Spain and Portugal have suffered one of their worst droughts on
record this summer, with consequences from empty swimming pools
for the tourist to economic disaster for farmers losing their
crops and livestock.
Roger Munns, Managing Director of Tribune Properties, predicts
that property prices in the two European countries could drop as
much as fifteen per cent in some areas as more owners decide to
put their villas and apartments on the market.
‘For many owners of second homes the original motivation to buy
was to have somewhere they could spend time in a relaxing
environment. Coupled with the thought of a good investment for
the future, the market for overseas homes from buyers in the UK,
Germany and Scandanavia has really taken off in the last twenty
five years.
But soaring temperatures and a strain on the water supply could
have consequences for their rental returns next year, which many
owners rely on to meet their overseas mortgage.
Many holidaymakers want to rent a villa with a pool – but the
attraction soon goes if the pool is empty. Some golf courses are
having to cut down on watering their greens too, and it won’t
take a big fall in tourism to mean the difference between
breaking even and not being able to meet the mortgage
commitments for some overseas property owners.
This autumn could see more properties than usual being put on
the market, with a consequential fall in prices’.
Early warning signs of a potential fall in property prices have
already been seen on the Spanish Mediterranean island of
Menorca, which has enjoyed better rainfall this year than the
Spanish mainland and no water restrictions, but some villas
being cut in price by over ten per cent.
Water restrictions on the mainland are having an impact on
potential villa buyers, with many questioning the value of a
swimming pool when they might not be able to use it.
Portugal has recently asked Spain for 6 million Euros in
compensation, as water levels in the River Douro which runs
through both countries fell below limits established in a
bilateral agreement,with Portugal coming close to accusing her
neighbour of stealing her water.
Good Time to Buy
‘For anyone considering buying a property in Portugal or Spain,
this September and October could be the ideal time to buy’, say
Tribune Properties. ‘Unusually many properties were being
reduced in price in August, traditionally a good month for
sales.
We normally see villa and apartment prices being dropped mid
September onwards when the tourists and potential buyers are
thinner on the ground as some owners are keen to sell and don’t
want to wait until the following Easter before having a real
chance of selling again.’
The drought isn’t the sole cause of property prices falling add
Tribune Properties, saying it has accelerated price falls and
come on top of an already poor year for many estate agents in
Europe.
‘A good barometer for European property are the tax havens of
Monaco and Andorra which don’t rely on ‘tourist’ buyers, but
usually have a steady supply of buyers interested in taking
advantage of the zero income tax rate. Andorra is in the
Pyrenees and has no water supply problem – but estate agents
were twiddling their thumbs this summer waiting for buyers to to
show – and they didn’t.
Monaco similarly has had no water supply problems, but has also
seen a lack of buyers. The tourists are still visiting the
Principality and hotels in Monaco and Monte Carlo have been as
busy as ever, but again there is a lack of serious property
buyers, and negative property inflation is quite possible in
Monaco this year for the first time in a decade.
With more property available on the market we would suggest
buyers draw up a list of three or four villas they have viewed
and liked, and then suggesting to the owners that they would
consider buying at fifteen per cent below the advertised asking
price to see which ones are prepared to consider it.’
Sea Water
One possible answer to secure the long term tourist trade and
consequential property market is to follow Malta’s example of
building desaliniation plants, converting sea water to drinking
water, sometimes known as ‘reverse osmosis’.
The Mediterranean island competes with Portugal and Spain for
the attention of second home buyers, and has a healthy tourist
industry – despite having no rivers and low rainfall, allowing
the island to function normally even in drought conditions.
The water from this source can be used for agriculture and
ensuring adequate reserves to fight forest fires for example -
it might just be the answer too for the swimming pools and golf
courses – and would allow a plentiful supply of high quality for
domestic use.
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