The Spanish property market took one hell of a beating over the financial crisis and it still is in a lot of pain. Like in every market there will be a bottom to that pain and there are signs that that could be starting to happen.
Investment in Spain from funds and private equity firms more than doubled to 13.9% last year with 37% going into real estate. Firms like the Blackstone group and Goldmans Sachs have been in the market and buying apartment blocks and social housing developments in Madrid.
Valencia was one of the worst affected areas and it is also seeing the early stages of a recovery. The local association, Fevec, says that builders are being asked to complete houses that were put on hold after being placed into the Spanish bad bank SAREB. Valencia accounts for nearly one fifth of empty Spanish homes.
Given the tightening in mortgage lending criteria and the underlying economic struggles of your average Spaniard (30% of workers earn less that €1216 per month), it may still be hard for the domestic side of the market to pick up. We’ve seen flows into government bonds and usually the next biggest investment vehicle is property. As confidence comes back to Europe property will be the sector that is likely to show the biggest gains.
As I saw from my last trip to Spain there’s still plenty of bargains to be had and still time to make the most of it. It’s still going to be an investment decision for the long term though. If there’s one thing investors like it’s a market on its knees and Spanish property fits the bill.
