Recovering real estate sector presents best growth opportunities

Investors seeking a bargain should turn to the Spanish property market as High levels of distressed properties and unsold stock in Spain  make it a buyer's market, it has been suggested.

According to Bloomberg reports, there are many reasons for people to consider purchasing real estate in Spain at the present time as the real estate values have now slipped to their 2003 levels, making it an enticing prospect for investors.

Commenting on the situation, Liam Bailey, head of residential research at Knight Frank, advised anyone considering entering the market to do so with caution. He said that buyers who choose a destination that they enjoy visiting on holiday to purchase a second home should have good rental potential as the property is likely to be in a place frequented by other tourists.

He commented: "There are reasons why properties are distressed. As an outsider coming into the market, it's so risky. You've got to get under the skin of the market and figure out why people are selling at a loss."

Despite the prices tumble by as much as 40 per cent in some regions, investors can still make a profit as a recovering market it is likely to present real estate speculators with the best opportunities for growth in the coming years. The news may prompt a number of individuals to look for Spanish properties with the country currently offering price reductions as a result of the market crash with the nation's Ministry of Public Works revealing earlier this year that a quarterly drop of 1.3 per cent was registered between July and September this year, while values fell 5.5 per cent on an annual basis.

Meanwhile, Adrian Warriner, managing director at Spanish-Living.com stated that for investors, the obvious advantage right now is the opportunity to buy in a market that's not far off rock bottom.

Mallorca is expected to undergo a top-down recovery in 2012

The Mallorca property market is expected to undergo a "top-down recovery" in 2012, it has been suggested.

According to Sotheby's International Realty, the high-end homes for sale on the island have performed relatively well this year and this is expected to continue next year.

Stephen Dight, Managing director of the organization commented:  "We expect a top-down recovery, that is to say continual improvement in the top-quality end of the market with a trickledown effect spreading to the lower priced property."

Mr. Dight was positive about the real estate sector in Mallorca overall, stating that its popularity with buyers from all over Europe, as well as the lack of available stock on the market are the reasons of the market resilience. Also, increased property sales and interest from potential buyers in Mallorca is helping to drive recovery in the country's beleaguered property market

Realty firm Taylor Wimpey de Espana outlined the reasons for the popularity of Mallorca as it did not suffer from the same problems relating to oversupply as the rest of the market, so the balance between supply and demand was in its favour and secondly, buyers claim that Mallorca is considered as a "superior" location to some mainland cities.

Javier Ballester, managing director of the company, said that Sales to foreign buyers have been driven by the price adjustments that the Spanish market has seen and Mallorca properties have seen reductions of up to 25 per cent. He also said that the company is looking at launching more developments to keep up with the current demand.

In related news, Spanish-Living.com website recently revealed that property prices in the Balearic Islands tend to hold up better than those on mainland Spain.

Valencia a safe choice for investment

While property prices in Spain have plummeted in recent years,   Valencia is considered to be a good option for those planning to purchase a home in the country as there are many homes in the city on the market for a low price at present.

Marc Da-Silva, founder of PropertyJournalist.com said that due to the Spanish housing downturn, there are a lot of the vendors have become desperate in their need to sell, so there is plenty of room for negotiation. He added that as it is easy to reach from the UK, Valencia is still a popular choice among Brits.  However, he stressed that price is the most important factor encouraging buyers to consider purchasing a property in this region. The city may not be the best place in Spain to buy an investment property, but it is "definitely a nice place for a holiday home".

According to a recent article in The Wall Street Journal, average real estate values in Spain have fallen by between 15 and 40 per cent since the financial crisis began. However, there is "still a sense of long-term economic stability" in Spain, which may appeal to investors hoping to pick up assets at low prices.

 Moreover, the high-end homes in Valencia, Ibiza and on the Costa Blanca have been in demand during the first half of this year. The lack of quality luxury apartments and houses should mean that prices in this segment of the market will remain stable. Property experts predict that there is also “a very positive second half of 2011" for the high-end property market in Valencia, adding that properties in this area have "great potential", with luxury homes likely to experience capital growth during 2012.

Meanwhile, Ignacio Osle, sales and marketing manager of Taylor Wimpey Espana, noted that the "global appeal" of Spain is such that individuals from everywhere in the world will be interested in sampling its traditions and way of life. The country is set to experience higher growth next year than its European rivals France, Italy and Greece - so  Spanish properties is still likely to be popular.

commercial property sector may take some time to recover

The commercial property sector in Spain may take more than a year to recover, research shows.

According to a data published by Savills, the lack of finance coupled with the wider European debt issues will slow the market's recovery. Since 2001, investment in Spain’s commercial property sector is now at its lowest level with just €1.25 billion (£1.1 billion) in deals concluded in the first nine months of 2011, Bloomberg Businessweek reported. The lack of funding from Spanish banks is deterring investors and this represents a 52 per cent drop over the same period in 2010.

Managing director for Spain and Portugal at RREEF - the real estate investment division of Deutsche Bank AG - Ismael Clemente said that Pressure on Spanish sovereign debt is pulling back investment. A lot of the big property deals that have come up this year have been canned because of a lack of financing.

 BNP Paribas Real Estate stated that the investment volumes in Spain’s retail real estate sector fell in the third quarter of 2011. Spain is also set to see a decrease in activity in hotel investment sector during the first half of 2011. Madrid has one of the lowest forecasts for activity in the retail market for both 2011 and 2012. The study found that Calle Serano/Calle Ortegay Gasset region of the city saw rents drop by four per cent between the second quarter of 2011 and the same period a year earlier.

Meanwhile, level of investment in Spain’s retail real estate sector decreased by two per cent in the three months from July to September, compared to 12 months previously.

In related news, Moody's downgraded the Spain's rating by two notches, from A2 to A1, following similar decisions from other agencies Standard & Poor's and Fitch Rating. The agency stated that this decision was partly due to "the downside risks from a potential further escalation of the euro area crisis".

The statement from Spanish government stated that it believes the credit rating cut is based more on the short-term problems in Europe, rather than the "long-term fundamental outlook" for the country.