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30 May, 2017
The financial crisis took its toll on the Spanish property market but now, almost ten years on, things are turning around thanks to an injection of investment from overseas investment.
In the UK, there is still an element of uncertainty following the Brexit decision but lenders are starting to put their hands in their pockets again and this has boosted the way in which investors are investing.
In Spain, buyers are starting to grow in confidence with a large number of foreign nationals looking to move to the country permanently or purchase a second home. This means that almost 15% of properties for sale in Spain were purchased by foreign buyers with British Nationals heading up the table.
Following the EU referendum, investors have still shown that they have a strong will when it comes to investing in Europe. Many markets in Spain were badly damaged because of the financial crash; however, some development lenders in the UK have been willing to lend which has made making the most of bridging finance an attractive prospect in Spain, in order to help growth, continue.
However, when it comes to the Spanish market, lenders, investors and developers need to consider the risks as well as any legal pitfalls. The following factors are crucial:
Investors and lenders have trust issues following the crash in 2008. The terms offered are now lower than that of the UK but a shortage of bank finance in Spain has meant that some of the more prominent lenders are not will to lend. However, if they do, they often only offer 50% LTV or even lower. In the UK, LTV’s are as high as 70% and are accessible making it easier for developers to obtain finance.
In Spain, finance is priced higher than the UK and this is down the difficulties mentioned above. Despite this, if the risks are reduced, Spain is an attractive place when it comes to investment for lenders.
True and Honest Assessment
The planning process in the UK is one that is transparent but the same cannot be said for Spain. Therefore, it is important to ensure that permissions are valid and complete assessments of the costs of development are considered.
The Legal Side of Things
In the UK, solicitors play a large part in the purchase of a property and the costs of doing so are settled upon completion. However, in Spain, the costs are paid upfront which means finding the finance to pay for this before it all begins. In contrast to the UK, notaries are used to help finalise a transaction so it is important that these are put in place in plenty of time.
In certain areas of Spain, stock levels are relatively low with a prime example being properties for sale in Marbella. This is down to problems associated with planning a reduced amount of bank debt. As demand increases and bridging loans become more popular to plug the hole in stalled developments, now is the right time to consider Spain as an investment opportunity but ensure that due diligence is carried out in a thorough manner.
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