Deciding why you are buying and identifying what are your requirements:
In these difficult financial times with an uncertain future if you fail to plan you will be planning to fail. So you must clearly identify what you need from your investment, holiday home or retirement property. Do not make the same mistake that most people make and let sentiment outweigh sensible logical assessment of you and your needs both now and in the future. Will that beautiful penthouse apartment on the tenth floor, really be suitable in ten years when you retire. Do you really need three bedrooms or would two suffice.
The best plans stand up to challenge and scrutiny so ask people for honest opinions not what you want to hear. Try to balance your needs today with five or ten years from now. Ask your self and others some of these questions:
Do I need a holiday home?
Remember to identify how many times per year you will use it? Can you rent it? How much can you rent it for? What if it does not rent can I still afford the mortgage or maintenance? Should I go for low maintenance properties? What about security? What about community charges? What about Insurance? which can be problematic when renting for commercial gain. What are the needs of your family, kids etc.?
Do I need a retirement property?
What do I need now? What will I need in ten years? Low rise/High rise? Apartment? Villa? Neighbours? Do I want to be near others or crave seclusion? Are there other expats nearby? What about healthcare? A permanent move requires serious thought and no impulse buying.
Am I investing for a short-term or long term return?
There are arguably (2010) signs of recovery in the Spanish property market but most observers believe that the influx of buyers from the UK, Ireland and Northern Europe will not rush in to invest in a market they were so badly burned in. Perhaps the buyers will come from eastern Europe. The biggest group of investors in Spanish property when everyone was leaving were Russians. In any case very few people myself included would believe that in 2010 there is the opportunity for
When I last looked at house prices in Spain I used data from the official Spanish price tracking model, Indice de Mercados Inmobiliarios Espanoles, the IMIE index. This house price tracking system showed that property prices rose from September 2002 by 15-20% per year until September 2006 then started to decline to a lower 5% increase in 2007, then -5% in 2008 then -10% in 2009. On checking this database again by February 2010 the slide to the bottom has now decelerated to -5% year on year decline. This is actually indicating an increase in prices over the last few months.
The Costas are still lagging behind as the property slide decelerates as they have seen a -7% drop year on year to February 2010. The lowest decline has been in the country municipal areas which did not benefit from the property boom, they have slowed to under -3% year on year decline.
Kyero the large property agent has another database of asking prices and their index is showing an average drop of only -1.4% with some modest and some spectacular increases in December 2009 as opposed to September 2009. They report small rises of 2% in Alicante with a large number of areas static or down slightly. However on the up side they report some winners with large rises of 19% in Caceres, 14% in Badajoz albeit from a very low base, 10% in Gran Canaria and 8% in Barcelona. The losers are Cordoba with -3%, Cadiz with -6%, Fuerteventura with a massive -17% but the prize for the biggest drop in only three months is a whooping -23% in Huelva.
It would not surprise many to learn that Spanish banks are hiding their true losses by not declaring properties in negative equity on their balance sheet. In order to off load some of the repossessed homes on their books, Bancaja's has issued a new mortgage deal which requires no interest or capital repayment for three years, has no administration fee and offers a LTV of 90%. However it is only available on homes that belong to Bancaja. The properties are mostly located on the costas if anyone is willing to take the risk.
Location, Location, location?
When you have decided what type of property you need will then determine the location, investment – are you going to go for city venues with year round rental returns. Holiday homes coast, seclusion or islands? Bear in mind that each region of Spain has a different set of advantages and disadvantages, and it helps to know which one best suits your needs. Where are the airports? are there cheap flights will there always be cheap flights?