Editor’s note: This article was first published in February 2012 and describes the Spanish housing market of that time, with falling prices, a lack of credit and competition from bank-owned properties. The Spanish market has changed considerably since then.
Falling home prices and the impossibility of selling. That is the situation in the Spanish property market. If it continues, it will put at serious risk even large fortunes whose main investment in the past was property, because today it is as if they had suffered a capital flight. The other problem is a lack of liquidity: there are already some cases of families with more than €2 million in property assets who, you could say, are struggling to make ends meet.
At the other end are people who, for various reasons, have to move to another city and would need to sell their home to buy another. Other people are approaching retirement and want to leave the centre of big cities to spend it somewhere on the coast, while many people who live on the coast or in the mountains need to move to the city centre for work. That’s where home swaps come in.
Some property portals, such as fotocasa.es, already offer a special section for users willing to list their home for swapping. At a rough count, there are around 20,000 people interested in a home swap, although many experts say it is far from easy to carry out.
To begin with, a swap is not simply a matter of exchanging and that’s that, at least in practice, because two purchase-and-sale transactions are needed, and that involves serious legal costs. The other difficult part of a swap is matching the value, because… how far would an owner succeed in swapping a two-bedroom apartment on the beach for a four-bedroom penthouse right in the city centre? And what happens when the home we are going to swap is already paid off and the other owner’s still has part of the mortgage outstanding?
The swap market is growing, though still very immature when it comes to execution, since two owners rarely reach an agreement. Most often one of them, as well as the swap, wants some extra money because they think their home is worth more. At that point, we would no longer be talking about a swap as such.
Even so, as the number of owners interested in this practice grows, it will be easier to find properties that are a closer match.
What is happening is that owners, in order to compete with bank-owned properties and the lack of credit, are selling their properties for less than they are worth, because it is the only way to get some liquidity.
Some estate agencies have already found a way to do business with swaps, and now offer services of this kind to act as intermediaries between owners and reach an agreement that works for both.
Further reading
Featured image: Les Haines, CC BY 2.0, via Flickr.
