Oct. 15 (Bloomberg) -- Prices of repossessed apartments built on six Spanish golf courses designed by Jack Nicklaus have been slashed by as much as 50 percent as banks try to sell assets acquired during the property market collapse.
A two-bedroom, 74 square-meter (796 square-foot) penthouse in Murcia, southern Spain, is on sale for 128,800 euros ($180,000), down from 272,000 euros three years ago. It overlooks the 18-hole Hacienda Riquelme course and has air conditioning, a 32 square-meter terrace and communal pool.
Spain’s real-estate and construction slump left thousands of vacation properties unsold and their builders facing bankruptcy. The number of homes purchased in Spain by foreigners dropped 78 percent from 2006 through 2009, according to a study published last week by the property website Fotocasa.es and the IESE Business School in Barcelona.
“This shows how desperate the banks are to offload their real estate,” said Borja Mateo, author of the book “The Truth About the Spanish Housing Market.” “The properties still look overvalued.”
Polaris World, the closely held builder of the Murcia resorts, handed over 1,500 properties and land to lenders in May 2009 to cancel 970 million euros of debt. Now the banks, which include Banco Popular Espanol SA, are using hefty discounts and 100 percent mortgage deals to help clear the backlog, according to the website of Villa Cashback, which specializes in marketing the Murcia apartments to British buyers.
An 85 square-meter, ground-floor apartment with two bedrooms overlooking the Mar Menor golf resort is on sale for 159,000 euros, down 28 percent from the 2007 price.
Anne Simpson, a 55-year-old from the Scottish city of Glasgow, is trying to sell her vacation home overlooking Hacienda Riquelme, which she bought in 2003 for 192,000 euros before it was built. She’s had no offers so far and thinks she’d be lucky to get 150,000 euros for it.
“As beautiful as the resorts are, they are in the middle of nowhere,” she said. “It’s getting better and more populated, but it’s still a bit of a wilderness.”
Golf became part of the construction mania that swept Spain in the decade through 2007 as prices for privately owned homes tripled. The country built more courses in the period than any member of the euro region except Germany, according to the European Golf Association. There are now 345 in Spain, 92 percent more than in 1997.
Existing home prices in Spain have fallen 22.5 percent since peaking in April 2007, the study from Fotocasa.es and IESE showed. The country now has about 1.4 million unsold homes, according to Aguirre Newman, a Madrid-based property adviser.
Fallout in Spain
Spanish banks took about 60 billion euros of real estate onto their books as a result of the country’s worst recession in 60 years. Starting Sept. 30, the central bank enforced tighter rules on how much lenders have to set aside in provisions for the assets, making it more expensive to hold on to them.
In Murcia, a region providing easy access to the 250 kilometers (155 miles) of beaches lining Spain’s Costa Calida, there are 21 golf courses within 50 kilometers of each other.
Hacienda Riquelme is the largest of six courses that were fashioned by Nicklaus Design, the company founded by the 18-time golf major winner, and completed between 2005 and 2009. Three are now run by Ola Golf, a company subcontracted by IRM Estates, the group of banks that canceled Polaris World’s debt in exchange for assets.
The others are managed by Polaris, which is 40 percent-owned by Credit Suisse Group AG, according to Polaris’s website. Beatriz Suarez, a spokeswoman for Polaris, couldn’t be reached for comment for this story. IRM Estates also couldn’t be reached. Neither Nicklaus nor his company have any investment or involvement in the resorts, said Scott Tolley, his spokesman.
There are signs the deep discounts for the Nicklaus golf apartments may be starting to spur interest, according to Paul Williams, managing director of U.K.-based Villa Cashback. He said his company sold four times as many of them in the first half of 2010 as it did a year earlier, declining to be more specific. He’s getting twice as many inquiries as last year.
“For the first time since 2008, we have seen the return of the ‘blind buyer,’ where a property is reserved without viewing, usually for the best discounted bank bargains,” Williams said. “Two years ago, the overriding sentiment was fear; now it’s opportunism.”
The British traditionally account for about 70 percent of overseas buyers of Spanish property. They may not be eager to splash out on vacation homes as the U.K. economic recovery falters and the government cuts spending to tackle a record budget deficit.
Brits in Spain
In 2007, about 45 percent of British buyers in Spain invested 250,000 euros to 350,000 euros, according to U.K. homebuilder Taylor Wimpey Plc, which markets golfing properties in the Spanish cities of Marbella and Alicante. Today, 20 percent are looking to spend 250,000 euros or more and 5 percent are prepared to spend more than 350,000 euros.
Gillian Kirk-Bushnell, a 67-year-old retired sales executive from near Canterbury, England, lives in her three-bedroom villa on the Mar Menor resort all year. She bought the property four years ago for 389,000 euros.
“For 132 euros a month, my lawns are mowed and irrigated, the communal gardens are kept immaculate and we have 24-hour, year-round security,” she said in an interview at the resort, surrounded by pristine greens, tropical trees and exotic plants. “This is a huge asset for people looking to invest in holiday homes.”
Murcia spent 750 million euros in the past two years to boost infrastructure and lure visitors. A new international airport in Covera, a town 20 kilometers from Murcia’s city center, is scheduled to open in 2011, and a high-speed rail link connecting the area to Madrid is due for completion in 2014.
Paramount Pictures Corp. has also reached a preliminary licensing agreement with the Regional Government of Murcia for a movie-themed leisure park to be built in the area, according to Pedro Alberto Cruz, Murcia’s regional councillor for culture and tourism. The project could bring 20,000 jobs to Murcia, which has an unemployment rate of 21.3 percent, he said.
Kirk-Bushnell says she has no regrets about buying her place, even though it has dropped in value.
“It’s irrelevant,” she said. “We live in paradise here and I’m not going anywhere.”
To contact the reporter on this story: Sharon Smyth in Madrid at email@example.com
To contact the editor responsible for this story: Andrew Blackman at firstname.lastname@example.org