In 2009, Spanish real estate made its way firmly onto my radar thanks to the deepest crisis in modern Spain’s history.
Spain was in a state of financial, economic and political crisis. One in four Spaniards was unemployed. The young were leaving in droves. There were 2 million homes too many in Spain. The situation was bleak – just the type of situation that can create a buying opportunity. In this case, it was the European buying moment of a generation.
Beginning in 2009, I visited regularly. But nothing happened. From 2009 right through to 2013, the market just stopped. Banks didn’t foreclose in large numbers. Sellers looked for prices much higher than buyers were willing to pay. I waited patiently.
It wasn’t a question of if, but when, something would happen that would allow real estate to sell at a true market value. I call this a “liquidity trigger.” Distressed homes or condos are put on the market to sell at whatever the market will pay for them.
I was waiting for something more than a regular liquidity trigger. I wanted a mass liquidity trigger, like a large number of units that have to be sold fast – a situation that would push prices temporarily to a new low.
In 2013 this got serious. Under pressure, Spanish banks started fire-selling homes and condos. Pricing had to be set silly-low to attract buyers. We had a liquidity event. But that was only half the story.
Irrespective of how low the sticker price, you need to be selective about where you buy. The economic situation in Spain is still, at very best, fragile. Not much has changed. There are still 2 million homes too many.
That’s why I zeroed in on the Costa del Sol. This is Europe’s sunbelt, where Brits, Germans and Scandinavians come to retire or soak up winter sun. Mobile people from right across the globe come here to live, work and raise a family.
Along the Costa del Sol, among the hundreds of deals that crossed my desk, there were some standout opportunities and places to buy – like the high-end areas around Marbella and the luxurious Puerto Banus. These are among the most internationalized and wealthiest places in Europe. Values here will recover fastest.
In one community, five minutes from Puerto Banus, members of my Real Estate Trend Alert service bought two-bedroom condos less than a year ago with prices from 129,000 euros. That’s for a home that listed for 380,000 euros when first put on the market. Today, one of these homes lists for 170,000 euros ($190,500). Classic high-end bounce back.
Along the coast, west of Puerto Banus, something big was also happening. Cheap property was still available because of the crisis. But, thanks to new roads and tunnels, an area west of Marbella was on the up.
In one community, the first penthouses sold for 86,900 euros. Right now, a new release of these penthouses is slated for 130,000 euros to 140,000 euros ($145,700 to $156,900).
Just over a year ago, I recommended condos with ocean views at another community close by with prices in euros from the high 80,000s. The last few ground-floor condos with no views list from 120,000 euros ($134,500).
You can buy for less than the cost of the brick and mortar. That’s quite the opportunity. Because of the deeply distressed situation caused by the popping of Spain’s real estate bubble, we can buy for less than the replacement cost.
A similar opportunity is unfolding up in West Cork, Ireland.
West Cork is an off-the-radar opportunity, but one of my personal favorites. It has long been a favorite of mega-wealthy business families, entertainers and financiers. In the corner of a small local pub, it’s not uncommon to see a sheep farmer, a fisherman, a banker turned cheese maker and an international businessman all sharing the “craic” (or fun) over a pint, with a rock star or movie star minding their own business.
For celebrities, this is an attention-free safe haven. For the international businessman, this is a secure place where they can move freely and openly. This is a warm and welcoming location of immense natural beauty. You can eat fish right off the boat or lamb from your neighbor’s farm. The modern world and its troubles seem a million miles away.
In the 1970s and 1980s, small numbers of Swiss, German and French started to come. They came for splendid isolation in amazing scenery, clear air and fresh, gushing water. Then the artists and the musicians started coming.
Then Ireland’s real estate market took off. Values soared. Prices were too high, though.
Thanks to Ireland’s crisis, values have now hit the floor. Down by two-thirds… even 80% in some cases. You can buy amazing properties for a song. Ireland’s economy and real estate market have been distressed, but the attributes of the location and the real estate are more compelling than ever.
We are at the early stages of a recovery. Foreign and domestic buyers are coming back. At today’s close-to-floor prices, West Cork is now a safe haven for your cash.
The buying moment for a little cottage on a couple of acres is now. Locals frequently opt to build a new house rather than renovate a traditional farm house or cottage. Where you see charm, they see only “old.”
The Beara Peninsula is the largest and most remote peninsula of this coast. It runs from Bantry Bay to Kenmare across the border in County Kerry. The Caha and Slieve Miskish Mountains run down its center. This was the traditional seat of power of the powerful O’Sullivan Beare clan. This was their safe haven.
A typical Irish farm cottage lists for 85,000 euros ($96,850). I expect it could be bought for 70,000 euros ($79,750). You are a short stroll from the ocean. And have great views to the ocean and headland beyond from the upper floor. For a total spend of 20,000 euros ($22,800), you could create a charming picture-perfect Irish farm cottage on its own ocean-view plot.
All for less than 100,000 euros. With today’s strong dollar, that’s only $113,900. With values at today’s rock-bottom levels, this is a safe haven for you and your cash.
Good investing,
Ronan McMahon
Editor, Real Estate Trend Alert
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