Words: Ashley Rigg
Published: 14th June 2011
*New property businesses flood Spanish market
You could be forgiven for thinking that now is not the ideal time to be starting a property business in Spain.
According to
National Institute of Statistics, April was the worst month for property transactions since the crisis began.
Yet, according to Dun & Bradstreet, new business start ups in the Spanish property sector are up almost 140% in the first five months of 2011, compared to the same period in 2010.
New property business formation climbed from 514 in the first five months of last year to 1233 in 2011. The areas seeing the most activity were Madrid, Catalonia and Andalucia.
The big question is why? For those of us working in the industry, it is difficult to understand the logic. Transaction volumes are at historical lows, buyers expect bigger discounts than sellers are willing to offer and banks are trying to steal business from agents by offering hugely preferential lending terms on their own stock.
The most plausible explanation is a combination of economic desperation and low perceived barriers to entry.
With unemployment at 20%, there are obviously many people willing to try almost anything to make ends meet. Entrepreneurship should be applauded but I fear many are moving into the market with their eyes closed, hoping for success but lacking a proper plan.
As I learnt to my regret early on, the most important part of any business plan is the section on the competition. To make money, you need to so things slightly better than your rivals and build barriers to entry through scale. The more niche your focus, the less competitors you have and the greater the chance of success.
Are there any good niche opportunities left in the Spanish property market? I’m sure there must be. For example, there are bound to be niche rental markets being underserved in certain geographical locations. New entrants with a good plan and finance to fund the cash flow deficit of starting a rentals business might stand a good chance.
I fear though that those with anything that could be defined as a “plan” will be in the minority. It is no coincidence that the D&B figures also show bankruptcies up 17.5% in the same period.
Source: Global edge
User Comments
That all seems very gloomy to me. Here on Granada's coastline life appears far better. We have seen visits to wisemovetospain.com rise nearly 60% compared to the same period last year. Viewings up by over 400% and sales up by 200%. Last year was the worst year in 25 years in real estate. I think National stats do not reflect what is really happening. Northern Europeans are coming back into the coastal market as the predominantly Spanish driven inland property markets struggle under the weight of the unemployment problem. The number of agents in the Costa Tropical dropped from nearly 40 to less than 15. As they see the turn a round they will return as they are doing. You assume these a new start up novices but they could be seasoned professionals starting up again as they see the market return. The hard work now is to explain to vendors the new real worth of their pile of bricks. At realistic prices there are buyers waiting.
nick westby,
wise move to Spain
I would tend to agree with you Ash.
It´s a pity to see so many people venturing into the Spanish property market for the first time. The vast majority will no doubt waste a lot of time and energy with little to show for it.
These budding entrepreneurs would do well to give some thought to working in other markets remotely. For example, encouraging Spanish (and anyone else who might listen) people to invest in the Brazilian, UK or Florida markets. Certainly a better chance of earning money.
Small Spanish companies are very bad at internationalizing their businesses though. Still very insular despite having a range of national champions (Ferrovial, Santander, Zara etc.)
Regards
Colin
Colin Murphy,
Torcana Ltd