Property In Spain

[Peter Hun]

hows the spanish market now?

Prices falling, taxes increasing. According to Tinsa (a semi-official source) real prices are down 30% including inflation from the peak. In reality -50% in cash terms is more like it (it varies depending on location etc)

Holiday home prices depend on UK released equity, so until the UK recovers and prices rise again, Spain will continue to crumble.

[timebandit]

hows the spanish market now?

In an ideal world, I would be spending my winters, in a warmer climate. With this in mind I keep an eye the Spanish forums.

A post made by TJ222 (sensible poster) on theeye on Spain forum, that seems to sum it up nicely.

Additionally i think anyone wanting to buy now in a market in which property is unsellable, should ask themselves why? The problem in Spain is not that the market has gone away for property, its that reality is gone. The papers keep telling me asking prices are only down 10% or some such nonsense, but what has asking prices to do with it. If I put my old mars bar up for sale on Ebay for 10quid, I imagine it would be there for ever. I could claim however that my asking price has not gone down, and complain that there is no market for Mars bars!!!!

The truth is that the market is still there for property, what is missing is realistic prices and the ability of people to match them. I know of friends who put their house up for sale in a very desirable area, but wanted the purchase price plus expenses. A single buyer emerged but didn't want to pay the ask. If you overpay for anything, its not then the fault of a new buyer in the future after the boom, if they do not want to overpay to relieve you of your problem.

Establishing good value after a boom is hard because you need to establish a reference point. If property went up 2 or 3 times in a boom, its not good value to get 30% off. A better measure is to establish what it would rent for, and then work in a yield of say 5% to etablish a capital amount. This is how proffesionals do it. I warn you that if you do it this way, you will find the asking price is overvalued by 50% or more.

Having said all that, the situation in Spain is now so precarious that i would definately sell and wait. The banking system is past life support and is going to take down Spain as a sovereign state, much the same as happened in Ireland, another property bubble hotspot. Its hard to imagine the state the banks are in, but they have all the worst, most overvalued property that was ever bought, as this is the stuff that defaults first. People fight tooth and nail to keep their good stuff and anyway this is the property that still sells. When the banks need a rescue, the books will be looked at and the first condition will be to unload all these toxic two bed flats. Then the market will capitulate and everything will get dragged down. A lot of stuff will be unsellable at any price and good two bed flats will go for the price of a car. Its already happening now in the US.

Noone knows what will happen in a situation where a country leaves the Euro, the details of debts etc will be very messy and will take some time to muddle through. One thing is for sure a huge amout of wealth will be lost.

Given all this why take the chance? Property is only going one way for the next decade and thats down. Prices are now falling fast in the UK and there is supposed to be a shortage. In Spain there is so much excess supply that its going to take decades to unwind. Who in their right mind is going to buy in this situation, remeber price = supply and demand. There is next to no demand and a cool million empty homes and STILL BUILDING !!!!!!!!!!!!!!!

Keep your money in a strong currency and wait for the dust to settle. You will be shocked at what is going to happen. Hope this helps, sorry its a bit black, but thats the facts.

[Trampa501]

Interesting article claiming Madrid propertys will start to rise again next year. Personally I doubt this, as many people's salaries are depressed, but still..

Madrid running low

Incidentally there have now been 15 consecutive months of double digit growth in Spanish exports. (article in Spanish)

Spanish article

It has been difficult as for a long time the growth in exports hasn't helped the unemployment situation, but the figures have decreased for the last 3 months, and are expected to do so for some months yet.

Incidentally there's been a huge explosion in Spanish IT startups taking place (perhaps because there have been 1000s of educated Spanish with nothing better to do). Expect great things from the Spanish economy in 2012.

I still agree with Ambrose that vibrant exports will save Spain, and perhaps the euro. But the way speculators are playing the game to get maximum debt interest, while hoping Germany will bale out Greece, means I won't be too surprised either way

vibrant exports Spain

[Peter Hun]

Home prices may fall by an additional 20 percent in the next four years before bottoming out, R.R. de Acuna & Asociados, a Madrid-based real-estate consulting firm, said at a briefing last month. The company estimates there are about 1.5 million unsold homes, which won’t be absorbed for another six years.

For those who have asked where the property market in Spain is going, that's one view: it may fall by another 20% over the next four years.

If it is true, what does that make the total collapse % since this all started? Will those who predicted around a 40% drop a few years ago be far wrong in the end?

http://www.spanishpropertyinsight.com/forums/viewtopic.php?f=2&t=5746

Then there is this issue, a tax based on the imaginary sale price that cannot be appealed and has to be paid, plus interest.

http://www.spanishpropertyinsight.com/forums/viewtopic.php?f=2&t=5746

Not the sort of thing to encourage take up of those 1.5million plus empty apartments, on to of the other shocking criminal activities of the Juntas.

Edited July 16, 2011 by Peter Hun

[Trampa501]

I can't see this figure of Brits going to Spain continuing to increase (for one I suspect Spain has benefited from a one-off consequence of the Arab Spring as holidaymakers play safe), but worth bearing in mind. Not all gloom and doom out there, and at some point the market will bottom.

Rise in holiday bookings

Investors interested in property in Spain could benefit from more rental opportunities as more Brits choose to holiday in Europe.

According to a new study by Abta - The Travel Association, bookings to Spain have increased by 11 per cent compared to last year, showing that the destination is becoming more popular with holidaymakers.

Short breaks are also seeing more people travelling into the country, especially to Madrid, as economies around the world recover and capital has been freed up to boost overseas stays.

"During the recession, luxury holidays were substantially affected, but have now experienced a healthy comeback," Abta said in a statement.

[Trampa501]

For those (if any) who were thinking of buying a place in Spain.

The Spanish government has announced that for 4 months, the VAT (iva) to be paid on new properties is to be reduced from 8% to 4%. so for example, if you buy a new place for 200k, you will save 8k Euros.

Obviously if you think prices are still to come down substantially, then no need to rush, but it may be of interest to anyone who was buying anyway. Obviously a measure to stop the gloom in the construction sector in Spain - there are elections due in November.

Business Insider

[Reality Check]

Its going to be interesting to see what happens in Spain over the forthcoming months leading up to the election in November & certainly immediately after it.

I read a recent article on kyero.com which said that the PP (Parti Populaire) would consider re-introducing the Tax Credit (should they come to power) which had been abolished at the begining of this year. Apparently, this may be holding the housing market back at the moment....

as well as unrealistic selling prices, high unemployement, low salaries, high job insecurity, very tight lending conditions & massive over supply.

Recovery of the Tax Credit

The experts agreed that the intention of the PP to reinstate the tax credit for property purchases, for incomes exceeding 24,000 euros, if they win the general election on November 20, may be additionally delaying purchasing decisions.

According to Serrano, the PP’s announcement, even though it was made months ago and was followed by a period of “silence”, “may be influencing” these decisions and he said that the PP should clarify its proposal and put on the table a “progressive” tax relief which is more conducive to families with lower gross incomes.

Link to story

[Reality Check]

Hi,

The reply by timebandit referring to the post made by TJ222 on the eye on Spain forum speaks volumes about the current state of the market in Spain.

Link

I have been following closely the central Madrid flat market as my other half has a lot of money saved up & would ideally like to buy.

However, the big problem for us has been some of the points raised in TJ222's post. Which are:

The truth is that the market is still there for property, what is missing is realistic prices and the ability of people to match them.

This is certainly the case in Madrid where prices seem to be very sticky although this year we have noticed some more realistic pricing on the part of vendors keen to sell their property.

For example, we viewed a flat in the "Prosperidad" barrio of Madrid, 2 bedrooms, 60 metres squared of liveable space in good condition. I had previously seen it advertised on idealista for EUR 260,000 which is out of our budget & therefore had dismissed it. My other half saw it advertised recently for EUR 240,000 , at the top end of our budget, so we went to have a look at it. I asked the owner why they were selling it (2 kids, need a bigger property) & how long they had had it on the market for, their reply, was over a year with no success so they have just dropped the price. So, sellers are waking up (slowly) & smelling the coffee. Needless to say we didn't put in an offer for a variety of reasons, one of which being the flat is still over valued at that price.

Establishing good value after a boom is hard because you need to establish a reference point.

This again has been our dilemma. What is the correct price & how realistic is the price of the flat in the current market given how out of control prices got during the bubble mainly down to out right fraud.

We use a combination of factors to help us determine the price which are:

1) price/ rent ratio

2) average metre square price as per www.fotocasa.es (look at "precio medio por zona" underneath the "BUSCA" button. They have an interactive chart based on selling prices which is most interesting to play with as you can really drill down & look at the price per square metre of different barrio's of Madrid, for example.

3) if you can read Spanish, check their quarterly report which is quite comprehensive & interesting.

4) Tinsa monthly report

5) Monitoring the market & keeping track of prices & dates of properties listed for sale

6)) Your gut feeling based on what you know from having read this site

Again, one property we viewed back in January in the barrio of Prosperidad, the guy who was selling it (family, one child, needed a bigger property) was quite open & frank with us about how things used to be. He is originally from Cadiz and told me that when he bought his house in Cadiz (before moving up to Madrid) the bank lent him the full amount of the property for 100% of the value, plus over inflated the price so he could re-do the kitchen & buy a car (I kid you not). He told me that was just the way it was then.....

The banking system is past life support and is going to take down Spain as a sovereign state, much the same as happened in Ireland, another property bubble hotspot. Its hard to imagine the state the banks are in, but they have all the worst, most overvalued property that was ever bought, as this is the stuff that defaults first. People fight tooth and nail to keep their good stuff and anyway this is the property that still sells. When the banks need a rescue, the books will be looked at and the first condition will be to unload all these toxic two bed flats. Then the market will capitulate and everything will get dragged down.

Again, couldn't agree more with what TJ222 has said. God & the corrupt politicians only know how the Spanish banking system is still above water given the extent of the dubious lending during the boom years & their massively over priced loan books of repossessed property. I have told my other half that I fully expect Spain will need a bail out at some point, probably very soon.

I certainly have not seen any evidence of them carrying out any mark to market valuations of their property book. You can still buy a re-possessed flat in Spain for its over inflated price with a 100% mortgage directly from the bank if you want. Maybe this will change if the Bank of Spain begins to force the Banks & Caja's to re-value their books to their true market value.

So, things need to & I have no doubt, will change.

You just need to look at the dis-affected youth and the 15M movement to understand that things will change.

I know prices will not fall as much in the cities & a good property, in a good location will always sell, however, with so much risk towards the downside we are for the time being, continuing to save & monitor the market.

[Trampa501]

I know prices will not fall as much in the cities & a good property, in a good location will always sell, however, with so much risk towards the downside we are for the time being, continuing to save & monitor the market.

I really can't see a house price crash in major cities like Barcelona and Madrid. These are the places people head to for work, and so rental demand is always high - Ask any English teacher who's worked in those cities. You don't get the 24% unemployment of southern spain there (halve that figure, and perhaps more if you include working on the black ). Madrid province (dominated of course by the city itself) has actually had strong growth this year, and both cities are enjoying bumper tourist numbers.

Spanish link = Madrid industry 9 times the average

However I do wonder about other cities, particularly the Andalucian cities, where the unemployment figures are high. Does anyone have any knowledge of prices in Seville or Granada?

It's worth remembering that the Spanish have been through a similar experience (with very high unemployment rates) in the early 90s. At that time they had to cope with a dramatic fall in British tourist numbers, and did so by seeking other markets eg Germans, Russians, until the Brits came back. This time around I can't see a sustained increase in tourism (this year is a one-off I think, thanks to unrest in Arab countries like Egypt and Tunisia), but who knows? Worth making a cheeky offer in coastal areas, if you want to invest there, and take advantage of the reduction in VAT. Although, if this measure does stimulate sales, the government may well extend it.

[Trampa501]

Article in the Independent.

time to grab a Spanish bargain?

Not all ramping either?

However, some experts argue that many of the best deals are available for properties that overseas buyers should steer clear of – homes at the lower end of the market likely to be located on over-built, or unfinished developments. "Because a property has a low price tag doesn't mean it's a bargain. Be prepared that with Spanish property you are looking at a long-term investment, maybe 10 years or more before you see capital appreciation," Mr Way said.

For anyone brave enough, the onus is still on the buyer to do their research, carry out due diligence before signing anything and ensuring the property is free of debt and other liabilities. From the start, it's important to hire an independent Spanish lawyer not affiliated or recommended by an estate agent or developer.

"When buying in Spain, it is important to speak to a local attorney who will help handle the agreement, conveyance and possible migration. There are local taxes and fees that the attorney can explain. It can also be helpful to speak to a tax adviser who can find tax incentives to residing in Spain," said Christian de Meillac from agent Knight Frank International.

[LiveAndLetBuy]

Hi Reality Check & Trampa

I've been living in Madrid for over 7 years now (bought a flat in 2004 and moved again at the end of last year to catch the end of the "tax credit") so I've followed the market quite a lot.

It is very difficult to gauge the Madrid market because all you have to go on are the ridiculous asking prices. There is a huge amount of property that has been sitting on the market for years and the Spanish simply won't drop their asking prices even though many will accept up to 50% less than what they are asking for. It is absolutely crazy. I sold the flat I bought in 2004 last year for the same price that I bought it for - and all I had to do was look the asking prices for similar flats in that area and take 10k off my asking price. I still see those other flats for sale now with the same asking prices and I know that they simply will not sell for within 20% of what they are asking.

The flat I bought last year had been on at over 400k and I eventually bought it for 330k (in Arganzuela, by the river). Even then I'm not sure whether we did the right thing in buying - it was the tax credit that swung it for us. To give you and idea - we get about 2.5k back from the government each year for the duration of our mortgage (30 years). So removing that tax credit has removed a total of about 75k in tax rebates. Obviously this assumes we keep working for the next 30 years and doesn't take into account inflation. But my point is that it is not insignificant. If there is a chance they'll reintroduce it then it's worth waiting.

My advice to "Reality Check" is to be very very patient and keep looking and don't be afraid to negotiate hard. If a flat has been on the market at 260k for over a year then I really wouldn't pay more than 200k for it. If your budget is 240k then go and look at flats on the market for 300k and make some offers. Especially if you have have a mortgage offer from a bank to show them. You'be surprised how desperate people are to sell.

Also remember that if you buy you will have 10% purchase costs and it may take you over a year to sell it (should you ever need to). Also if you use an agent to sell it they will charge up to 10k. So buying in Spain only really makes sense if you can get a good deal and are here for many years.

[Trampa501]

Amazingly enough they're building again in Spain.

Spanish Banks build exit

Yet banks are building in strategic spots, where they say there is more demand. Banco de Sabadell, a midsize lender based in Barcelona, is building or planning to build 50 new construction projects, and also funding the completion of 150 projects that developers wouldn't have otherwise finished because of slack demand, said Salvador Grané, director of the bank's real-estate division. Meanwhile smaller Banco Pastor is working on five new apartment buildings around Madrid and the northwest.

Mr. Cabal, the real-estate broker, is pitching properties for the Bankia project in central Madrid. The bus-station location sits near the intersection of two freeways, and homes will have features like floorboard heating systems and a device that can automatically draw the blinds, start the clothes washer or call the fire department. The bank is selling them for about €4,500 a square meter and sharing the proceeds with the developer.

"People are hiding their money under the floor boards, and they won't take it out until things are better," Mr. Cabal said. "With the euro fears, we're all scared stiff" about whether the homes will sell.

In some instances, banks are waiting until they have lined up buyers before starting construction. Banco Pastor took possession of a parcel in one of Madrid's upscale districts in 2008. It is now continuing to round up home buyers for Mindanao House, with 104 of its 130 apartments spoken for. It started construction early last year, when about 50 units were already spoken for.

I suppose 104 out of 130 taken isn't too bad, and if these buildings are being built in Madrid or Barcelona then at least there is a prospect of folk being in a position to buy. I suspect the story on the coast is very different though? Unless folk are speculating that an early exit from the Euro will spark foreign investment?

[winkie]

If anyone has ever had to deal with bureaucracy in Spain this might strike a nerve....still made me laugh.

[righttoleech]

If anyone has ever had to deal with bureaucracy in Spain this might strike a nerve....still made me laugh.

muy chistoso.

[redwine]

http://www.burbuja.info/inmobiliaria/index.php

Muy chistuso

Its funny!

I checked out the resources section on the site but its not there

I thought that those who live in Spain or pretend to live in Spain might of mentioned it but they said nothing!

The above link is the Spainish version of this site

Spains own hpc website

burbuja inmobiliaria or bubble property info

With over 3 million posts and well over 8,000 members if not more

Hoy today have a look

The Spainish have some amazing avatars

BTW Italy also has its own version of hpc but its alot smaller than the Spainish site

[getdoon_weebobby]

got an email from la manga club

30 days use a year

doing 4% guaranteed rent through till 2023

from 100k , 90% mortgages

so ur rental agreement pays your mortgage in a fairly prestigious development

[Nautorius]

got an email from la manga club

30 days use a year

doing 4% guaranteed rent through till 2023

from 100k , 90% mortgages

so ur rental agreement pays your mortgage in a fairly prestigious development

Careful......you forgot about the Management Fees which will wipe out that income. Also everytime you use your own apartment you have to pay ocupancy fees which can be more than staying in a hotel! Add to that the latest property taxes and wealth Tax and you would be better staying well clear of these developments.

If you really want something you can buy without linking in to these Lifestyle deals for a better price and if off the bank get 100% deposit anyway. In reality that 4% rental is not real, they just load up the price of purchase and it is Cashback......if the rentals go up they gain not you...

Cheers

N.

[Nautorius]

Guys,

This is anecdotal from living across in Gib and watching the Market in the CDS avidly. In reality Spanish land is now worthless. The cost of a detached Villa on the CDS is now less than the current build cost which means there is negative land values. This is as a result of financing restrictions on Private Sales (Max 60% if possible to overseas), concerns over Land/Buildings/Wealth tax changes and of course Euro uncertainty. Add to that the 600k of developer unsold homes held on the banks books and it paints a grim picture. I was recently offered a prime location Villa in Sotogrande (Costa) where the Villa was being sold for less than the land was bought in 2003 to buy it and it is on a big 1600sqm plot...and it did not go to sealed bids...only one confirmed offer at below what the bank wanted. went for €430k....about €800k less than the next door villa sold for in 2007.

Spain is still dropping and no end in sight. I was told that high end property will only drop a little...however this time because of no finance and scared off foreign buyers it is tanking. My advice is still to rent. A great Villa can be had for €1500 a month and even at todays prices the Mortgage at 60% would be €2500 on that size of property plus taxes plus upkeep...rent will be better for the next few years.

Other signs of the times are that the price of luxury cars are dropping, boats and berths as well. I cannot see any signs of recovery. I love Spain but having exposure to one property is enough...no chance of Investing at the moment.

[swissy_fit]

Allowing corrupt local politicians and builders to swindle thousands of foreigners and then confirming the swindle once it was revealed probably wasn't a great longterm move, if it weren't for that then foreigners buying would probably be slowing up their crash.

[Nautorius]

Allowing corrupt local politicians and builders to swindle thousands of foreigners and then confirming the swindle once it was revealed probably wasn't a great longterm move, if it weren't for that then foreigners buying would probably be slowing up their crash.

Good Point, and additional fuel to the Firesale......

[Venger]

Main page of today's http://www.surinenglish.com/

“I needed some money to visit my grandchildren and now I’ve lost my house”

As a result she has been forced to rent out her home and sell an apartment in Marbella at a loss to pay off a debt that threatened to leave her homeless.

Stupid cow didn't need two properties, and should have sold one before her eyes bulged at easy money from a new investment scheme run in Spain, which she also should have paid UK advisor to check over in advance.

Always someone else's fault. Gimme the money, I deserve it, and deserve HPI and to have lots of properties.

How about making way from more prudent people who've saved, instead of asking others to pay your way after years of good times, and for all your excesses..

More detail

http://gangsuncensored.blogspot.co.uk/2012/04/thousands-of-british-expats-are-on.html

http://belegal.com/equity-release/

[Democorruptcy]

Other signs of the times are that the price of luxury cars are dropping, boats and berths as well. I cannot see any signs of recovery. I love Spain but having exposure to one property is enough...no chance of Investing at the moment.

Anywhere I can buy a bargain mobile home?

A German made one would be nice.

[righttoleech]

Main page of today's http://www.surinenglish.com/

“I needed some money to visit my grandchildren and now I’ve lost my house”

Stupid cow didn't need two properties, and should have sold one before her eyes bulged at easy money from a new investment scheme run in Spain, which she also should have paid UK advisor to check over in advance.

Always someone else's fault. Gimme the money, I deserve it, and deserve HPI and to have lots of properties.

How about making way from more prudent people who've saved, instead of asking others to pay your way after years of good times, and for all your excesses..

More detail

http://gangsuncensored.blogspot.co.uk/2012/04/thousands-of-british-expats-are-on.html

http://belegal.com/equity-release/

When house collectors use one of their properties they tend to be more upset than someone who loses their sole home. It's because they think they are so clever to have multiple pwoperdees.....they foresee nothing less tnan bloated luxury as the plebs are bled white.

[righttoleech]

When house collectors use one of their properties they tend to be more upset than someone who loses their sole home. It's because they think they are so clever to have multiple pwoperdees.....they foresee nothing less tnan bloated luxury as the plebs are bled white.

meant 'lose'.....not use

[Venger]

When house collectors use one of their properties they tend to be more upset than someone who loses their sole home. It's because they think they are so clever to have multiple pwoperdees.....they foresee nothing less tnan bloated luxury as the plebs are bled white.

I agree, but I just picked on her because she had a Marbella investment property, as well as her main Spanish home, before getting herself wound up in one of these schemes.

Most of the others are pensioners, and it seems many did it to avoid inheritance taxes + get an income, borrowing hard against their own homes. I've had it for feeling sorry for older people who've had many advantages, including HPI* and buying in Spain at pre Spain-boom prices, who've gone on to MEW their homes in Spain away.

Or even those pensioners who sold up at peak UK prices and decided to splurge all their gains top of the market in Spain, expecting property to always reward them as it had done for decades, because they're worth it, and have no real gritty insight into the value of money.

They were not preyed upon. Homes are for living in, not withdrawing almost all of the equity against a scheme. Now, as well as incurring losses, they are also under investigation for tax avoidance.

*

Many had a small pension, but hundreds of thousands of pounds from the sale of their UK home, which had soared in value over their lifetime.

Sixty five year old Toni Minta fears losing his home in Estepona, for which he paid 600,000 euros ten years ago. He took out a loan for 1,250,000 euros which went to a tax haven. Now the ups and downs of the economy have reduced this sum to 500,000 euros yet his original debt with the bank remains intact.

Another victim is Eric Mould, 64, who after a career in sales moved to a seaside villa in Puerto Banus, near Malaga, in 2007. He and his wife Mary, 60, sold their four-bedroom detached house in the UK to buy a three-bedroom villa with a swimming pool for €1,188,000 (£990,000).But five years later they are living in a friend’s flat in the town and battling to pay €2,100 (£1,745) a month in mortgage repayments to Danish bank Nykredit.

Shortly after arriving in Spain, the couple borrowed €1 million against their villa with the bank. They say the British financial adviser who sold them the equity-release mortgage told them it would be a ‘win-win’ situation.

http://www.lawbird.com/wordpress/author/admin/