SPAIN: About to head off to the sun? Dream of buying your own foreign holiday residence? You are not alone, as Fiona Forde reports from Madrid
Between March of last year and February of this year, more than €3 billion were channelled into the purchase of 7,350 apartments and 850 family homes along the western Costa del Sol, the southern coastal area of Spain that includes the towns of Marbella, Torremolinos, Fuengirola and Estepona, according to a report issued by a local property firm.
And of the foreigners who are buying homes in this area, those who are selling them will tell you that about one third of them today are Irish. Some 250,000 dwellings around Spain are now said to be in Irish hands, the bulk of them on the Costa del Sol.
That property prices have continued to rise has done little to curtail demand, however. "The Irish buyer is coming back," says Encarna Obanos, a real estate agent for Kristina Szekely, one of the oldest agencies in the Marbella area that caters to the upper end of the market.
"Let's say the Irish represent 30 or 40 per cent of foreign investors, but we are talking about a different kind of buyer now to four or five years ago, when the Irish boom began. Today they are builders and developers who are not only buying one property for themselves, but 10 or 20 units on top of that to resell to clients back home."
Ms Encarna says she has no doubt that her clients are doing well, buying off plans and reselling for a hefty profit before completion, typically making 40 or 50 per cent on the price agreed at the time of paying the deposit. "Prices can double in the space of a year down here, and that is a fact," Ms Encarna says. Her clients, she claims, fall neatly into the half-a-million euro bracket, with many of them willing to pay in excess of a million.
When the boom period began in the late 1990s, the Irish buyers flocked to towns and resorts within easy reach of Malaga airport, lured not only by the sun and the sand, but by the elite and the luxury of Marbella, and by the fact that the region is a well serviced one for tourists. In what is known as Marbella's Golden Mile, so coined for its palatial beach-front villas, money is no problem for the Irish, where the community is growing and where Irish surnames are becoming a common feature on golf club membership lists.
Mary Dunne owns the franchise for Property Partners Marbella, part of the Property Partners group in Ireland. She casts some light on the apparent bottomless Irish pit.
"With the property boom in Ireland, property is worth a lot more now, so people are releasing equity on their Irish homes to pay 30 or 40 per cent of a down payment here." And finance, at 3.5 per cent on a 30-year mortgage, is readily available for the remainder of the asking price.
That is how it works for her average client, the majority of them self- employed, but including a long list of professionals too, the Irish man or woman who buys a €350,000, 2-bedroomed apartment in the sun.
But for the buyers at the other end of the market, who are speculating on properties that fetch well in excess of €500,000, it works differently. "When they are buying two properties, one for themselves and one for investment, as many clients do, they tend to be advised by their lawyers to set up a Spanish company," Ms Dunne says.
Everything is above board, she says. "It's just that the property is bought in the company's name and not in the buyer's name. That way, they pay less in capital gains." Twenty per cent instead of the 35 per cent the non-resident is subject to, and significant when the amount in question runs into hundreds of thousands. "And by setting up a Spanish company, the Irish buyer also evades the standard 5 per cent retention tax on resale.".
Exactly how many companies have been established in this way is difficult to ascertain. For Juan Avies, the director of Banco Atlantico in Marbella, there are too many to count.
He deals with a lot of Irish buyers, characters he says he has warmed to greatly since they began to flock south a few years ago.
"I put through about 80 mortgages in Irish names every year, but then there are so many more that are unaccounted for." Is there a lot of black money in the property sector? "Of course, that goes without saying."
Is there a lot of black money passing through the hands of the Irish? "As I said to you earlier, I really like the Irish. They are my best customers. Really good characters."
Briton David Searl is less reticent when I put the same question to him. A property consultant on the Costa, he has lived for more than two decades in the south, and has worked for the most of that while in property. "Of course the Irish money is black," he says. "Everyone down here knows that. But it's not just the Irish. They're all at it. And Spain is protecting them. It is cleaner than it used to be, but if you want to hide money, you will have no problem in finding someone to help you do it."
Few in the sector are willing to talk about the colour of the money. Why would they? Be they bank managers, real estate agents or the buyers themselves, the business is too lucrative for all parties concerned.
But that said, not all buyers are speculators, not all buyers are earning a living out of property.
Dublin-based Brendan decided to buy in Marbella in 2000 when the children began to arrive "and when family holidays became too expensive." Now, they escape to their pad in the sun "for about seven weeks of the year," he says, making the most of summer holidays and mid-term breaks. "From Dublin to our apartment there it takes about four hours," he says. "It would take you longer to get to Mayo."