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Overseas advice: how to buy a Spanish second home at below market value

Despite it being not far off 15 years since the global financial crisis, the fallout is still being felt in the Spanish property market, which was one of the most devastated by the banking crash due to the number of developers that went bust in that time.

Property law specialists CostaLuz Lawyers says that many homeowners continue to pay ‘eye-watering mortgage payments’ for properties that have fallen in value by as much as 40%.

Meanwhile, figures from the Global Property Guide’s January 2021 update on Spain highlight that nationally the country’s house prices are about 23% below peak levels. This rises to 32% below when adjusted for inflation, while in coastal areas where prices soared in the boom years, the figure can be much higher.


Keith Rule, UK office director of CostaLuz Lawyers, said: “We’re working with a number of property owners who are in negative equity and looking for a quick exit from their property ownership. Rather than getting to the point of repossession by the bank – which neither the owner nor the bank wants – we are acting to find buyers to step in and purchase the property.”

He added: “With the right legal arguments, we’ve found that many banks are willing to accept a buyer at prices below market value in order to progress a sale and avoid repossession.”

The firm says that, for buyers nowadays, prices and interest rates are a totally different story than they were during the boom years, with those seeking second homes, or even primary residences, in popular tourist areas potentially benefitting from some superb deals available at present when using a service like the one offered by CostaLuz.

For sellers and banks, such a service ‘usually provides the only solution other than repossession’. With property values below the level of the outstanding mortgage debt, sale on the open market is not a realistic option, but an ‘easy sale, presented by legal property experts making just the right arguments, can work for all concerned’.

“We’ve been negotiating these kinds of deals between sellers, banks and buyers since 2012,” Rule insisted. “With nearly a decade of experience in this area, we are well-placed to help buyers achieve the prices they need.”

He concluded: “This frees sellers from their negative equity position and saves banks the time and expense of repossessing and then selling the properties themselves. We would certainly encourage any buyer looking for particularly good value to consider this route into Spanish property ownership.”

While there are strict restrictions on Brits going abroad and entry into Spain at present, there are set to be new coronavirus regulations coming into force later this month which will enable people to leave the UK to prepare a second home for sale or rent. 

The latest restrictions, applying from March 29, will contain a number of specific “reasonable excuses to travel” outside the country, including what Labour has branded as “the Stanley Johnson clause”.

The exemption will allow people to travel abroad in connection with the purchase, sale, letting or rental of a residential property, with these activities including visiting an estate agent, developer sales office or show home, viewing residential properties to rent or buy, and preparing a property for moving in.

While welcoming this, Rule also sounded some words of caution. He said: “It’s excellent news that British second home owners will be able to travel overseas once more from March 29 in connection with the purchase, sale, letting or rental of a residential property. With so many owners having been frustrated by their inability to travel, we expect to see a rush of activity within the sector.”

However, he added: “We urge second home owners, or those planning to purchase second homes, to continue to make decision with their heads, rather than their hearts, and not rush into anything without due consideration and independent legal and financial advice.”

It's not 100% clear if the exemption includes exemption from quarantine, although it seems very likely that people returning would still need to isolate for 10 days and take two tests on day 2 and day 8. Meanwhile, there is no guarantee that people will be able to enter the place they have a holiday home, or one where they're looking to buy, without needing to quarantine there.

Given the current situation, flights are still very volatile - with many being cancelled at short notice - and restrictions vary in different parts of the world, with parts of Europe currently trying to prevent a third coronavirus wave. So it's likely anyone leaving the UK will still face considerable challenges even once the exemption is introduced.

Demand for a Mediterranean bolthole increases

Things are also looking up for one of Spain best-known islands. According to Engel & Völkers Mallorca, which has 18 property shops and over 30 years expertise on the island, the first two months of this year registered a 64% increase in internet requests over the same period in 2020.

The firm said this demonstrates that the pandemic does not seem to have dampened clients’ desire to purchase. It puts this down to the island’s easy access, year-round sunshine and modern infrastructure.

The island’s location in the middle of the Mediterranean provides direct access to all of Europe’s main cities, each within two to two and a half hours flying time away. This, along with the ‘obvious advantages’ of approximately 300 sunshine days per year, a modern infrastructure and ‘great variety of landscapes and culture’ provide the ideal base for many overseas clients, the agency argues.

Such clients make up more than 44% of the buyers on the island, according to figures from the Ministerio del Fomento taken in Q3 2020.

Spring surge in demand

In Mallorca, fields of almond blossom signal the arrival of spring and increased interest from potential investors. Typically, they are looking for their own private space either in the countryside, with gardens and land to grow their own food, or close to the seaside in ‘light-filled modern villas’.

Engel & Völkers says wherever the clients are looking, they want to enjoy Mallorca’s open-air Mediterranean lifestyle and climate, and are keen to visit as travel restrictions start lifting and the Balearic Region starts to open up once again.

“Mallorca ticks all the boxes for our clients who are looking to invest in the island where the premium end of the real estate market has remained stable despite the rollercoaster year we experienced in 2020,” Florian Hofer, managing director of Engel & Völkers Balearic Islands, commented.

“This year has started beyond our expectations with a substantial increase in internet requests underlining the confidence in the island’s market and as a result our sales have got off to a good start. None of us know what 2021 will bring but as the region starts to open up, it’s clear that the demand for Mallorca is as strong as ever.”

How to buy and finance luxury property in France

Heading to Spain’s near neighbour and news that Enness Global, one of the world’s leading high-net-worth mortgage brokers, has released its latest market insight detailing how best to approach a high-end property purchase in one of the world’s HNW locations of choice.

The guide includes advice and information on the residential mortgage process, equity release and finance, property development, bridging finance, assets under management vs dry lending, the legal process, structuring and tax summary, search and negotiation, development and refurbishment, a local look at Paris, the French Alps, Côte d’Azur, Cannes and more, and a timeline to buying in France.

“France is, of course, one of the most popular property markets for foreign nationals: we are all aware of the chic appeal of Paris, the enduring allure of the Riviera in the summer or the freshness of the mountains in winter,” Islay Robinson, chief executive of Enness Group, said.

“However, buying a property in France, especially as a foreign national or non-resident, is particularly difficult. France’s legal and financial systems are unique. Culture and customs are often a learning curve. Then there’s language, time zone and other complications to deal with (not to mention navigating the three-hour lunch breaks).”

He added: “Here at Enness, we are lucky to work with many of the leading experts in the French market: real estate agents, search agents, notaries, and developers. Together, we cover every aspect of the French property market and the buying process. Our guide is a comprehensive and collaborative attempt from each of these firms to lay out the French market, dispel some of the myths, unravel the questions, and give some market-leading tips and tricks into the French market.”

You can receive a free copy of the guide via email by registering here.


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