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9th August 2007

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Do not believe the hype! There is more than one property market in Spain and some are performing very well!

Negative media reports of last week's stock market slide focused on only one aspect of the Spanish property market. Some people are doing their best to talk the Spanish property industry into a crash but their arguments are built on very poor foundations.

There has indeed been a sudden dip in the average value of property companies on the Madrid stock exchange. But, when their stocks had risen by an average of 65% in the past year, that's not really too surprising.

We are seeing a correction rather than a crash. And much of that correction appears to be based on the faltering performance of one single company which has speculated on land prices. I believe that some investors have become victims of their own over-confidence in the performance of property assets. Spanish property company shares were clearly overpriced and investors are bailing out after finally recognising that prices cannot keep growing. This could be good news for the property market as a whole, as it will reduce the vast gearing of listed property companies and reduce the high levels of house building which has led to some oversupply in some regional markets.

Like any property market, in any country, performance is defined by a range of factors and varies by region. There is a distinction between the domestic market, where Spanish nationals have taken out large mortgages and even re-mortgages to finance a “two-household or more” lifestyle, and the non-resident market of UK and other Northern European buyers who still see Spain as their favoured destination. While some developers are now suffering the consequences of over-supply as the full impact of a buyers market kicks in, others at the luxury end are still seeing healthy sales.

There is still a steady growth in the value of properties on golf resorts, especially in new hotspot areas such as Murcia, home of the Polaris World golf resorts, where prices have increased significantly in recent years. The reasonable conclusion to draw is that there is not just one Spanish property market, but rather a variety of them which are all performing very differently.

Developers in over-priced areas will have to be more realistic with their prices. Some regions still offer plenty of growth and the Spanish Housing Minister's viewpoint that the real estate market as a whole is heading for a soft landing rather than a crash seems perfectly reasonable as there are many pockets of the country that remain undervalued, the Murcia region being one of them.

Murcia is already up to 40% cheaper than the Costa del Sol for example and those that have bought for investment are already sitting on a profit, whilst new entrants to the market here can be reassured that they are buying under-valued rather than over-valued property.

Spain still represents a good long term investment and rental returns for holiday lets are superb. Interest rates are lower than in the UK and the mortgage market is becoming more liberalised whilst tightening up against illegal and low quality builds

Much of the inflated confidence in Spanish property has been due to speculation, with investors driving up prices through off plan purchases in recent years. There is now a trend back toward the lifestyle buyer. Leading Spanish property agents report that when they were selling properties in the late 90s for example, customers wanted a second home, a holiday home, a place to retire to, an investment or all four. Whilst Spain is still the country most people want to go to, today’s investment is more in the quality of life, healthcare, accessibility, climate and the cost of living.

Spain remains the number one choice for British buyers investing overseas and the recent emotive headlines should not deter people from moving there. In spite of negative publicity, UK and Irish buyers are still coming to Spain in their droves. Rightmove Overseas reports a 92% increase in enquiries for Spain during the first quarter of 2007, compared to the same period in 2006. The increase in searches has largely been driven by emerging areas as well as the recent surge in the popularity of Spanish golf resorts.

James Espin
Marketing Director
Overseas Property UK
1 May 2007

About Polaris World & Polaris Golf Property UK

James & Debbie Espin are Directors of Overseas Property UK, the parent Company of Polaris Golf Property UK which specialises in the promotion of property for sale on the unique family of seven Polaris World Golf Resorts in Murcia, Spain featuring nine Nicklaus designed golf courses. Since being introduced to Polaris World at its outset more than four years ago, they have built up a widespread knowledge of the resorts, the Murcia region and the buying process in Spain as well as the extensive range of property, home and lifestyle services that the Polaris World companies offer to their clients.

For Editors

James & Debbie Espin are available to comment on Polaris World and the property market in Spain. Please contact them by telephone in the UK on 0845 4 66 55 44 or by email.