Brits and Spanish property – buying habits and new hot spots
A report from Currency UK Ltd
London, 14 November 2005
Currency UK’s team of foreign exchange specialists spend much of their time assisting Brits transfer their funds abroad for property purchases, with Spain being the most popular destination. “Over the last few years we have seen several new areas gain in popularity and overtake the traditional destinations on the south coast,” says Adrian Jacob, Trading Director at Currency UK Ltd. “So we decided to commission some research to identify and clarify these trends.”
The research was carried out within Currency UK’s network of estate agency partners and other contacts in Spain and also referenced a number of government publications.
Murcia
Currency UK identifies Murcia as the most popular new destination for the 70,000 Brits buying property in Spain every year. “Between 2001 and 2003 there was a 200% increase in buyers from the UK and the rest of Europe”, says Hukes Pfeyffer, Barclays International Business Development Director in Spain.
Murcia airport now has about 20 flights a day from outside Spain, easyJet fly from Bristol and Gatwick and GB Airways, flying under BA’s flag, is currently advertising a Gatwick-Murcia service from £69 return.
Murcia saw the fourth greatest rise in property prices over the last 12 months, according to the Spanish Property Insight website (www.spanishpropertyinsight.com) in its report for the first quarter this year. Inflation there was running at 17%; Andalucia at 17.9%; Valencia at 18.3% and Castilla la Mancha at 23.5%.
However, the Insight’s editor, Mark Stucklin warns: “Murcia still has a ‘frontier’ character that can translate into highly unprofessional practices, so buyers should proceed there with caution.”
Tim Hodges, managing director of County Home Search International, which finds Spanish properties for British buyers, adds: “Murcia is definitely of increasing interest to British buyers for three reasons. It has traditionally only had old-style property, but now it is an emerging property centre. Secondly, there is a new airport and thirdly, there are the big players like Polaris World coming in with golf resorts to join the existing La Manga Club.”
Mallorca
There is something of a sense of celebrity attached to Mallorca. This can perhaps be traced back to 1929 when British poet and author Robert Graves moved there. Michael Douglas and Catherine Zeta-Jones have a house in Valldemossa, Boris Becker and Claudia Schiffer both have homes on the island and Andrew Lloyd Webber recently cited Deía as the “gastronomic capital of the Mediterranean”.
The growing interest in Mallorca is reflected in the property inflation on the island. This is running at 5%-18% a year, says Sebastiaan Kemna of estate agents Mallorca Hot Property.
He sees the best investment in new developments as the licences for these have now run out on the island, and therefore prices could rise by 20%. Two to three bedroom flats can be rented out at £720 a week in the high season. On the East Coast where property is cheaper, new two bedroom flats cost €200,000 against €267,000 on the South-West Coast.
Combined statistics from the Office for National Statistics and the Housing in England Report (2003/04) suggest that rental income from British properties abroad totalled nearly £190 million. Spain represents the bulk.
Inland trends
“Many of our customers are now looking further inland, seeking the peace and quiet of a rural setting” says Jacob. Mark Harvey, managing director of Cluttons estate agents in Marbella, sees the move away from the sea set to continue. “There’s a new generation of British buyer, who’s more savvy and wants something more authentic away from the coast,” he says.
“Old-timers are also leaving the coast as it’s not what it was 20 years ago. All over Spain people are much more adventurous.”
Two inland areas generating particular interest at the moment are:
Extremadura
Harvey points to Extremadura, which lies above Andalucia, as a popular new destination. “The attractions are price and authenticity; there are no grotesque hotels or holiday resorts, but it’s back to nature. Brits buy old wrecks for nothing and do them up.”
Spanishpropertyinsight.com states in its first quarter report that Extremadura remains the cheapest province for property in Spain. However, this might not continue for long as in the first three months this year prices rose by ‘a robust 15.5% year on year’ against the national figure of 15.7%.
Onteniente
Another inland area to watch out for is the town of Onteniente in the region of Valencia, predicts Vince Barnes, Currency UK’s agent in the area. “Onteniente is the future of the housing market,” he says, “as it’s a very big place with excellent infrastructure connecting it by motorway to Alicante and Valencia.
“You can get a three bedroom house with a pool there for €100,000 while the average price that Brits pay for a two-bedroom flat on the coast is €150,000.” Vince Barnes is also the principal of Spanish Property Direct in Valencia.
‘A-Day’
A-Day (6 April 2006) will see the Government change the rules determining what kind of investments can be held by individuals within their pensions. Potentially this will allow houses, including overseas homes, to sit inside tax-efficient Self-Invested Pension Plans.
However, the trustees of Sipp funds must approve the location of a home bought for a pension plan and Sipp providers are yet to confirm which areas will gain approval. Decision criteria are likely to include the tax regime in the country in question, clarity of the property purchasing process, transparency of title deeds and evidence of a strong resale and rental market. According to a recent article in The Observer, “Established holiday locations – Costa del Sol, Costa Blanca and Mallorca will be strong” in that they have a proven rental income potential.
So, if you are considering taking advantage of the new rules, seek professional financial advice and focus your search for property on well established locations.
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