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Murcia Investment Update

Murcia Investment Update

The Paramount Factor, International Investors looking at the Region of Murcia.

02/04/2012

Murcia has been named as number 22 in a list of “Property Hotspots.”

A very interesting article appeared in El Pais this weekend discussing what´s now being called the “Paramount Factor.”

The possibility to make money out of property developments in the area following the announcement that the land purchase for two thirds of the land needed to build the park has gone ahead, has galvanised investment companies and there have been a flood of parties jumping onto the Paramount band wagon.
Newspapers who have given the subject scant coverage for the last 18 months are suddenly Paramount experts, sending their sales executives into a frenzy of advertising sales, producing multipage Paramount specials, even though the reality is that most of the investment purchases will be made online, by people who have never even been to the region and have no intention of ever doing so.

Whilst free promotion for the region is very welcome, and many businesses are desperate for the park to go ahead, it is a little un-nerving to see so much hype , particularly given the fact that there is still no confirmed financing to build this park, as much as all of us who earn a living here in the Murcia Region would like to hope that there is.

From day one, we´ve refused to hype, concentrated on delivering the facts how they are, and not tried to capitalise on the potential on offer by telling anyone that this is a definite, although it would have been easy to start a Paramount property section, tell a few white lies and try to flog advertising to everyone by jumping on the bandwagon.

All those involved are assuring us that there are investors : Pedro Cruz is adamant this park will happen, the Mayor of Alhama told us in the last press conference that there were investors, but he couldn´t say who for confidentiality reasons, and Samper confirms that the hunt for investment is still underway.

But there are no names yet, so until there are, there are no names yet, and it would not be unrealistic to expect that were the financing fully in place and the project 100% that all parties would be keen to make sure we all knew about it.

Here are some extracts from the coverage being given to Murcia Internationally:

” World’s Top Real Estate Hotspots Revealed
New report from InternationalLiving.com ranks world’s best overseas property markets. ”
Baltimore, USA.
U.S. citizens planning on investing in property should focus on booming emerging markets overseas, new research has found.
InternationalLiving.com’s Global Real Estate Index 2012 highlights the world’s 27 most attractive—and potentially lucrative—real estate hotspots outside the U.S.
Locations were ranked based on categories such as ‘Value for Money,’ ‘Appreciation Potential,’ ‘Income Potential,’ ‘Costs’ and ‘Ease of Buying.’
Las Terrenas in the Dominican Republic and the Iracema area of Fortaleza in Brazil’s northeast rounded out a top five dominated by Latin American countries
Depressed markets in the struggling Eurozone also figured, with Ireland’s capital Dublin coming in at 14th place and Spain’s Murcia region sneaking into 22nd.”

IPS Investment:
“Murcia and the Costa Calida has often been in the shadow of more popular Spanish resorts along the south coast. Not anymore – the imminent construction of the new paramount them park will jump start this forgotten region, sparking a rush for available property.

1. The Paramount Effect
The impact of this high profile new theme park on Murcia is already becoming evident with the first signs of investors moving in to take advantage of low prices. The property market in Murcia has already bottomed out with prices in some areas now 60% below their peak in 2007.

This presents us with an opportunity not to be missed. News of the new theme park will inevitably trigger short-term speculation to Murcia which may bring significant price increases around the ‘hot spot’ areas around the park.

Investors should be wary that the quality of some developments will vary and some developers are repeating the mistakes of the past and failing to focus on quality.
Investing in quality developments with good leisure facilities will reap greater rewards in the long term, even though they may appear expensive compared to sub-standard developments in the same area.
As with any property market, you get what you pay for in Murcia.

2. Theme Parks Affect Property Value
Most people enjoy the benefits of living near a park, both in terms of the economic and aesthetic aspect. In fact, there have been studies carried out on the effects of theme parks on nearby property values and not surprisingly they have concluded that parks do indeed increase the value of properties in the area.
Historically, supporters of park developments have felt that they will help boost local property markets. A study conducted in Portland, USA in 2000 found that a group of parks had a positive impact on the values of properties. Another study conducted on a number of parks in Dallas in 2001 found that homes facing a park were worth 22% more than their equivalents further away from the park.

3. Increased Tourism Means Higher Yields
With theme parks come increased tourism and prosperity, this is why Paramount is now going ahead. Spain needs its property market to recover and the construction of this high profile park is seen as a catalyst to improve what was once the forgotten region of Spain.
The arrival of more tourists of course translates into high demand for accommodation, particularly in peak season and Murcia has the kind of climate that will make that season a long one.

With prices 60% below the prices you could expect to pay for property in 2007, this presents an ideal opportunity to take advantage of increased yields on property in the best developments.
Typical yields on smaller holiday apartments in Murcia are 6% gross or £4,500 a year on an £80,000 purchase.

4. Prices Have Dropped up to 60% Below Their Peak in Murcia
When we look for value in a property market, we naturally look at the price history, why pay more when you can pay less? Paying less for the best properties available is the real opportunity in Murcia.
There will of course be speculative developments in the region offering seemingly fantastic deals, however in order to get true value, it is worth looking into opportunities to invest in resorts that have excellent leisure facilities.

Golf properties are more resilient when it comes to price corrections and hold their value better over time. If the facilities are first class, the tenants will be happy to return year after year and ensure you gain maximum ROI on your purchase.

5. Surplus Stock in Murcia is Now 50% Sold
You may have noticed that the banks in Spain have been keen to offload their distressed developer stock. This has led to a rush of investors to the Murcia region encouraged by the many bargain properties on offer with 100% plus finance.

This has helped reduce excess stock levels in Murcia by 50% to the point where availability of property will be squeezed in the coming months. This will inevitably have an impact on prices and particularly the prices of those development with the best facilities.

6. Murcia Airport Will Help The Property Market Take Off
A new international airport is about to reach completion in Corvera and by the summer of this year it will make South Eastern Spain one of the main gateways to into the country.
The new airport is privately managed and has been built with one purpose in mind, to take on the Alicante and allow tourists and second home buyers the freedom to travel directly to Murcia whenever they want.

This along with increasing numbers of tourists attracted to the high profile theme park is a powerful combination, that can only boost prosperity in this relatively undeveloped corner of Spain
The recent opening of a Harry Potter Theme park in Florida last summer saw a massive 17.4% rise in overseas visitors, with overall numbers of visitors of 18.9 million – and that was in the midst of a global economic downturn.

The airport is being built with a capacity of three million passengers, however plans are in place to expand this to 8.7 million and 14 million in the years to come.

7. It’s Not Just About Overseas Investors and Tourists in Murcia
Investing in holiday resorts is often regarded as speculative. Over the years the advice from the experts has been to invest in the cities for maximum ROI as this will virtually guarantee a steady supply of tenants and an exit strategy.
Murcia is a case apart at the moment – it offers the best of both worlds for investors and second home buyers alike. The unspoilt region has also long been popular with Spanish second home buyers and continues to be so dispelling the myth that only overseas investors are buying holiday properties.

With prices now 60% below their peak, property in Murcia is now well within reach of middle class second home buyers from cities such as Madrid and Barcelona.”