Europe, in Spain, the top buyers are Britons who accounted for 15% of all sales to overseas investors, followed by the French (10%), Russians (9%), and Belgians (7%), according to Spain’s society of property registrars. In the Canary Islands a whopping 34.34% of property was bought by foreigners in 2014.
What does this mean? Well, it could mean that house prices in the rest of the world are too high (have you seen how much a 1 bed flat in London costs now?) or it could mean that confidence has returned to the Spanish property market and savvy investors know a good deal when they see one.
“Hang on” I hear you say, “My house in San Agustin has hardly changed in value since 2007 and recently someone offered me more than I paid for it 7 years ago.” This may well be true as the South seems to be more recession-proof than other areas on the island and prices don’t tend to fluctuate as much due to the high demand from foreign investors. However house prices have still been affected and the little price increase you saw last year may well be even more this year.
Where to get a bargain
So according to many we’re at, or soon to be at, the bottom of the house market price cycle, but where can you find a bargain that will actually make you money over the next few years?
Obviously estate agents are a good place to start and will be the preferred trusted source for most. However there are a few other places you could look too. Firstly you could check the housing websites like fotocasa.es and segundamano.es for a private buy where you can often negotiate significant discounts, however never buy directly without a good lawyer. If you’re feeling brave you could also try to pick up a house at auction. Because of the high number of unemployed and recent falls in salaries, if you have the cash up front available there are plenty of bank repossessions around that are often well below market value. However buying at auction is not for the faint hearted and you should always seek good legal advice beforehand.
So, the data says property prices may well have stopped falling, foreigners are buying up over 1 in 3 houses in the Canaries and Mogan still has more days of sun than any other place in Europe. Whilst we cannot recommend you go off and buy a house now, it may be the time to really start looking for your dream house because this time next year it may be a little more expensive.
Note: If you are considering purchasing property in Spain, always seek legal advice from a reputable lawyer.