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Spanish Sellers Need to Drop Property Prices To Compete for Deal-Seeking Investors - 11 January 2011

Because of Spain’s oversaturated housing market, sellers will have to slash prices further if they want to avoid foreclosures in 2011.

The country’s economy has suffered terribly in recent years and as a result, development projects have gone unfulfilled and a number of distressed properties have hit the market. In 2010, home prices in some regions of Spain dropped by more than 14 percent, while the average home price fell by nearly 6 percent.

As the country’s economic woes worsen this year, banks, or cajas, will have to drop prices drastically and sell in bulk if they want to unload properties and save themselves from financial collapse.

While some experts cite Spain’s economic instability, rising unemployment and the poor-performing euro as deterrents for potential buyers, others disagree. They say many overseas investors having been waiting for Spain’s market to bottom out — which was expected to happen last year but didn’t — so they can cash in on the best deals.

A recent survey showed that a third of all potential U.K. property buyers listed Spain as their top overseas investment choice. Participants cited dwindling home prices as a major reason to buy property in the long-favoured holiday destination.

Further hindering or encouraging British interest in Spain, depending which way you look at it, is the recently U.K.-government appointed overseas property advisor. The position was created to help deal with complaints that a number of British expats have fallen victim to development scams in Spain. While Britons have lost millions in property scams in recent years, the new advisor will hopefully deter such problems from arising again.

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