Spain: A Buying Window?

Spain: A Buying Window? Maybe Not


Barcelona looks cheap to some


Here in HK there's a magazine called Square Foot, and the latest edition (April 15-30th) includes a cover story:


BARCELONA : Europe's Hidden Real Estate Gem


The argument in favor of buying property sounds compelling, at least in comparison with buying in overheated London, or in expensive Hong Kong:


Prices are well off the top:


"Average prices in Barcelona have fallen 30% since the Global Financial Crisis and now sit at roughly where they were in 2004."


Other bulletpoints in favor :


+ Barcelona is a cosmopolitan centre of commerce and culture (2mn people, 4th highest city for GDP in Europe)

+ Foreign buyers are coming in: French spooked by tax rises. Foreigners may get residency permits

+ Cheap by comparison:


AVERAGE PRICES :

Central London - Eur. 1,255K = GBP 1,065K (?? )

Central Barcelona - Eur 457K


+ Interest rates can be as low as 1.25% (really?), with much higher yields


Travel Times from Barcelona:

+ Madrid ----- : 1 hr., 15 mins

+ Paris ------- : 1 hr., 35 mins.

+ Rome ------ : 1 hr., 40 mins

+ London ---- : 2 hours

+ Hong Kong : 15 hrs, 45 mins


These points make it sound attractive, but I have a raft of questions.

As appealing as this sounds I would also have a number of questions:


1. how hard will it be to manage a property in an unfamiliar city which is a long way from HK?

2. what is the vacancy rate like?

3. how much does it cost to appoint a manager?

4. how hard is it to evict a defaulting tenant?

5. can you legally take a bond/security deposit large enough to secure against damages caused by the tenant?

6. what are the taxes like?

7. how good is the title?

I looked at property in Whistler BC recently ... prices are off nearly 70% from the highs...


When I asked the agent for cash flow statements that exposed why prices are down so much...


One word: GLUT.



And from what I have seen of the Spanish market, two words:


MEGA GLUT



"The Spanish economy continues to buckle under record high unemployment of 27% and rapidly declining house price values. With ratings agency Standard and Poor’s predicting that property prices could fall another 13% by year end the prognosis looks grim not only in Spain but for the rest of Europe as well."

Due to an absolutely crippling housing crash, there are approximately 3 million vacant homes in Spain today.


http://business.financialpost.com/2013/04/17/a-tide-of-squatters/




"Prices will drop in some places until who knows where"


http://business.financialpost.com/2013/03/20/spain-braces-for-tsunami-of-bankruptcies-as-banks-pull-plug-on-zombie-developers/