A new Spanish property boom or a bottom-feeding frenzy?

IN one of my first columns for The Olive Press this January, I wondered aloud if the bottom of the housing market was behind us and if this year would see a real recovery. I’m still wondering…

As I write, now midway through 2014, southern Spain’s property market seems in much better health, at first glance, and some agents and clients are even using the ‘B’ word, again. (As in ‘boom’…)

There are signs of a rebound – a reliable barometer of trade is new businesses setting up shop. Travel Marbella’s Golden Mile and you’ll find at least five agents have opened in the last 12 months. Puerto Banús is awash with shiny office suites and salespeople, hoping to reel in a well-heeled client or two.

Elsewhere on the coast, colleagues are taking on more staff to cope with fresh demand. And, at Terra Meridiana, we are also looking to hire someone, to serve the rising wave of buyers and sellers who walk through our door.

This is good news for the local economy: more jobs, more taxes, and more benefits for all who live and work in the area. But some aspects of this market also remind me of the last boom.

I was in a developer’s offices a few weeks ago, when my client made what I felt was a very solid offer on a new home. The developer’s representative replied the price was non-negotiable and if my client didn’t put down a deposit immediately, the unit would surely sell the following week. It didn’t, I hasten to add, but, five weeks later, it had.

The doomsayer of the 2008 crisis, Nouriel Roubini, predicts another bubble is forming in Northern European hotspots, in a world driven by cheap debt and what he calls “inflation-hedgers”. He doesn’t mention Spain, however, which is not surprising, as we are clearly not in boom territory.

So what is happening? My view is there is a general feeling, among most clients, that we have hit bottom and now is as good a time to buy as any. Whether current activity is just a feeding frenzy, or the start of a real, sustainable recovery, is still impossible to tell.

Unlike last time around, where there was always another home to sell, we have a problem finding stock, particularly in premium locations at the higher end of the property ladder. The market is tightening and it’s tougher to source quality properties. Bargains are also harder to find, as you’d expect, especially in desirable areas. This is, undoubtedly, having a positive effect on the market.

At the same time, there’s now a market for plots, where once there was none, because buyers cannot find what they want already built and ever more clients are considering fixing up older properties to their tastes. We may not see a skyline of cranes for some time (and, hopefully, never again) but look around and you’ll see construction in many areas.

Prices are still low down here; try to find an equivalent property in the south of France and you’ll have to pay many times more. Price will be the real test of recovery, I reckon. In a boom, people are confident about buying because prices keep going up. In the current market, they are buying with confidence because they think Spain cannot possibly get any cheaper.

Increased activity one day, leads to rising prices the next. The leading valuations firm, Tinsa, recently announced average house prices fell by just 4% in May, compared to more than 10% in the same month last year, indicating a plateau, perhaps, has been reached as things bottoms out.

As a result, we have already begun to see a re-balancing of power from buyers to vendors. Only when prices really begin to rise will we tell if all this market activity is sustainable. I would like to think it will be but, this time, let’s hope for a longer stretch of gradual growth, rather than another bubble about to go ‘boom!’