Costa Blanca’s Housing Market 2016
06.04.2016 Riikka Aukee
The housing market in Spain is very different today as compared to what it was some four years ago when the recession was at its deepest. Since then, the pace of new construction has picked up sharply, even though the levels are far from ten years ago when the housing bubble was at its peak.
The banks have accumulated a lot of apartments in various conditions and of different ages for sale. There are still plenty of properties on the market in the aftermath of the crash. On the surface, these properties can seem to be bargains. However, looks can often be deceiving.
The advantage of property owned by a bank is a low price or at least the opportunity for some aggressive haggling. The downside is that the properties have often been vacant for a long time and have often been allowed to fall into disrepair. As many of the troubled construction projects of yesteryears relied on an "if you build it, they will come" -strategy with regards to services, the location can today be found to be secluded and far away from shops and other expected infrastructure. In many cases, the fast-paced construction some ten years ago did not meet the modern requirements and building standards of today.
The range of properties on the market is wide. Apart from the locals, the expats from the Nordics, Britain and Germany moving back home are a significant source of supply to the housing market. Most of these properties are between 10 and 20 years old. This age-category constitutes the bulk of properties currently on the market. The condition of these apartments, as well as their need for repairs, is, however, very varied.
New construction is today sound and on a healthy foundation. The economic crisis that started in 2008 was survived by the fittest builders whose business was steady then - and still is. Construction came to a near halt for a few years following the outbreak of the recession, but now the industry has recovered.
As the price-level of the old housing stock is kept up by both by owner-psychology and to some extent for book-keeping purposes of the banks, buyers of new developments benefit now from an excellent price-quality ratio in comparison to re-sold housing. The developers compete mostly on quality while the price level has been so-far relatively stable.
The demand for new, modern and well-equipped rental properties is growing. Today new projects in Costa Blanca are mainly bought by foreigners. Some live here permanently, others during the winters, and some vacation here only occasionally. When not in use by the owners, the properties generate instead rental income.
Usually, the properties are let out with the help of a rental agent, as this relieves the owners from dealing with details such as key delivery, maintenance and other errands. Rental agencies provide a full range of services for the holidaymakers including apartment and area introductions as well as airport transfers. Property owners receive a hassle-free return on their investment that often can cover the mortgage payments of the property - without even having to be in Spain.
While Spain is traditionally considered to be a very bureaucratic country, lessons have been learned during the past decade. Vast improvements have been made to the laws and regulations governing the purchase of new homes. Among other things, new developments now come with a mandatory 10-year insurance on the structures (taken by the builder and underwritten by an independent party), as well as with a limited warranty on, for example, the surface materials.
The law dictates that the builder must set up an escrow-account in which all payments by the buyer are kept by a bank until the property is handed over to the new owner. The bank will be held responsible for this procedure. Without adhering to these obligations, the property will not be allowed to be registered in the national property registry in Madrid.
In our newsletters we discuss Spain’s, and especially Costa Blanca’s housing market – you receive news, tips on buying property, advice on how to finance the purchase, and how to create an income from a rental property in Spain. If you want to know more, do not hesitate to contact us. We at Grupo Mercal work very hard to have the best understanding and the most up-to-date selection of new property developments on Costa Blanca. We would be happy to share our findings with you.