Thinking Strategy

If intending to invest substantial sums buying and then letting a property in Spain it is absolutely necessary to get it right. Time consuming though it is, a thorough understanding of the marketplace is essential and this work will pay dividends later. Like all good business propositions let us start by writing a strategic statement.

Against a background of the worldwide economic situation and Spain’s natural advantages, buy-to-let investors offer to supply different types of homes in various locations to the letting marketplace with each seeking to maintain a position of competitive advantage.

The demand for rental property is from visitors and residents of all nationalities, including Spaniards themselves, at work, rest, or play looking for properties that give easy access to desirable features or entertainment, supported by a multimillion Euro advertising and promotion budget from the Spanish Tourist Board.

Follow London

During recessions people will take fewer overseas holidays and property prices will be deflated. In times of relative prosperity more people will take overseas holidays and property prices will increase. A depressed worldwide economy sends out a property buy signal that should be timed to the best advantage when the economy begins to swing upwards. Conversely a buoyant economy stimulates the housing market and raises the possibility of selling at its peak. All this simply means the buy-to-let investors have to get their purchase timing correct for their own personal financial circumstances.

Property prices vary nationally. The UK has one of the highest price structures in Europe and the south east of England is recognised as the most expensive area, with London hitting a peak. A good guide is to follow London. Changes in the housing market often start in London and the south east and ripple outwards to the rest of the UK. What happens in London is a reflection of what is happening to the USA economy, for the UK is a follower and not a leader in world economics. Following London can give advance warning of coming changes.

An annual publication by London Residential Research is aimed at developers and agents. However, an average amateur buy-to-let person will find it extremely instructive. It monitors new developments in every residential area in London, publishing prices, yields, which districts are going up and which are going down.

It does not claim to have all the answers but no sensible developer ignores the trends, statistics and issues highlighted since it is possible to recognise various projects that are considered a good investment. Investment is not risk free and it may be that a heavily geared landlord will discover that interest rates will be a couple of points ahead of rental returns, but the bottom line is that a decent London flat will not do an Enron, Marconi or Railtrack.

The publication demonstrates different ambitions in the property market. It can help focus on whether to buy offplan and double your money by selling on in 18 months time, or invest in something that gives a little bit of income and then a lot of capital growth, or even an investment with no cash flow now but a thumping great payout after 20 years.

What relevance does this have to buy-to-let for fun and profit in Spain? Directly none. Indirectly it is very useful to read, to understand the complexities of the property market and the terminology used. It is a source of information, an increase in knowledge.