Spain’s Real Estate: Three Pockets of Opportunity

Spain is in a terrible mess. The banks and the country are broke, by any reasonable measure. Spain’s regions (like U.S. states) have also borrowed too much. Unemployment tops 27%. Youth unemployment is north of 50%. The young with skills and initiative are leaving in droves. The scientists are going to the U.S. or U.K. with well-advanced research projects tucked in their brief case. Some haven’t been paid in six months. The engineers are heading for Chile and Brazil.

Estimates put Spain’s excess supply of homes between one and two million. No one knows for sure but my guess is that it’s much closer to two million than one. The birth rate is low. The young are emigrating. Few immigrants are coming. This is working against any absorption of this oversupply. For those with jobs…particularly the young who would typically pick up this slack…incomes are so low that even at prices of 30%-40% of 2008 prices it’s still beyond their reach.

Spain’s macro picture is horrible…and the macro picture for her real estate market points firmly down.

But that’s not to say the current crisis hasn’t turned up some killer deals—in particular along Spain’s tourist and expat haven of the Costa del Sol.

Today you could buy close to the beach for as little as one third of 2009 pricing—and you could generate rental yields north of 10%. That’s achievable even if you only make your home available for rent half the year and use it the other half. You just need to buy right. You see, unlike Madrid’s ghost towns there’s still demand to buy or rent along this Costa. That demand is coming from northern Europeans—not stretched Spaniards.

That’s because, while Spain’s fiscal and unemployment situation has spiraled, it’s become a more attractive place for expats and vacationers. I see this in particular along the Costa del Sol. Today, tourists are coming back. Prices have come down and competition is less intense from destinations like Bulgaria and Turkey. Worried holidaymakers are changing their vacation plans from Egypt’s Red Sea resorts back to the familiar Costa del Sol amid political turmoil in Egypt.

In the Costa del Sol, they feel comfortable. Everything here is familiar and comfortable for northern Europeans. They have access to all the services and amenities that they have at home. Wealthy Russians have also started to come on vacation or to buy a second home.

I’ve waited four years for real estate prices to reflect Spain and Europe’s crisis. With the exception of one deal in Granada there was always something wrong—price, location, construction quality, project viability…or all of the above. I told Real Estate Trend Alert members to hang tough. That our time would come.

Today it’s game on—at least in a small number of deals and pockets of opportunity. Many sellers here just want out and to move on…and that’s when we get the market-clearing prices I’m seeing in pockets along Spain’s Costa del Sol. It’s not just individual sellers who are eager to sell. Only last month, Spain’s bad bank, SAREB, entered the market with its first fire-sales. It’s just the kind of situation I’ve been waiting for…and I wasn’t disappointed on a recent scouting trip there.

Right now, I’m writing up my full report for members of Real Estate Trend Alert. My scouting took me up and down the coast…to 13 different locales in total. But in this report, I’ll hone in on just three specific pockets of opportunity.

These three opportunities are the crème de la crème of what the Costa del Sol has to offer… Like the luxury condos on a millionaire’s beachfront row that SAREB has just released at deeply discounted fire-sale pricing. Or, back from a port and beach, a condo building where the bank is set to release 40 condos in the next two weeks. (My recommendation is to grab one of the penthouse units that have views to the Mediterranean.)

But there’s one little town that particularly grabbed me. This place has stayed off foreigners’ radar. Yet it’s only a two-mile stroll along the beachfront boardwalk to one of Europe’s most luxurious and glamorous ports. In that port, a boat mooring could set you back $1.3 million. But, hey this comes with privileges…you get to drive your supercar into the port.

This was my base for the duration of my scouting trip. It charmed me. And, threw up some seriously interesting real estate opportunities.

Tune in tomorrow when I’ll explain when my buy flag is up in this little Spanish beach town.

Next week I will send members of Real Estate Trend Alert my full report giving readers the inside track on the Costa del Sol’s real estate market including how to buy the best bank and individual fire sales.

But Spain is not the only country where I’ve unveiled opportunities in recent months. My scouting has taken me to some of the best and most undervalued parts of the Caribbean…Brazil…and Greece…to name but a few. Find out more about the opportunities I bring to Real Estate Trend Alert members regularly here.

Editor’s Note: Ronan McMahon is a director of Pathfinder (International Living’s preferred real estate advertiser).

 

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