By Temma Ehrenfeld

NEW YORK (Reuters) – Dreaming about a summer or retirement hideaway in Spain? You aren’t the only one.

Leo Sulas bought a two-bedroom apartment near Gibraltar last month for about $320,000 after looking at options in Florida and Texas.

“Property taxes and maintenance would have been higher in the United States and a similar property would have cost at least $450,000,” he says.

Sulas plans to maintain a residence in Chicago to stay in while visiting his children but retire primarily in Spain in two years.

“I’ll be able to sit in my living room and look at the ocean,” he says.

While Spain brokers a $125 billion deal with the euro zone to bail out the country’s banks after a real estate boom and bust, a wave of buyers backed by a stronger dollar may just be arriving. U.S.-based searches of Spanish property listings increased by 10 percent this May, compared with a year earlier, at London-based global broker Knight Frank.

SPAIN STANDS OUT

Americans are getting more interested in other European real estate, too: U.S. searches for all European properties are up 26 percent from a year ago, according to Knight Frank, and especially for listings in France, Italy and Switzerland where prices are generally holding steady or rising slightly.

But in Portugal, where a bank crisis similar to Spain‘s may be on its way, U.S. interest fell last year. International realtors have been warning buyers to wait and see in Greece.

So for Americans looking to plunge in close to a market bottom, the moment may be ripest in Spain.

“All the bad news one can read is correct,” says Barcelona-based Christoph Toelle, managing partner of Sotheby’s International Realty, “but thanks to the crisis, a buyer can find properties that would never come on the market before.”

For example, a million euros ($1.25 million) now buys a luxury corner two-bedroom, two-bath apartment on the Paseo de Gracia, Barcelona‘s avenue of designer shops.

In 2007, an apartment like this one would have cost 40 percent more and most likely wouldn’t have been publicly listed, Toelle says. Along the Costa Brava, the northern coastline (often described as “Tuscany with a beach”), he says, apartments for sale are scarce, but steeply discounted single-family homes can be found.

In the luxurious Sotogrande complex, on the Costa del Sol, James Stewart, representing the British real estate broker Savills, is seeing apartments down to $800,000, from $1.4 million.

“We’re pretty near the bottom,” he says. Security and costs are in line with other luxury areas in Europe, he notes.

Inland in Granada, home to the Alhambra palace and gardens, Ronan McMahon, a contributing editor at InternationalLiving.com, is enthusiastic about a project with condos beginning at 800 square feet (75 square meters) for less than $100,000, down 50 percent from original pricing. The bank, which foreclosed on the developer, is offering 95 percent financing to non-residents. The development is surrounded by high-end villas with pools, McMahon says.

“You need to make contact with solid realtors,” McMahon says. “Go for a month and look, and it’ll more than pay for the price of the trip.” In rural Murcia, for example, he sees a mixed bag of “affordably priced villas” amid a lot of failing projects.

Even in the less-fancy areas of the highly developed Costa del Sol, where prices soared and then collapsed, some people are biting. Spain has cut its sales tax in half, to 4 percent, through the end of the year on newly built properties.

In the last four months, Geoffrey Donoghue, owner of Always Marbella, a Costa del Sol realtor, has begun getting about a dozen calls a week from Americans and has made a handful of sales. He continues to have buyers from around the world.

One caveat for the well-heeled: this year, a “wealth tax” applies to non-residents with Spanish assets above 700,000 euros (about $875,000), “net” of certain costs.

STEER CLEAR

Most realtors recommend steering clear of bank fire sales, however.

“There are fantastic bargains but, in my opinion, prices are still falling,” says Peter Veitch, of Investabroad Properties, “and parts of the coast look like a wasteland. Hundreds of restaurants and other amenities have closed down.”

To avoid shaky projects, he urges foreign buyers to get legal advice independent of the developer, agent, or owner.

Getting a loan from a Spanish bank other than on a foreclosure can be tricky, says sales agent Kirsty Bryson of Luxury Homes by VAPF in Alicante. However, banks do offer variable rate loans beginning from 4 percent to 5.25 percent (and the interest may still be deductible). Specialty brokers can fix the exchange rate for up to three years.

Another option: borrow in the United States against your main home. Norwegians Per Nordland and Irene Johansen, for example, raised funds by borrowing in Norway on their main residence.

For about $625,000, they built a two-bedroom, two-bath home within walking distance of a beach near Moraia, along the eastern coastline. When they first began looking three years ago, costs were much higher, says Johansen, who adds, “We couldn’t have afforded this view.”

Sulas says he isn’t worried that the euro zone troubles will hurt his investment or lifestyle: “If there’s going to be a revolution in the streets, it isn’t going to be in a little town by the ocean.”

(Editing by Linda Stern, Chelsea Emery and Dale Hudson)

Image(s): FreeDigitalPhotos.net