Where to start with the Spanish property market? Millions of homes effectively repossessed by the banks, hundreds of ghost developments – half-built, filthy and awaiting the bulldozer – and buyers at the height at the middle of the decade nursing losses as high as 70 per cent. But there is another side to the Spanish market as Richard Way, Editor of The Overseas Guides Company and a British expert on the Iberian market, explains.
"Most people think of Spain in terms of the lower end of the market where there was massive overdevelopment and price collapse in parts.But at the top end, I am being told, things are now more buoyant with international buyers including the Russians and Chinese coming to market and stabilising prices at least," Mr Way says.
The likes of PGA Catalunya and Sotogrande – both based around world-class golf resorts – are reporting a rise in sales despite the economic turmoil in Spain. "Buyers are fed up with being let down by property developers and their promises – they want to buy on a mature development. First we built the golf course, hotel, infrastructure and then we started to sell the villas and apartments," says David Plana, PGA Catalunya Resort's corporate director.
Catalunya is unlike the archetypal Iberian golf resort. It is low density, set in 300 acres of forest, sensitive to the environment, and properties are built to owners' specifications in many instances, with traditional and modern sitting together seamlessly.
Prices start from ¤250,000 (£217,000) for a one-bed apartment, two-bed apartments at ¤350,000 and three-beds at ¤575,000. Semi-detached villas start at ¤ 695,000 and plots of land for owners to build on – with the help on-site architects –from ¤380,000.
The development is also not in prime property-building Spain but in the north-east, 10 minutes from the picturesque town of Girona and 45 minutes from the cultural heart of Barcelona. Mr Way, who has a villa in the Catalunya region, says the area has a very unique appeal.
"You are near the Pyrenees for skiing, you can hit the beach, and you have Barcelona. Transport links are fantastic, too, with Eurostar connections taking you into the heart of the province. Also, because it can be cold in the winter you don't find as many retirees, which has meant that there is nowhere near as much development as in, say, the costas."
At the other side of the Iberian peninsula – just to the east of Gibraltar – is Sotogrande, which is most famous for its five golf courses including Valderrama, which has hosted the Ryder Cup. A major development, spread over 4,500 acres with a marina and nestled on a hillside overlooking the Mediterranean, it is a mature development – started in 1962 – with the infrastructure in place and, like PGA Catalunya, Sotogrande has managed to keep buyer interest even despite the economic pain in Spain.
"Prices have fallen here since the height of 2007/2008 by around 25 per cent but that's nothing like the 70 per cent seen in other parts and on less mature developments. But in the last year or so prices have stabilised, we are seeing buyers from Spain here and a quarter of our clientele is currently from the UK, despite the strength of the euro against the pound," says Michael Norton, the sales director at Sotogrande.
But wherever you look in Spain – from the high-density costas to resorts like PGA Catalunya or Sotogrande – there are extra factors to take into account. First, there is financing.
"About half of our buyers have cash but the rest use some sort of financing. We have strong relationships with the local banks and it's possible to get mortgages at 70 per cent loan to value," Mr Norton says. Property on Sotogrande starts at ¤350,000 for apartments, ¤490,000 for town houses and ¤690,000 for villas.
The Spanish banks, though, with so much repossessed property on their books, are saving their best mortgage deals for people coming direct to them. "It is possible on some of the bank-owned developments to get a 100 per cent mortgage but remember this is non-transferable so you can't take it with you if you choose to trade up the property ladder. Also because it is offered it doesn't mean you should accept it – you may be buying into a development with a poor infrastructure or so far away from the coast it is difficult to resell," Mr Way cautions.
In addition, the Spanish government has just introduced a nationwide property transaction tax of 8 per cent. Previously the regions set their own tax rates and some were considerably lower than 8 per cent but cash-strapped Madrid has put a stop to this. Overall, Mr Norton estimates buyers in Spain should set aside at least 12 per cent of the purchase price for taxes and fees.
And there is something else British buyers have to take into account – currency fluctuations. In the past two months the euro has appreciated against the pound by 6 per cent. That could make a massive difference to a buyer's bottom line. "If you're stretching yourself to buy, be aware that the pound and euro are pretty volatile at the moment and if currencies move against you it can hit you hard in the pocket," Mr Way says.
One way to counter this is to buy a futures currency contract, paying a fee to a currency broker for the option to buy currency at a set rate at a set date in the future.
However, on the upside it does seem that in the high-end resorts in Spain there is a degree of recovery underway, with buyers returning. And this, according to Mr Way, is just beginning to seep out into the wider market which may give hope to Britons who invested during the property market frenzy of the past decade.
"I'm seeing properties in nice locations in the costas for instance beginning to make a bit of a comeback. Ultimately, Britons still love Spain and that should ensure long-term interest," he says.