“Boom or bust”

Description

Added value

Related topics

Real Estate

The Spanish real estate sector has experienced tremendous growth during the last ten years. Such growth has attracted many foreign investors from second home buyers to project developers. Both classes of investors belong to our clientele.

There are many reasons behind the “boom” in Spanish real estate over the last ten years:

1. Never before in Spanish history have interest rates been so low, a fact that enhanced the purchasing power of the Spanish citizens.

2. In general terms, the Spanish invest their savings in their house or apartment. Spain has the highest percentage in the European Union of households (92%) that own houses as compared to rentals.

3. Spanish local (municipal) administrations took part in the speculative tendencies by limiting and delaying the assignment of land for development through unclear processes.

4. The influx of five million immigrants pushed demand at the lower end of the market and the purchasing power of numerous EU citizens who, thanks to lower airfares, are purchasing in Spain and the growing population of retirees who have decided to establish themselves in Spain.

Investors and owners whose land was converted to building land saw the value of their property sky rocket.

Assuming that the municipal zoning plan allows it, any individual can file for a permit for project development of a piece of land. There are many municipalities where project development through transparent and efficient procedures is possible.

Unfortunately it has become clear that there are some municipalities where cases of corruption or unjust enrichment have been discovered. The case of Marbella is a widely known example.

Will there be a “bust”? The recent increases in interest rates might give foot to strong movements in the real estate market. If that happens, undoubtedly new opportunities will present themselves.

We follow the legal developments and movements in the Spanish markets closely. Due to all that is at stake and the disagreements that mark the Spanish political landscape, (constant) changes of rules and regulations seem likely, although it is difficult to predict what kind of changes.

There are reasons to watch the current market situation closely. Given the current upward trend of interest rates it is possible for a number of property developers to get into financial trouble and they or their banks may be forced to sell their projects at lower prices or even at auctions.

At first, the Spanish banks could be tempted to maintain these projects under their control, selling bits and pieces in order to not disturb the market. You can count on our expertise to enter into negotiations with such banks if that happens.

Auctions are not highly transparent, but the lawyers of De Haan & Mulder can count on their experience with this kind of procedures and, if push comes to shove, will help to guide you through the process.