Investing in Spanish real estate

 

2015 Investors struggle to find a safe haven for their cash as banks give negative interest rates and the stock market remains volatile. Financial experts keyed in on markets are suggesting a big quantitative surge in an already robust European property yield game. From the south of Spain to the north of Norway, luxury real estate investments are making more and more sense.

So what is so interesting about the Spanish real estate, and specifically Marbella?

Spanish real estate is slowly recovering from six consecutive years of recession. People are more “bull” to the market, and a heavy storm of large institutional investors have raided a good amount of both commercial and private properties.

The falling euro has significantly slashed the cost for travelling to and investing in Europe, and subsequently more non European citizens are tempted to invest here. As an example, a 500,000 EUR property in Spain last May 2014, would have cost approximately 4.1 million Yuan (HK$5.2 million), whereas last month it would have only cost 3.5 million Yuan.

If we also look at what Spain and the Spanish banks have actually been through over the last years, it gives investors very good reasons for investing:

The Spanish authorities took a number of important measures to address the problems in the banking sector before they had to resort to an EFSF loan of 100 billion EUR to cover capital requirements of nationalised banks.

The measures included the clean-up of banks’ balance sheets, increasing minimum capital requirements, restructuring of the savings bank sector, and significantly increasing the provisioning requirements for loans related to Real Estate Development and foreclosed assets.

We now see banks are willing to lend money again. Add a 6-month Euribor rate of 0.110%, and life is finally smiling back at real estate investors in general, and specifically in Spain.

Marbella real estate:

Marbella is a bit different from the rest of Spain. It still manages to compete with Cannes, St. Tropez, Monaco and Mallorca, as the most preferred holiday destination for the rich and famous. With a micro climate, 320 days of sunshine and an ever increasing international environment, Marbella will come out of the recession strong and all history tells us “stronger than ever before”.

It is also important to recognise that to have a Marbella address is simply not enough. There is a large gap between the demand areas. In key areas of Marbella, the prices have already had a positive increase from early 2014 where as the low demand areas still struggle with prices falling.

When we can reach a high demand from holiday makers, not prioritising the investment case of buying a property, but more for the lifestyle that a second home in Marbella can give them, we can have very high hopes for 2015 – 2020.

Our CEO Philippe de Beaumont, has his own thoughts around the investment cases now appearing:

“Real estate in Spain has had a strong turnaround so far this year, and I believe this market, along with Ireland, will deliver the strongest rental growth over the next five years. If we also add a slow increase in prices for high end properties, an investment in a good quality Spanish home with a good to very good location seems very bright at the moment.”