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Is Non-Regulation Hampering A Property Market Recovery in Spain?

Oct 30, 2007
Regulation and red-tape are normally the dirty words entrepreneurs blame as hindrances to the capitalist art of making good profit. Money is best made when business can flow freely and market forces are left to their own devices. Certainly true in markets that show healthy demand and confidence, but in less affluent times when global credit issues have knocked confidence in a property market across the globe, is the lack of standards and some form of regulation simply fanning the fires of insecurity and hampering the recovery.

The Spanish Property Market is a case in point. Hit by planning scandals and over supply of new developments in the south. LRAU land grab in the East and topped off with the global credit crunch, it is not surprising that times are no longer as rosy for Agents in the Spanish Market.

Yet reports that show a steady increase in the numbers of UK residents still moving abroad and traveler statistics through Alicante airport showing over 50% of traffic is coming from the UK would suggest that the buyers are still coming in ever increasing numbers.

So what is the problem? Are they coming to look and not buy? Is the lack of confidence in the market making them hold back unless they find the deal of a lifetime before committing to a purchase.

Confidence maybe the biggest issue holding back buyers from making that purchase. A lack of confidence in prices. Confidence in Agents and the lack of representation for buyers who are traveling across borders to make a huge investment decision in a market renowned for dodgy deals and rogue agents.

What would some form of regulation bring to the market?

If you compare a regulated market such as the US with that of Spain, there are several issues that may help the Spanish market.

Representation of the Buyer is distinguished from that of the Listing Agent
A single market of property provided by the Multiple Listing Service effectively providing agents with the entire market as their property register.
Co-operation between agents.
Education standards.

All these issues build confidence in the buyers mind and help agents effectively act for their employer whether it is a buyer or seller.

It could be argued that even with regulation the US market is struggling to cope in the same way as the Spanish market. Whilst this is true, the underlying reasons are more supply/demand led than in the Spanish market.
In the US the market is suffering a correction to historic price rises and a mortgage crisis that has seen lenders reduce the ability of people to borrow enough money to sustain the cost of purchase thus killing the demand.

In Spain all indications are that buyers are as present as ever but they are currently choosing not to buy but are watching the market to see what happens next.

If confidence is the key to helping them make that decision to buy, then maybe some form of regulation may provide the answer.
About the Author
Neil Ebsworth is co-founder of AMLAspain.com, TheSpanish property MLS. A portal for Spanish Property for sale for the Real Estate industry in Spain.
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