On the costa del cranes
Article Date : Friday, January 07, 2005
WHILE THE housing market in other European countries dips and dives, in Spain the boom just goes on booming. Last year Spain built more houses than Germany, France and Italy combined. An incredible 21 per cent of all housing in Spain has been built during the past ten years, according to one study, suggesting that the economy is driven by the twin motors of tourism and the construction industry.
So what is fuelling this building spree? Mark Stucklin, a property consultant who runs spanishpropertyinsight.com, attributes it to “a potent mixture of low interest rates, a reasonably healthy economy with falling unemployment, innovation and competition in the mortgage market, a Spanish tendency to buy rather than rent, and increased demand from northern Europeans assisted by low-cost airlines”.
There are two sides to the boom: the cities and the coast. In the big cities, and the swelling satellite towns that surround them, demand has been pushed up by a sudden rush of immigration. After virtually no immigration for 500 years, an estimated two million people have arrived in the past seven years, mainly from Latin America and the European Union. Officially, house prices in Barcelona have risen by more than 100 per cent in the past three to five years, while in Madrid the price per square metre of properties doubled between 2000 and 2003.
The other main driving force is that there seems to be no end to the stream of second homeowners from both Spain and abroad, which is pushing building on the coast to saturation point. According to the Royal Institution of Chartered Surveyors (RICS), in 1999 14 per cent of the housing stock was second homes (though this share is expected to have grown even higher since) and the Office for National Statistics reported that in 2003-04 almost 70,000 Britons owned a home in Spain; other estimates put the figure at closer to half a million. Demand from the UK may be further stimulated if, as was suggested this week, the British Government decides to squeeze the owners of holiday homes in rural areas.
Spanish owner-occupation levels are among the highest in the EU. According to an RICS report, 83 per cent of Spanish homes in 1999 were owner-occupied compared with 69 per cent in Britain. There is also a strong bricks-and-mortar investment culture. “Property has always been a popular asset in Spain,” says Stucklin. “And just when investing in the stock market started to gain in popularity in the 1990s, the subsequent slump reaffirmed people ’s belief, however misguided, that property is a sounder investment.”
The boom may look good to the Treasury but it has been a disaster for José Public, who has been priced out of the market. Over the past five years house prices have risen seven times faster than salaries and, even with low mortgage rates, for most young people it is impossible to get on the property ladder.
For Britons it is another matter: Stucklin sees no end to demand in the near future. “Low-cost travel and retiring baby-boomers make it likely that over the next 20 years many more northern Europeans will relocate to Spain. Potential demand is high for years to come, but it may be limited by the pensions time-bomb.”
Overdevelopment of the coast has a knock-on effect on prices because the less attractive the location becomes the more buyers are likely to look elsewhere. But it seems that the climate and lifestyle are sufficient compensation for many foreigners, who are prepared to live in areas possibly more built-up than their home towns. “It will take a lot of really awful overdevelopment to put people off Spain for good,” says Stucklin. He suggests that people look to the Canaries, “the only true winter-sun destination in Europe”. Over the past five years, he says, prices there have gone from above the national average to significantly below.
However, as every inch of coast is gradually covered by villas and blocks of flats, the trend for foreigners seeking a second home is to go inland, where prices are much lower and it is still possible to find peace and quiet and even, perhaps, someone who speaks Spanish.
Property from the Times Online
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