SPANISH PROPERTY – A BRITISH PUZZLE!

This is an odd time for Britons as far as Spanish property is concerned. The massive fall in the value of Sterling against the Euro, over the past two years, has really complicated everything. This is as true for those currently owning property in Spain who want to sell - as it is for anyone who wants to buy a Spanish property.

The conundrum, of course, is: what will Sterling do in the mid-term? This may seem an esoteric question but any significant change in the strength of Sterling could be profound for both Spanish property buyers and sellers alike.

At the moment, the fall in Sterling for current owners of property in Spain has been a mixed ‘blessing’. The bad news is that Sterling’s fall against the Euro has reduced any UK derived income by around a third (if we take 1.40 Euros to the £ as the old ‘benchmark’). This has devastated the finances of many people, particularly those relying upon a fixed Sterling income.

Indeed, Sterling’s weakness has made continued life in Spain almost impossible for some Britons - who have been forced, often reluctantly, to place their Spanish property for sale. This is, invariably, so that they can return to the UK and regain the purchasing power of their Sterling income or re-enter a job market less shattered than Spain’s.

Obviously, the sheer amount of Spanish property for sale on high density British estates has also acted to reduce the sale prices of all the surrounding properties. This is the cruel operation of the ‘law’ of supply and demand and has acted to further exacerbate the position of any desperate Sterling seller.

Within all of the bad news for British sellers of Spanish property, there is one factor that is good news – although it has an obvious danger. The Euro is now strong. Indeed, a British seller (intending to return to the UK) can drop his sale price by around 30% with impunity (unlike his European and Spanish counterparts) – given that the Euros he will receive upon his sale will (depending upon when he bought) make up for this price drop.

In other words, if someone bought a property in Spain for 300,000 Euros with Sterling at 1.40 then it cost them £214, 285. Now, give or take, they can sell the same property for around 235,000 Euros and still get their money back – leaving aside taxes and expenses etc.

However, of course, this situation will last only as long as Sterling remains weak against the Euro. If Sterling starts to rise then a British seller’s unique latitude to drop his price ‘artificially’ will be eroded. Of course, the purchasing power of his UK derived income will rise but, in my experience, once someone wants to sell then their mind is made up. Indeed, few people remove their Spanish property from the market once embittered by a life in Spain that simply did not work out - irrespective of the fact that the main cause was the volatility of exchange rates.

That said, for a Briton who wants to buy Spanish property, the strength of the Euro has not been helpful. As the example above shows, in effect, there has been no price change at all - if someone tries to sell his property at 235,000 Euros now instead of its 300,000 Euros price tag a couple of years ago. Whilst the price reduction may look good – on a closer analysis, to a Sterling buyer, it amounts to no drop at all, despite the property crash. So, most Britons can still find Spanish property to be expensive, unless it has been discounted by a seller way beyond 30%.

Of course, the ‘winner’ in all of this is a non Sterling European (with cash) who wants to buy Spanish property. He is in as favourable a position as his Euro compatriots, trying to sell their property in Spain, are disadvantaged. Indeed, Euro sellers must be appalled to see the sale price decreases the British can afford to make!

So, what does all this mean?

Well, as a British seller, intending to return to to the UK, it means that you must keep an ‘eagle eye’ on the respective strength of Sterling and the Euro - and then be proactive to change your sale price continually, as appropriate.

Certainly, if you really want (or need) to sell your property in Spain then you must take advantage of the Euro’s strength right now. This just may(!) be a golden opportunity for you to be able to drop your price (on the face of it) to absurd levels - without suffering too badly. Indeed, my ‘gut’ instinct is that you should act fast and decisively to do this, because Sterling may just go up and hold its position. If this happens then you may have lost an almost unique chance to sell on price alone – which, at the end of the day, is what tempts most buyers.

On the other hand, if you have Sterling and want to buy Spanish property then this is possibly a time to ‘watch and wait’ to see if Sterling strengthens. Alternatively, it is the near-perfect time to look for property in Spain on high density ‘British’ estates. These, for the reasons stated above, are far more likely to have superb distress prices than their Spanish or European counterparts.

Finally, what will Sterling actually do over the mid-term? Frankly (as of early 2009), I have no idea at all! That really is an esoteric question and probably a puzzle to us all. All I know is that its movements have very significant implications for us Britons and property in Spain...

SPANISH PROPERTY – BEACH APARTMENTS IN SPAIN

Even in this dreadful recession, it is hard to imagine that the desire for apartments in Spain from North Europeans will subside. It is one type of Spanish property that will always be popular. Certainly, few things are more more desirable than owning a low maintenance, low cost (and safe) holiday home. Indeed, to have somewhere convenient and familar for breaks away in the sun is, surely, one of life’s ultimate luxuries?

The problem, as everyone knows, is that the Spanish property market is in crisis, which has been largely due to massive overbuilding. This is true of every sector – not least that of new apartments in Spain.

So, what makes one apartment in Spain better than another? How should you assess what you are buying - and how can you purchase something that will retain its value or (over time) become a sound investment?

Of course, ensuring absolute legality (see my book!) is one of the most fundamental aspects to buying a Spanish property and this is as true of apartments in Spain as it is of the more problem prone sector encompassing villas in Spain. However, apartments in Spain have their own particular danger and this revolves around the 1988 Coastal Law (Ley de Costas).

The Coastal Law was designed to protect the integrity of the Spanish coastline – and in particular the beach area and the first 100 metres from the nearest point reached by the sea. As I have written elsewhere:

The Coastal Law ‘divides’ the coastline into two areas of protection. The first is the ‘public domain’ which is, crudely, the area between the sea and the furthest point which the sea has touched in the worst known storm. This includes all areas of sand, shale and pebbles.

The second area of protection is divided into:
- The Protection Zone. This is the first hundred metres inland from the public domain (although this area can be extended a further hundred metres by the Spanish state, autonomous region or local town hall). No building of any nature whatsover is allowed within this area.
- The Zone of Influence. This area extends for 400 metres inland from the Protection Zone. Building is allowed - however restrictions are applied on a reducing scale of severity as you move inland from the sea.

Obviously, some properties in Spain were built within 100 metres of the sea prior to the Ley de Costas being passed. These can be subject to a ‘concession’ meaning that they can avoid demolition. However, any ‘concession’ must be treated with the very greatest possible care and should be subject to expert, independent advice from a Spanish land law specialist.

Needless to say, the Coastal Law has been erratically enforced over the years. This has resulted in the construction of a number of Spanish properties (including villas in Spain) that oftenly blatantly transgress the law. To put it mildly, this type of puchase could be disastrous - should the authorities decide (as they occasionally say they will) to enforce the law and demolish the offending buildings...

My point is that you must be very wary of buying an apartment in Spain that is too close to the sea and that could be deemed to come under the Coastal Law restrictions.

Of course, typically, the best apartments in Spain to buy are those that are ‘front line’. Everyone wants an unobstructed ‘sea view’ and quick, trouble-free access straight to the beach. As a consequence, it is these properties that are most in demand - and it is these that have retained their value and are excellent investments for the future. This is particularly the case if a ‘front line’ apartment in Spain is within easy walking distance of a lively area with shops, bars and other amenities.

Certainly, the importance of proximity to amenities should never be underestimated, if you want your apartment in Spain to be a sound investment (and to be able to really maximise its use). The Spanish coastline is long and there are countless coastal apartment blocks stretching for miles away from any coastal town or village. However, many are often far from any real amenities and (normally) cannot be compared in value or desirability to those reasonably close to a pretty, lively and permanently lived-in area.

A ‘permanently lived-in’ area is especially important, not least because many coastal apartment blocks are virtually ‘closed down’ out of season. Worse still, this is also true of the one or two surrounding bars or shops that are often open only during the Easter or summer period.

Without doubt, the glory of Spain is the all-year round, excellent climate and few things are more depressing than taking a winter sun holiday in an area that is almost completely ‘dead’ out of season. A canny buyer will always recognise this point and ensure that any apartment in Spain he buys - is not dangerously compromised for most of the year. This affects not only personal enjoyment of the property but also, obviously, its re-saleability and potential investment value. This, of course, is just as true for villas in Spain...1

WORK IN SPAIN – A PERSONAL VIEW OF SPANISH CULTURE AT WORK

I have spent the past seven years working in Spain - which has been a somewhat interesting experience. In a way, it has enhanced my life in Spain. Certainly, within the predicatable frustrations of normal day to day work, it has provided a fascinating insight into Spanish culture – or, at least, the working Spanish culture of our area.

I am, of course, a journalist and author - so most of my time is spent writing. Unfortunately, this is rarely profitable enough to avoid having to work for real! So, during the past seven years, I have also had to work in Spain, at times, conventionally. This has included acting as a management consultant to two estate agencies selling Spanish property and as a marketing consultant to other unrelated businesses.

So, you may well ask, what is it like to work in Spain?

Well, firstly, I must emphasise that my experience of working in Spain has been restricted to the Comunitat de Valencia (an area that stretches down much of the middle to bottom part of east coast Spain). So, it may not be representative of the rest of the country. Indeed, even to speak in terms of anything to do with Spanish culture (whether social or working) is, to some extent, always going to be little more than a generalisation. Spain is nothing if not vast and has very significant regional variations. That said, I suspect that much of what I have experienced is reasonably true for much of the country:

If you wish to work in Spain, the first thing to appreciate is how, in most areas, Spanish businesses seem to operate within a very personal network of close contacts – often extended family. All of these are frequently interwoven with other businesses which are often completely unrelated. For example, the head of one business (sometimes even a very small one) can often be connected, quite unexpectedly, to other businesses that you never realised had anything to do with the person concerned. This can make working in Spain a somewhat hazardous matter. Upset one person and you can find that you have, unwittingly, upset a whole range of completely ‘unrelated’ people – running a series of businesses potentially important to you!.

Of course, tight social and working networks have their advantages. If your work meets with the approval of one person - your reputation can spread firmly within that particular local ‘circle’. The trouble is that this is organic growth at its slowest - and it is very difficult to accelerate! Unfortunately, Spain (or at least the Comunitat de Valencia) seems to work on personal recommendation to (almost) the exclusion of all else.

As a consequence of the above, it is vital to understand the importance of an ‘enchufe’. Strictly speaking, this is Spanish for an 'electical' plug – however, in human terms, it means something quite different and something that few North Europeans ever seem fully able to grasp. This is despite the fact that understanding the importance of an ‘enchufe’ is fundamental to success for anyone working in Spain.

An ‘enchufe’ is someone with ‘connections’ i.e. someone influential either in a social or work sense – although both, as I have mentioned, are generally inextricably interwined. This is the type of person who can introduce you to contacts (and contracts) way beyond your ‘pay scale’. An ‘enchufe’ is absolutely vital in a range of multifarious ways and can get you out of trouble - or make the critical difference between your work in Spain being a success or failure.

Needless to say, ‘enchufes’need to be treated with great care together with an absolute recognition that a favour asked - is one to be repaid at some time. Misunderstand this concept and any work in Spain (connected with the Spanish) will be an uphill struggle! So, identify an ‘enchufe’ - critical to your work - and make sure you look after him (or her) even if, at times, the relationship can feel strained, artifical or lop-sided!

Spain is, of course, the land of small businesses. This is not say that there are not ‘big’ businesses but that most businesses are small and family owned. So, much of the time you are likely to be working in Spain with business people (outside of the major cities) who are somewhat parochial. This tends to mean (as a dangerous generality) that they are not always very sophisticated. This may be the reason why doing business in provincial Spain can sometimes feel a little bit ‘manana-ish’ (if there is such a word!) and sluggish.

Certainly, I have had countless meetings with some very dynamic sounding (and looking) Spaniards who, at the time, seemed to have definitely understood a particular proposal – and given it the green light. Unfortunately, all too often, nothing actually happened in reality. This may, of course, have something to do with the lunacy of my own proposals! However, if it does, then it reflects a common feeling (amongst British business friends) that the Spanish are sometimes infuriatingly reticent (maybe from politeness) simply to say no or that something is rubbish! Either way, my own experience is that it can be hard to ‘nail down’ a contract – despite being under the very distinct impression that everything is going ahead.

None of this must be taken as meaning that it is impossible to work in Spain or that the Spanish do not work hard. That would be to completely misunderstand my experience. The Spanish work extremely hard and labour for long hours for little pay. They are a delight to work with and invariably charming and fun. In fact, I have no doubts at all that my life in Spain (and that of my wife) has been enhanced by working here.

However, recognise that working in Spain is different from the UK and that you have to find a strategy that works for you. This, by definition, should take into account all the wonderful parts of Spanish culture - together with those parts that can make work in Spain, at times, exasperating!

In other words, be prepared to adjust your expectations and normal working practices to suit the different environment of Spain. If you do this successfully then your life in Spain and any work in Spain that you do - will be both fulfilling and rewarding...1