Predictions are that average prices for coastal properties will rise 12% this year, and for the market as a whole by 15%.

This is following the trend of the last few years; in 2002 there have been hefty gains in many places despite the pause in the market after September 11 2001. It is estimated that average year on year growth to September 2002 will have been just over 18% and 15% year on year to December 2002.

The exciting thing is that as with any average, this suggests prices in some areas have grown even faster. And in you buy in the right areas this year, you can easily beat the averages again.

**EXCITING**

So why is the Spanish property market such a consistently exciting performer?

Since 1996 there has been a property boom in Spain, fuelled by low interest rates, low unemployment and the introduction of the Euro. The combined effect of a strong domestic market, and a buoyant second home market, has been sustained appreciation in capital values.

Of course, a lot of the demand has been from abroad. It is estimated that around 1.1 million non-Spaniards own holiday homes in Spain, of which around 500,000 are British. A lot of the benefits are obvious: of course there’s the sea, sun and sand. However, as development around the coastal areas has reached its limits, continued demand has started to push property prices and values higher.

A report commissioned by the German bankers LBS, and published in October 2000, concluded that by 2005 a further 800,000 European Union citizens will purchase a property in Spain.

An even more optimistic forecast by the Spanish organisation ANTUR suggests an extra 1 million non-Spanish buyers by 2005.

**DEMAND**

I predict we’ll see this general demand from buyers across Europe being fuelled by, and sustained by:

o Continued low interest rates in Europe making property in general easily affordable. The European Central Bank base rate is just 2.75%

o The single market application of the Euro which allows price comparisons across Europe, and the practical application of facilitating and speeding up borrowing, and cash transfers, across Europe.

**SPOT OPPORTUNITIES**

To beat averages price increases you will need to spot the next up and coming areas. However, this is not always straightforward and without proper research, property investor novices often fall into the trap of investing in an area too soon.

Investing too soon can leave you tying up your capital while waiting for prices to move, and you may have been better off just putting your cash in the bank. At least you would have earned some interest.

Alternatively you can shop for bargains in regions which have a proven track record.

**OVERLOOKED REGIONS**

Here are two regions which I think have been relatively overlooked until recently, and which I will be up-and-coming areas for the future:

o Costa Ahazar

o Costa Almeria

**COSTA AHAZAR**

There is a ground-floor opportunity on the Costa Ahazar, where construction of a new airport is due to commence this year - just outside of Castelló de la Plana.

It is hoped that the airport will be operational within three years and, as it is due to have a 4km runway, it should be able to handle aircraft of any size.

At the moment, the nearest airport is Valencia, but this is small airport and has limited facilities for night flights. This means the number of flights to the Costa Azahar is restricted at the moment. With Valencia situated on the southern stretch of the Costa, this means the Castellon region at the north of the Costa is less accessible to visitors, and second-home buyers.

The completion of the new airport will make this whole region much more accessible and put it on the second-homebuyers map.

At the moment it is under the shadow of its more popular neighbour, the Costa Blanca, but in three years this will change. Start putting out feelers for reasonably priced property before the inevitable rush in a few years time, when the new airport opens up the area to new buyers.

**COSTA ALMERIA**

This is one of the last unspoilt coastlines in Spain and is much less developed than its near neighbour the Costa del Sol.

Partly, this is explained by the relative difficulty of access.

However, expect to see this change with:

o Increased capacity at the airport at Almeria City

o Greater accessibility by way of the coastal motorway from Malaga

With buyers looking outside of the already crowded Costa del Sol, expect to see prices on the Costa Almeria start to beat the national averages over the next few years.

**EXISITING BARGAINS**

Watch for continued growth on the Cost Calida

I predict that Murcia on the Costa Calida will continue to grow in importance as a regional airport, fuelled mainly by increased demand from second home-owners on the Costa Blanca and the Costa Calida. As facilities improve, and the number of flights increases, this in turn will increase demand for property on the Costa, producing a virtuous circle of demand and property value increases.

** Costa del Sol?**

Also, I think the Costa del Sol will provide an interesting buying opportunity this year.

This is definitely a region with ‘previous form’. For example, it is estimated that prices rose by 30% - year on year - between May 2001 and May 2002.

However, at the moment there are problems with over-supply in some areas. This means that in some locations on the Costa del Sol prices will stagnate this year as the market pauses for breath. A consequence of this is that:

o There is an opportunity to negotiate on prices

o There is an opportunity to shop around

o There is a premium value for property with unique features, if you can find them.

**DEMAND**

But don’t wait too long. Turnover of properties is quick, demand is still strong, and it is likely that the slack will be taken up by the end of 2003, or the middle of 2004 by the latest. Prices rises may slow but it is estimated that we should see price average increases of around 15% in 2003.

**COSTA CONFIDENCE**

Why am I so confident of the future of the property market on the Costa del Sol?

o Facilities and capacity are to be expanded at Malaga, where a new runway is due to be operational from 2005. Ten million people flew into Malaga in 2001 - a number expected to have increased to 12.5 million in 2002. This is continued evidence of a booming area.

o The European Union has identified the Costa del Sol as the fastest growing area in Europe, in terms of population, with the number of people living there expected to grow from 2.5 million to 6.5 million by 2011 (figures supplied by Hamptons International).

o It is estimated that around Nerja on the Costa del Sol, prices rose by around 30% during the 1999 construction of a motorway link to Malaga. A new motorway link to Sotogrande, in the west, has recently opened and I predict that this will continue to fuel prices increases in this part of the region.

o A new rail link from Fuengirola to Sotogrande is also being considered, which will increase accessibility - and therefore demand - on the west of the Costa del Sol.

o A high-speed rail link is being constructed between the Costa del Sol and Madrid and should be completed by 2007. This will reduce journey times to 2½ hours.

A large proportion of Spanish residents have, or aspire to, a second home on the coast. Increased accessibility will increase demand from the ‘home’ market, and this will impact on all property prices on the Costa del Sol.

It will also make the area more accessible to Spanish holiday makers who rent property, which will in turn increase demand for properties from investors.

o Irish buyers re-entered the market strongly in 2002, mainly as a reaction to tight fiscal measures at home introduced by the Irish Government. This trend is likely to continue throughout 2003 as the Irish Government is set to introduce additional legislation to make investing in property at home far less attractive. I predict an increase in Irish buying on the Costa del Sol, where Irish buyers already account for some 16% of all property transactions.