Buy One Get One Free On The Spanish Costa
As I’ve reported to you, our global real estate investment editors have been issued marching orders: Identify and detail the world’s top crisis investing opportunities right now.
That’s no small challenge, for the number of markets that qualify continues to expand. Property markets worldwide are soft, down, tumbling…even falling off a cliff in some cases.
One editor in Europe advises:
“Spain should be high on our list. I have at least three sourcing agents that offer deeply discounted properties there (50%+). Foreign developer stock in Portugal (especially end-of-project stock) is sometimes prone to discounts, but nothing like the Spanish phenomenon. It’s like buy-one, get-one-free along this country’s coast.”
Our new friends at NuWire concur:
“Spain’s property market continues to tumble,” NuWire’s editors report, “as a surplus of homes and condos depresses prices. The decline may continue for years, and property prices in this country could fall as much as 50% over the coming three years, as more developers suffer severe financial problems.
“As in many places around the world, property sales and lending have collapsed in Spain, but here the situation is compounded by chronic over-building.
“The most pessimistic outlook comes from Javier Ortiz, financial director of real estate group Grupo Inmo. ‘If developers don’t sell their flats 25% or 30% cheaper now, in two or three year’s time, they are going to have older, unmarketable properties,’ he claims. ‘These properties will then be more expensive due to financial costs, and the developers will be forced to sell for as much as 47% less in real terms,’ he continued.
“Two more lending developers are in crisis. Restaura SL and Strength, have been forced to seek court protection from their creditors.
“Restaura SL specializes in buying, refurbishing, and reselling residential buildings in prime city locations, mainly in Barcelona. It has bought and refurbished some of Barcelona’s landmark historic buildings, and many of its clients are international investors.
“The company, which has debt of 237 million euro spread among a half-dozen banks and savings banks, is part of the Restaura Group, which has debt of 1.6 billion euro. Due to a lack of financing it has been unable to close crucial sales in recent months.
“Restaura SL is regarded as a victim of its own ambition, having expanded too quickly during the boom. Restaura, which has offices all over Spain, also opened offices in France, Germany, and Poland.
“The real estate developer Strength, which specializes in building holiday homes around Catalonia, has 100 million euro in debt.
“The International Monetary Fund has forecast recession for Spain in 2009, but the Spanish government is calling for 1% growth. What in fact plays out is crucial for the property market, as, without economic growth, there is no job creation. Without new jobs, there are fewer buyers to help mop up Spain’s monumental housing glut of more than a million homes, many of them new.”
Even at these prices, should you be thinking about buying along the Spanish costa?
“The key, bottom line,” our in-house global property investing guru Lief Simon, cautions, “is to buy for rental. The current situation in Spain is a chance to put a nice rental cash flow in place…as long as you make sure you’re buying in an area that will see enough traffic to get you the occupancy you need. Otherwise, you’re just buying an HOA fee.”