Is it Really Time For Part Two of Our Big Boom Article?

Has it really been a week since the last article about the question in the title? Is it really time for part two of our big boom article already? Well, yes it is. So last week we posted the following statements about the Valencia and Spanish Property market. We talked about a lot of them last week. This week we talk about the rest. Just in case you didn't see it you can see the original article here.

  • The market is extremely strong at the moment
  • Most people expect the market to get stronger as interest rates drop this summer
  • Supply is limited and getting worse
  • Demand continues to grow from a national and international level
  • First time buyers are having problems finding suitable properties at reasonable prices
  • Investors are investing more
  • Government policies are not having the desired effect
  • Mortgages are getting easier to find
  • People are moving to the suburbs to find value
  • Rentals are almost on the point of being impossible to find for foreigners and not great value for residents
  • It's better to buy than rent
  • There are not enough new builds
  • There are not enough affordable options being built
  • The "Guiri Jails" should be made residential to give first time buyers a chance.
  • Immigration numbers are increasing demand
  • Bidding wars are happening!
  • The Train Has Left The Station (Edited)

Do we think a huge boom is coming? Do we see opportunities in the market or has it got away from you? What is going to happen in general? Read on to find out.



Investors are Investing More

There are lots of investors buying in Valencia and they are investing more. First they are willing to buy apartments at higher prices because rental prices have risen so much so their return is still healthy, but also those who have already bought are buying again and again as their first investment apartments are giving them such a good return.

As a small example of what is happening, just this week brought news that an investment group has bought two buildings in the Malvarrosa near the beach to demolish and build 32 investment apartments. However, also this week the local council has announced a moratorium on new licences for tourist rentals so we await what effect that will have on the market.


Rentals Are Becoming Impossible for Foreigners

Rentals are difficult for the local population due to the price rises recently, it's now near impossible to find anything decent in Valencia city for under 1000 euros per month and when average wages are around 1800 Euros per month then this is extremely difficult for single people. For foreigners the situation is possibly worse because the majority of rental owners will not accept foreigners as tenants. Even if you are coming with a larger budget than required when you look online it's extremely difficult to get a rental and as the number of rentals available drops it is becoming even more difficult, not to say almost impossible for many people. If you have any extra requirements such as pets, lower floors for accessibility issues or strange timings for the rental then it is probably close to totally impossible.

As we have written before in these pages, it's not a xenophobic thing, it's an insurance thing. If you remember we started Stepping Stone Rentals to avoid this issue for our clients. Equally, because of the increase in prices of long term rentals, SSR properies are now an even better deal.


It's Better to Buy Than Rent

Your rental will cost you more than a mortgage on a comparable property. That's a simple fact. However you will need to have a lump sum to put down on a purchase as banks will go up to 80% of value for the mortgage currently (Just 60-70% for some foreign nationals) and you also have to find the costs of purchase adding up to another 15% (16% when getting a mortgage).

If you can do this then expect an interest rate of around 3% though better deals are available and experts expect interest rates to be around the 2% mark by the end of the year for fixed rate mortgages over 20 years or more. What this means is that a mortgage of 100k at 3% over 20 years will cost around 550 Euros per month to pay off currently. If you manage to get a mortgage at 2% at the end of the year then this 550 Euros would become 507 Euros. A comparable property on rental will cost you around 800-1000 Euros. Remember though that a mortgage of 100k would not buy you a property in the city of Valencia if you only put down 20%. A property in one of the towns or villages around Valencia at that price though is totally feasible.


There Aren't Enough New Builds

When you look around the outskirts of Valencia and the towns surrounding the city it looks as if there is plenty of building going on, you see cranes on the skyline wherever you turn it seems. However, there are still not enough new builds going up both in terms of apartments and especially houses. Equally, all builders are massively booked up at the moment so finding a developer willing to build and having the capacity to do so is difficult. Therefore, buying a plot of land and building your own place is not really a viable option unless you are willing to overpay massively to an architect and builders to "encourage" them to work with you.

There Aren't Enough Affordable Options Being Built

On a related note, if there aren't enough new builds then there are certainly not enough affordable new builds. Social housing numbers are really low and affordable housing options are rare too. The government has tried to put in place minimum numbers of social housing units to be included in any development project by the big developers but there are still far from enough and the concept of what is actually affordable is also moot.


Guiri Jails Should Be Made Residential

"Guiri Jails" are springing up everywhere and the new moratorium on licences for tourist rentals may or may not stop this explosion in their numbers. For those of you who don't know Guiri Jails are ground floor studios converted from shopfronts and they get their name from their occupants, foreign tourists, (Guiri is a term often used by Spaniards referring to foreigners) And Jails? Because they often have bars in front of a huge front window meaning that enough light gets in but they are not liable to suffer from vandalism. Shops used to do it with shutters, Guiri Jails don't want shutters of course as that would take away all of the light and also they would really really be a jail where you are locked in.

Currently though the trick for the Guiri Jails is that they remain commercial premises and therefore can be rented out on Airbnb and others as a commercial property for up to 11 months a year. Currently you cannot live in them long term or register on the Padrón as a resident there. Here at Valencia Property we feel that there should be the option to convert this commercial status into residential to add more properties into the mix for first time and younger buyers. Due to their size, usually around 35-40m2 they are perfect studio flats for first time buyers, single people and those looking to get onto the property ladder. Converting them to residential would give more options to these groups when buying and also give them an asset to sell when the family grows and they need to move to a bigger place. See below for an illustration of why they are known as Guiri Jails.


Immigration Numbers Are Increasing Demand

Over 500,000 new arrivals came into Spain last year. A combination of arrivals from digital nomads, people looking to upgrade their lifestyle, retirees, family reunion for immigrants who have been given residency rights and arrivals from war zones and populist idiots around the World has increased the population. And those are good things as Spain needs more people working here and paying into the social security system in order to fund pensions and the health service among other things (On the other hand around 300,000 people left). People of working age coming into the country and paying in is good as they use services such as the health system less. However, this does increase demand for housing and when there is a lack of building as described above it brings more pressure into the market and pushes prices up more.


Family Atomization Fuels Demand*

Family units are getting smaller and for every family unit that breaks up, whether that is from older children leaving home for university or to become more independent or even divorce, then more individual units are needed. One of the issues with property in Spain is that every property has a catastral reference number and it is difficult to divide even large properties into smaller units. It's possible when we are talking about a single building being used for various flats, although the paperwork required can be onerous, but larger apartments of 200m2 for example can not usually be broken down into a couple of 100m2 units. And we all know what extra demand without greater supply brings don't we?


Bidding Wars Are Happening

We had a client outbid for a property this week when they offered asking price. We had one where the owners refused a full price offer and relisted late in the week at a higher price. We had a client who went above asking price to secure a property which is usually unheard of here. There is always another interested party now, at least in the city, so we are seeing many properties listed on the portals now at what we euphemistically refer to as "optimistic" pricing levels and then they sell too and they have people competing to buy them!


Conclusions

This is the current market. It's not overheating yet because there is more and more demand even at current prices. Prices have now reached and in some cases surpassed the highest levels of 2008 before the world financial crisis but circumstances are very different in terms of liquidity in the market, interest rates and economic prosperity. Spain is doing very well at the moment and when you take into consideration inflation since 2008, a cumulative 34.27% increase in prices in that time, there is still considerable room for movement on prices even if we don't take into consideration the boom in asset prices in the last decade.

Source: https://www.officialdata.org/spain/inflation/2008?amount=100

(Source https://www.officialdata.org/spain/inflation/2008?amount=100).

You would expect things to continue on their merry way but let's go back to our original question,

Is it really time for the big boom in the Valencian and Spanish property market?

Despite all of the evidence I've presented both here and in the previous post last week I don't expect a huge move in prices any different to what we have seen over the last five years. A consistent uptrend to continue for sure, a huge boom not so much. So those of you biding your time and waiting for prices to fall before buying may have to wait a long time. A reduction in supply will continue meaning greater pressures on prices to move upwards as long as demand remains in place. Currently I don't see that demand reducing for all of the reasons given here and in the previous post.

Here at Valencia Property once again we have just seen a record month both for completions and average prices but our numbers are taken from a small sample size and despite our ongoing success we are not the main part of the market, we don't even touch the local market in general, all our clients are sourced from other parts of the world. We are having to turn people away for various reasons ranging from budgetry constraints to lack of availability of our staff to deal with people as we strive to give good service. The former is frustrating and the latter means we are currently training people up to work with us but it takes time.

Here is an example of what we had to say to somebody this week with a budget around 130k for a property ready to move in and their requirements meant that the property had to be in the city of Valencia itself, not around the city in the towns and villages.

The first issue there was the fact they could only view in August, we are mostly off that month, and secondly their requirements meant a more realistic price for what they were looking for might have been starting at 250k. Unfortunately this may become a template response for certain price ranges in the current market.


*An Edit

For Some The Train Has Left The Station

The response above is unfortunately going to become more common. I was talking with my colleague Gavin today and he said that for some people who he has been working with for a year or so there is now no chance of finding what they want based on their requirements. They had a chance last year at the price they wanted and could afford, with the requirements they had and in the areas they wanted but now... it's simply impossible. The train has now left the station for them and it's not coming back any time soon. As I said above in the conclusion there will be A consistent uptrend (in prices) to continue for sure. For those clients unfortunately they will not be buying in Valencia... unless...

The only options they now have are to change the criteria, change the location or change the price they can pay by getting finance through a mortgage. The train still hasn't reached the stations around the city, local trains are slow ;-), but it will be there soon. If you are looking at property at your price limit and there is one that ticks most of your boxes then maybe decide to go for it.

At the lower price ranges, and that means anything up to 300k in the city now, we can no longer say to you "Be patient and something will come up". It almost certainly won't. As prices rise your wages don't generally rise at the same rate and your savings most certainly don't. Use low interest rates to your advantage because that is what everybody else is doing or change the criteria and go for somewhere not as affected by the price changes.

I live outside the city and have done happily for 25 years. I still consider myself to be living in Valencia but with the best of both Worlds, a great city on my doorstep in 15 minutes and a quieter place to live with more space that I got for my money when I bought. And why didn't I buy elsewhere closer to the city? Well what I wanted didn't exist in my price range so no change there then.


How You Can Get Your Place in Valencia?

If you want your own place here and want to work with the most professional and reliable team in Valencia Property land then you need to get prepared. This week we have had to disappoint people calling us from on the ground here in Valencia because we are fully booked. If you copy those people and contact us when you get here to see things tomorrow then expect us to have to let you down (It will be the same with most agencies)

We need you to contact us well before and reserve your property viewings with us. You can read how to work with us on the post here. This allows us to have a conversation with you and find the best selection for your requirements. Equally you could fill in the form below and start the conversation that way.

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Rural Property of the week

A fully functioning Casa Rural in Xeresa just ten minutes from Gandia. Sometimes you get a lot for your money and this is certainly a case of that. Let's take a quick look at what you get in the FOUR individual units that comprise this casa rural.

ACCOMMODATION:
4 independent apartments (6 bedrooms and 4 bathrooms in total). Single storey, around a beautiful, enclosed courtyard. Reception area/laundry room.

Unit 1
1 bedroom, bathroom, large, fully fitted kitchen, large living room, storeroom.

Unit 2
2 bedrooms, 1 (very large) bathroom, large living room with fitted kitchen, storeroom.

Unit 3
1 bedroom, 1 bathroom, living room with kitchen

Unit 4
1 bedroom, 1 bathroom, living room with kitchen

Extra Spaces (courtyard)
1 bathroom, 1 bedroom

Interested? Well you should be if what you are looking for is a nice place to live in a quiet small town and at the same time with the ability to have an income from the rest of the units. Running successfully as a Casa Rural this place is set around a delightful courtyard on the edge of a village surrounded by orange groves 40 minutes to the South of Valencia city and just 10-15 minutes away on your bike from Gandia's blue flag beaches.

It is a wonderful place to be if you like walking, cycling, mountain biking, rock climbing (there are some great crags nearby), the tranquility of the countryside – or if you just want to be close to some of the finest beaches in the Mediterranean. And as mentioned above you can make a living from it too.

Because this Casa Rural is working well too, it is not being sold due to lack of success. So much so that the current owner only opens during the three months of summer. Obviously, you could open for longer, depending upon how you wish to run the Casa Rural. Equally, the owner lives in one of the apartments rather than renting it out. They also have details of the finances of the business and these they can provide, if you come and take a look.

This Casa Rural could be changed back into a family home, that absorbed all (or most, perhaps) of the current accommodation and this may be an option for you if you are looking for a single home as opposed to a business. You may also leave it as it is and just have the extra units for all of the visits from friends and family that you may imagine wanting to spend some time with you. Plenty of options here.

Priced keenly this place is an excellent investment for living, working or simply to give you and income from renting out. It's your choice but now take a look at all of the photos and get in touch so you can visit.


City Property Of The Week

A lock up and leave apartment in Cabanyal, probably just what you wanted to find when you set out on “Your Journey” or what I like to call, “Looking for a flat in Valencia”.

Ideally located for all the things people like in the Maritime area, 500m to the beach and the excellent Cabanyal Food Market with tons of little bars, shops and informal eateries such as Mercabanyal and Mercader, there also some high end places Like La Sasteria and Casa Montana which has been around since 1836, so I suppose they must be doing something right.

Two Bedrooms, 1 Bathroom, a light Living Room and Kitchen with a couple of balconies and that all important cross ventilation, there is also a tenant until October and its a 4th floor walk up (Burn those Tapas Calories, its Operation Bikini time!) but Valencia is hot to trot right now and every week there's less and less on the portals.

Time to get in touch I think, before you miss the boat. Mediterranean Street awaits you.


If You Liked This...

Then as usual just click on the images below to be taken to other articles of interest including of course the first part of this article from last week's blog.






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