Are there any real estate bargain in Marbella?

This post is addressed to all the professionals still trying to live off the real estate market in Marbella…. In the past couple of years, construction has virtually stopped and everybody is talking about the liquidity crisis. In the eyes of a non-professional, it seems that prices have come down but not that much.

On one hand, you have a myriad of properties for sale. However their owners appear unwilling to significantly drop their price… or unable to because their mortgage is that high. On the other hand, you have many people apparently interested and able to buy real estate, but not willing to do so at the current prices. When and where do this supply and demand meet?

Buying real estate seems premature right now. A theory goes that banks are in the process of finalizing the legal return and transfer of many properties. These will come to the market in 2010 at discounted value. Not everybody may have access to them, but they will still have the effect of pushing down market prices.

Another theory says that the best bargains are over: the people who absolutely had to sell already sold, and that remaining owners prefer waiting out the crisis rather than selling at a large discount….

Reality is probably in-between. It does not matter as much what the overall situation is, what matters is the specific deal one may conclude. But where do you find the real estate bargains in Marbella? Professional opinions are welcome.

Global Real Estate

Many people in Marbella have had a great run riding on the growth of real estate over the last 10 years.  Today again some are trying to position themselves for the next phase. There is nothing like looking at hard facts to anticipate the future. It may not tell you where we are going, but it tells you where we are coming from and there may be something useful to learn from it…

To get a general perspective of the evolution of the overall Spanish house prices and a comparison with other countries, the Economist has come up with a good house price tool. With four variables (house price index, real-term price, price vs average income, % change in prices) shown by quarter for the last 10 years and for 20 countries, this tool highlights the differences between countries during the boom years and the subsequent economic downturn. It is easy to use and very visual.

Compare the evolutions of Spain, Denmark, Switzerland and Japan to see complete different stories over the last 10 years and in the recent past…

Marbella Real Estate 2009

I would like to start this post mentioning that I am not a real estate professional, not even an aficionado…  However I like to understand what is happening around me and I find it useful to look at facts to help me make some sense out of the information and misinformation we are subject to.

Trying to understand the depth of the crisis in Marbella, I have visited many real estate websites and forums.  This is what professionals are generally telling us:  Marbella real estate has come to a complete stand still… Prices are near bottom…  Marbella properties are a good buy right now…  Marbella is a brand that will come back…

I decided to do my homework and look directly at the raw data from the Ministerio de Vivienda (Housing Ministry).  Here are a few interesting facts I found:

- In 2008, there were 25.1 million properties in Spain, of which 4.4 million were in Andalucia and 1.0 million in Malaga province.

- On January 1, 2009, there were 21,092 properties for sale in Malaga province, or 13.5 properties per thousand inhabitants. In addition, there were 8,977 properties under construction for sale.

- Out of 100 municipalities in Malaga province, 24 had more real estate transactions in the first half of 2009 than in the first half of 2008.  However, there were 4,476 less transactions in total for the province, representing a drop of 30%.

- Among the municipalities showing growth in transactions, we find Monda (+25%), Benhavis (+54%), Alfarnate (+820%!- small base but still…)

- Among the municipalities with a drop, we have Torremolinos (-13%), Benalmadena (-23%), Marbella (-32%), Estepona (-58%)

- The proportion of foreigners (residents or not) buying properties in Q2 2009 is 20.3%, higher than in Q2 2008 at 19.2%, but lower than in Q2 2007 at 26.2%

- The average price per square meters in Marbella was 2,598 euros in Q2 2009, vs 2,833 in Q2 2008 and 2,805 in Q2 2007.  This is only a drop of 8% from 2009 to 2008.

Statisitics are tricky.  They often fog reality with averages, different base sizes, apparent correlations…  However, I will risk a few common sense impressions:

- The real estate crisis is deep but there is business out of there, albeit not for all the former players…

- The level of houses available seems way too high.  This is going to be a buyers´market for a long while…

- Prices may not have reached their bottom yet…

- Foreigners have not left and represent a potential source of growth in the future if Spain recovers more slowly than its neighbours…

- There may be some encouraging signs for people focusing in winning niches…

So should one buy a property now in Marbella?  As always in business, it all depends on the price.  Most products bought at a very discounted price offer an opportunity for a nice return, the same goes for real estate.

Considering the facts that the recovery will be slow, the money invested will not be accessible,  the real estate prices may still go down, rental income is limited, I would personally need to find a very significant bargain to invest in a property right now.  However, If I were to look for a property to live in, then this may a good time to find the house of your dreams…