Polaris World cropped up again in the news recently – this time in The Guardian. It’s gloomy reading for anyone thinking about buying a property in Spain. Like most of the world, the credit crunch is hitting home – and the property market, where investments represent a huge proportion of income, is feeling the pinch the hardest.
Of course, when times are tough at home (and inflation seems to be on the rise to add to the well documented slide in property prices) then people are naturally reluctant to embark on an expensive venture in overseas property markets. This is reflected in the reports of falling prices and empty properties. Despite all this, Polaris World themselves are keeping a brave face on things. Is this justified?
In the short term, it has to be said that “probably not” is a fair assessment of things. With banks unwilling to lend to buyers due to a lack of liquidity in money markets, and house prices falling, the number of people with the means to buy abroad is shrinking rapidly. This problem is compounded by the sheer scale of Polaris World’s developments. With so many properties either still under construction or unoccupied the traditional rules of supply and demand come into play. In this case: too much supply, allied to too little demand. That puts downward pressure on prices, and the anecdotal reports apart prices in the Guardian article ring true.
However, amidst the doom, it is important to remember some fundamentals.
Firstly, the reason the market in Spain has boomed so much over the last decade is down to demand. People aspire to a life in the sun and Polaris World offer a great way to do that. The model offers the chance to buy a property, live there for a few months each year and turn it into a rental stream through letting for the rest of the year. That also hasn’t changed.
Secondly, the developments themselves are high quality, well-situated and well served by a fantastic array of facilities. That is a strong differentiator from other property options, which perhaps demand renovation or village life that while aesthetically pleasing is not to everyone’s taste. Added to this mix is the enormous popularity of golf – which continues to experience boomtime as a leisure pursuit.
Despite all that, Polaris World will be unable to buck the wider trend to falling prices over the next year or so. Perhaps counterintuitively, that might make now a good time to get into the market. In the longer term, prices should rise over and above the market in general thanks to the strong factors built into the proposition. As people get jittery and sell at values below the market average, logic dictates that the prices currently being bandied about represent real bargains for those with the stomach to sit tight through the credit crunch.
Whatever decisions the markets make, these are interesting times for the Spanish property market in general – and Polaris World in particular.
2 responses so far ↓
dyor // May 14, 2008 at 5:57 pm
I would dispute the statement that the PW proposition that you can use it for a few months of the year, and rent out for the rest to receive an income stream. Check out the holiday property rental sites and you will see lots of PW property available for rent, at silly prices and no takers. Basically there is not the capacity at the airports to get enough people into Murcia to rent all the properties currently being offered. As more and more developments come on stream, the rental situation just gets worse. The lack of any real rental demand is why I pulled out of buying on PW four years ago, and nothing has convinced me that I made the wrong decision.
DYOR
Garth Mendacious // May 15, 2008 at 9:06 am
It’s a good point but I haven’t had much trouble renting mine out – although admittedly it hasn’t achieved year-round capacity or anything. I’m expecting things to be very tough for PW over the next couple of years though and I can easily understand why you’d be happy to have stayed out of the market.
With regards to the airport, there’s much talk of a second runway starting construction this year (completion in 2010). Clearly the authorities have been slow on the uptake in responding to the region’s needs for more capacity, but in the long term I see no reason why, once the airport is upgraded, the region as a whole shouldn’t continue to grow.
http://www.airliners.net/aviation-forums/general_aviation/read.main/3931202/1/
The Spanish leisure/property market has its cyclical lows like anywhere else, but the trend since the 60s has been ever upward – even taking into account the stagflation of the 70s and the recessions of the 80s and 90s.
I could be wrong, but I own a couple of PW properties myself, and I’m quite relaxed about it.