The Truth About Distressed Sales in Spain

27 Jul 2011

I was recently asked by our UK press agents if we could supply information about the best bargains possible in Spain. The information was requested for an article for the UK national press.

This was based in terms of the biggest percentage decrease i.e. from a Bankrupt Developer or just an individual having to sell.

The real problem with such a narrow blinkered approach is that you really don't get to the real issues behind such price reductions and the various complexities of the market in Spain in General.

The best starting point is to explain the market within markets. From the point of view of the best market that has to be Mallorca which is the equivalent of the London of the Spanish real estate market and you just don't find any bank repossessions that an international property buyer would want to buy. Even compared to last year there is no discounts available anymore. Last year we sold a lot of property for sale in Spain in Mallorca because we were able to bring buyers and sellers together however this year it's been much more difficult buyers are looking for the same deals but they are just not out there.

Now if you take Marbella and Costa del Sol you have two very distinctive markets in one. Mijas Costa where a property can cost 50% of an equivalent property in a good district of Marbella and because there is more of an overbuild in Mijas Costa along with other economic factors prices are much lower and its possible to buy a two bed unit for as little as 120,000€ in fact we sold a Penthouse in Mijas Golf for €135,000. Now these prices reflect up to a 60% drop and people who are now buying them are buying below replacement value when you take cost of land and infrastructure costs into consideration.

Now if you look at Marbella this becomes much more different entirely where prime location areas are showing no discount whatsoever and again we recently had very nice clients who came over and basically saw for themselves prime location area of Marbella were the same as London prices. As Julia from our company put it, is Alan Sugar going to take 40% off his house and sell it to you?

So where are these massive discounts of up to 70%? well there are one or two brilliant opportunities like Marina del Castillo but they are sold out within a week of coming to the market but the majority are horrible developments in secondary locations that an international property buyer wouldn't be seen dead in well certainly not in this current market.

Now if we look at distressed sales you will never ever get the real percentage of discount from a seller because the reality is the advertised price is always more than he is prepared to accept. We always have a pretty good idea where a deal can be struck when a seller is truly desperate but the seller in desperate times would never put his bottom price onto the market. An example of this was a recent property reduced from 500,000€ to 350,000€ and eventually sold for 250,000€ which reflected some 50% discount - but on the books the client was showing a 35% discount.

So in conclusion its best to look for what value for money you are getting with your property purchase and not in straight discount terms. You may see something with an 80% discount but that was probably 70% overpriced to start with and doesn't represent the same value as a property showing a 30% discount in a good area of Marbella.

Fortunately this is still the skill in the market place for the best real estate agents and one of the few things that keeps the best ahead of the game in the modern internet world when everyone in an estate agent.


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