When do prices go down? Or do they?

This is a question we get asked all the time and there are many different opinions about it!
At the moment the market remains strong with high prices and many sales, despite interest rate rises in many parts of the world. The Costa del Sol is popular and many nationalities are buying here even though there has been a large decline in Norwegian and Swedish buyers during the summer due to the weak krona exchange rates. Of course, a general slowdown with declines can come, but it seems to be a slight decline in that case.
However, there are customers who always believe that prices will soon go down and therefore wait with their purchases. Whatever the state of the economy, they base their attitude on their own desire rather than the facts. Then there are others who take the plunge and invest in lifestyle.
Just like the stock market, it is very difficult to get the timing right; to buy when it is cheap and sell when it is at its peak.
But when a client asks me this question, I always ask a counter question; “What is the main reason you want to buy a home?”
There are really only three answers to that question.
1. housing
2. vacation home
3. investment

If the answer is home or vacation home, there are a number of other questions that are more relevant than whether the price is high or low. Perhaps the most important question is “Can you afford to wait?”. By this I mean not only in terms of money, but also lifestyle.
You have to have a home and many people want to get away from renting and have something of their own. In the long term, a home is a good investment as long as you’re not overleveraged with variable interest rates.
But if it’s a vacation home, what do I mean by “Do you have ADVICE to wait?”? In short, in my 23 years as an estate agent on the Costa del Sol, the majority of clients who have bought a holiday home have been between the ages of 40 and 65.
And depending on whether the customer is 40, 55 or 65, the requirements for the property are also different. A 40-year-old customer often wants a 3-bedroom apartment on the ground floor by the pool so they can keep an eye on the kids while they swim during their summer vacation. A 55-year-old client would rather pay a little more to get a penthouse far from the pool to enjoy the peace and quiet of their long weekends in the fall when they go down from Thursday to Sunday night and come back to work on Monday with new energy… The 60+ client is looking for proximity to shops, bus/train, there must be a lift and is reluctant to live on the ground floor, but also not on the top floor with a roof terrace that they don’t use. For them, it should be practical to live during the cold months of the year and they want fresh bread within a short walk.

So how does this relate to prices going up and down? Well, price cycles in Spain tend to have a length of 8-10 years. If we take the most recent ones as an example; from 1997 prices went up for ten years and by 2007 they had gone up 147%. Then there was the big banking crisis and prices went down by 41% until 2015. In 2016 it went up again until now, in 2023, it has gone up by 37% (despite the temporary drop during the pandemic).
So with that in mind, can the 40-year-old customer “afford” to wait 8-10 years before buying? Probably not, as children get older and requirements change. Can the 65-year-old customer “afford” to wait 10 years to buy their home that they will enjoy all winter? Now that they are finally retired and have time to think about themselves.

If the customer says it’s a pure investment, it’s a completely different matter! The most important thing for the customer in this case is to have the right agent who can find good properties, help with other services such as renovation, and of course sell the property at a profit. In a market with rising prices, this is an “easy job” for the agent because most things go up at the beginning of the cycle. But in the middle/end of the cycle it becomes more difficult, and when it starts to go down, you really need expertise to find the right property. But it is precisely in the downturns that the real bargains are revealed!
It is therefore important for the investor to have a good, long-term relationship with the broker. Certified professional agents, with established offices, usually get more and better properties sold directly to their client list, before they hit the open market.
When you search for real estate agents on the internet, you get thousands of websites with, in many cases, the same properties. Some pages are just landing pages with no visiting address or even pictures/info on who the agent is. A tip for investors is to research different agents before contacting them. Are they certified Spanish brokers (GIPE, API, or similar)? Are they well established? Do they have offices you can visit? Check if they have good reviews on Google or Facebook!

Then take a face-to-face meeting or a video meeting if you are not there. For the investor, the most important added value is the right broker! From the purchase to the sale.

For customers from Sweden and Norway who want to sell their home, now is a great time to bring the money back home.
For example, I had a client who bought a property from me in 2011 and got a EUR/NOK exchange rate of 7.5, when he sold he got a rate of 11.34. This resulted in an “extra” currency gain of NOK 384,000 per EUR 100,000!

For these sellers, however, it is important to list their property with an agent who works with many nationalities who have their money in Euros or dollars. This is because those agents who only specialize in the Swedish and Norwegian market do not have strong buyers right now.