If we go back to early 2000, during the years before the housing bubble burst in 2007, in the vicinity of 700 000 homes year were being built in Spain. It was a time of high speculation, driven by low interest rates and ever-rising property prices.
From August 2007, there was a slowdown in demand, resulting in an over-surplus of housing stock that has become a major burden on the balance sheets of banks and savings banks – the main financing entities of the projects.
Today, a new scenario has opened up for visionary overseas investors. From an investment point of view, the current situation provides three benefits:
A large quantity of brand-new finished housing with high-quality construction levels
Deep price repositioning
Favourable financing conditions
The Ministry of Fomento, in its report of January 2012, stated that in excess of 676 038 new homes are available for sale in Spain, where Andalusia, Valencia and Catalonia represent over 50% of the total.
As a result of a decline in demand there has been an unprecedented price repositioning in Spain. By region, this price repositioning is greater where the excess of supply is higher, which has forced the various owners involved to make greater economic efforts to boost that demand.
Finally the very willing banks and saving banks have set up favourable financing conditions, both in terms of interest rate levels (in some cases, Euribor plus 0.5%) and also in the amount of funding that can be offered from 60% up to 100% of the total values of homes.
There are thus several reasons why South Africans could invest in offshore property in Spain:
Main residence: There is a demand for professional needs in main cities such as Madrid and Barcelona, where there is a general lack of property on offer, both for rental and sale.
Second home: The high-quality construction of housing in coastal areas, near golf courses and ski resorts makes this moment a great opportunity to purchase a second home in Spain.
Investment: Low price levels, optimal financing terms, good rental options with a high demand from tourists, along with expectations of a longer term price recovery after the end of the crisis, create a very attractive scenario.
The opportunity allows for portfolio diversification for international investment groups with high income levels and strong economic capacity.
Legislation is expected, which will allow non-EU residents to get Spanish visas if they buy a property over €500 000.