Is this the bright new dawn for Spanish property?

The diversity and attraction of the Spanish property market, coupled with lower prices, has brought confidence flooding back

From boom to bust and back again? Not quite – the current upturn in Spain’s property sector looks like it has legs and, rather than inspiring a tidal wave of ‘me too’ markets like last time (Bulgaria, Dubai – we’re looking at you), currently stands alone as the best value property market in Europe.

The halcyon days of the early millennium propelled Spanish real estate to heady heights, with the sector accounting for 18 per cent of the country’s GDP in 2007. Back then, the market generated €30 billion every year; today, the figure stands at barely a tenth of that…

A dramatic decline, granted, but the fact that the sector is able to generate €3 billion a year after the crises of 2008 and 2010 is impressive in itself. However, as international investors have been tempted back to the market in a steady trickle in the past 12 months, the signs are strong that Spain’s property market is now inexorably clear of danger.

In June, Merlin Properties created a €1.3 billion real estate investment trust (REIT) designed to take advantage of the recovering situation. Merlin’s investment followed on the heels of US tycoon George Soros’ own multi-billion dollar investment in the Spanish construction sector.

At the same time, Spain’s banks have begun offloading their assets – which collectively amount to hundreds of thousands of distressed residential properties – at knock-down prices, creating an almost perfect storm of affordable property and investor confidence that is perfectly set up to maintain a sustained recovery.

Speaking to finance journal Investment Week, Dean Tenerelli, European portfolio manager at T Rowe Price, said: “We are at an interesting juncture as real estate in Spain has reached a trough since the crisis; rent prices are historically low and there is an abundance of low-cost property on sale.

“Banks are now shifting these assets from their balance sheets at bargain prices to meet tougher capital reserve requirements. Consequently, REITs are being established to capitalise on this, ahead of Spain’s eventual property upswing.”

In other words, so confident are some of the smartest investors in the world that the Spanish property market is primed for a return to the apex of the investment tree, that many have already thrown billions of euros behind it.

No other country in Europe has such a serendipitous set of market conditions. Spain has the widest selection of residential properties for sale on the market, across a varied landscape of mountains, coastal regions, golf courses and cities. Prices are lower than they have been for years, and steadily rising, and confidence in the sustainability of the market’s growth has been given regular shots in the arm.

Could now, finally, be the time of the Spanish property market 2.0? It certainly looks that way.