Spanish Real Estate – Is It Overpriced?..

Property:Real-Estate

As Spain has become more and more popular as a place to purchase property, attention has naturally turned to the rise in real estate prices there. Healthy growth in property values is to be desired, of course, but when does healthy cross over the line and become overpriced? And is Spain in that situation right now?

What Do Buyers Think?

According to several polls, Spanish buyers generally believe that a market bubble exists, while foreign buyers (especially the British) are far more likely to say there is no bubble. As Spain’s popularity has surged among UK buyers the prices have swelled as well, but the demand continues with no end in sight.

Official Opinions

The question of whether or not Spanish property is overpriced will be answered in different ways by different sources. Officially the Spanish government provides many assurances that the real estate market is solid, but in practice they have taken steps to keep the market from overheating. For example, Spain has launched a new rental agency with the purpose of renting private property at below market rates in hopes of cooling the market a bit.

In contrast to the Spanish government’s low key efforts, The Economist Magazine has warned of the potential for a “market bubble” in Spain beginning as far back as 2003. Their most recent warning referenced concern that property is overvalued by as much as 60% in comparison to rental prices. Even the Bank of Spain has entered the fray, making official statements that Spanish property prices are overvalued anywhere from 8% to 20%. This is much lower than what The Economist Magazine estimates, but the fact that a large financial entity has gone on record affirming a market bubble is significant.

So What Should You Do?

It’s clear that there are signs of property being overvalued in Spain, but don’t let that scare you away completely. As with many other forms of investment, real estate is best considered a long term strategy rather than a short term strategy. If you’re looking to speculate in Spanish property and make a fortune by turning it around quickly, you’re very unlikely to be successful. In fact, you’re most likely to lose money in such “get rich quick” transactions.

If, however, you’re looking for a vacation home to keep and enjoy for many years to come, then by all means consider property in Spain. Over the long term you’ll be much more likely to successfully weather the short term ups and downs of the real estate market, and in the end see a healthy increase in your property’s value.

Jamos - www.spaingolfproperty.co.uk