In August I visited a new luxury beachfront apartment building on the Costa del Sol’s new Golden Mile. Within eight days earlier this year, 122 apartments in the building sold. The fire-sale pricing was that good: $347,209 for an apartment. Seven months later, these apartments were listing for $528,396 each.
The opportunity here is simple: to buy quality real estate in one of the last remaining bank fire sales of such properties before what I call the “sell-out bounce.” By this I mean the price hike that comes when all the properties in a building sell.
There will be fire sales along Spain’s Costa del Sol at attractive sticker prices for a very long time. But deep, deep discounts on the best-in-class deals that will appeal to the international expat are set to close. Buyers are back. And they are competing to get in on these deals. That’s why we are seeing apartments that sold at fire sales list for 17% higher a month later.
Spain’s tourism numbers are at a record high. The country greeted 42.3 million foreign tourists this year through August. That’s up 4.5% on last year. Global events are driving this. Spain has competed in recent years with Turkey, Egypt, and Bulgaria’s Black Sea resorts. Turkey and the Black Sea resorts have become more expensive, while Spain’s crisis means lower prices. Turmoil in Egypt and other parts of North Africa means that visitors are heading to Spain.
Spain’s biggest sources of tourists—Germany, Scandinavia, and Britain—have been least affected by Europe’s crisis. Meanwhile, Russia’s new middle classes, rich, and super-rich are starting to arrive in droves. When the crisis broke, numbers slowed, but I’ve now seen this recovery first-hand.
This growth in tourism numbers is reflected by an increase in second-home purchases in certain locations. In some places, and at the right price, buyers are back. For example, in one luxurious resort town, three new real estate agencies are opening their doors. This is a dramatic reversal of the disappearance of agencies I saw during the crisis. Strong opportunities sell fast. Especially if a large number of units are being fire-sold. Then there’s a “bounce” in prices.
You can see and feel this buzz across the most desirable pockets of the Costa del Sol. This is an international place. International trends and capital flows are a bigger driver than the health of Spain’s economy. And international trends are working in the region’s favor. As in the U.S., northern Europe’s population is ageing and looking for somewhere affordable and sunny to spend part of the year. Cheap flights mean they can fly home for the price of a steak dinner. Everything here is familiar and extremely affordable by northern European standards.
Despite this surge in real estate, you will still find killer deals if you know how to buy. Each opportunity is location- and deal-specific. It comes down to how motivated the selling bank or individual is…how many apartments they have to sell and how quickly. When the deal is right you need to be ready to pounce.
For now, everything is still fragile. Developers and banks failed as the real-estate bubble popped. Estimates put the excess supply of homes in Spain at between one and two million. There has been almost no liquidity. So to sell a community of villas or an apartment building the banks had to slash prices. I mean seriously slash prices…by up to 70% off on even best-in-class communities. That’s the only way they have been able to make quick sales in large volumes. A fire sale doesn’t work if you don’t have liquidity. It falls flat on its face.
Luckily for IL readers, the banks don’t pay agents’ commissions on many of the best fire-sale deals. That means many agents try to keep these deals secret. That’s where I come in…
Editor’s note: Ronan will tell you more about this opportunity in the current issue of International Living magazine…and one more time-sensitive European opportunity right now. He’ll also tell you about the small island country that’s ripe for investment and second home owning.