With the news that Spain has got off to a flyer in 2013. Spain had hoped to sell up to €5 billion Euros of bonds; instead, it managed €5.8 billion Euros—and at yields well below previous issues of similar bonds. As a result, Spanish 10-year bond yields have fallen decisively below 5% for the first time since March 2012. For Spain, the successful auction is further confirmation that it is regaining investors’ confidence and vindicated its decision not to seek emergency support from the European Central Bank. The Spanish government has also taken a range of issues but has tackled the troubled banking sector which being recapitalized and restructured. The number of banks has fallen to 12 from 50, the number of branches is down 14% and employees are down 13%, with further substantial cost cuts to come. Spanish banks have also regained access to bond markets and may be able to repay some ECB funding at the end of this month. All this puts Spain in a good position to come out of the recession a lot stronger than a lot of experts predicted.
So how does this impact on the Spanish property market? Obviously the most important point here is when trying to attract investors the number on word that screams out I CONFIDENCE. If an investor is confident in the market place then they are more likely to invest in that market. Spain is also taking real initiatives to find buyers for its huge housing stock as signaled by its intention to try and get more overseas property buyers from the Middle East, China and Russia by giving residency to those who buy a property in excess of 160,000 Euros. Whilst this has yet to become law it shows the Government is thinking outside of the box. This idea makes far much more sense than trying to reduce taxes to sell properties. Just make it easier for those who want to buy and a 160,000 is not much to pay for a safe haven. In Cyprus where they have a 300,000 Euro entry limit the number on Chinese buyers has increased considerably.
What do these initiatives mean for buying investment property in Spain? The obvious one is if some of the excess stock can be taken from the market then price rises are likely to come sooner rather than later once the housing market recovers. Let’s not forget that most bank repossessions are being sold well below replacement value thus making Spanish property very attractive from a capital growth point of view. South of Spain also has the warmest winter weather than any other part of Western Europe and will always have a substantial international property market that won’t be affected by local market conditions. The other major factor is that Spain is pretty close to the bottom of the cycle if it not already there. As any good investor will tell you the best time to buy is before it hits bottom and the best time to sell is before it hits the top.
So is the Spanish property market the best place to invest in 2013? The answer depends on your own views and interpretations of the fundamentals but Spain has a lot going for it when compared to other overseas property investment opportunities and when you can buy below replacement value its certainly worth further investigation and research.
I personally very optimistic but maybe it won’t be until the second half of 2013 until everything starts to fly off the shelf.
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