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Nautorius

The Final Nail In The Coffin Of Spanish Property

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Well the latest Info from the Costa Del Sol.

I have been looking for a Repod 3/4 Bed Townhouse or Villa. There are several reasons but one was that they came with finance attached. Historically in Spain you could get up to 80% Mortgage based on surveyors valuation. This valuation would stay with the property when sold and could be transfered to the new owner. This meant the property mortgage could be moved accros as well. For the last 12 months of Property crash this has stopped the market from collapsing. Once prices dropped 20-25% then the Value Equaled the mortgage. This meant that Brits did not need a deposit to buy but could use smaller savings to cover costs and transfer market mortgage. With Repod properties there were even cash back incentives from the banks available!

But this has now ground to a halt. The banks have recognised that by transfering the mortgage they retain the risk as there is little if any equity in the property. This means Brits strugling can just hand in the keys and walk away. So the banks have decided to only transfer mortgages where there is still real equity in mortgage i.e actual sale price over 10% higher or they are asking for you to deposit with them the equivalent of what a house deposit would be up to 20% of the value and lodge it into a Bond affiliated to the bank. This has had two efects. Firstly the rate of Repos is increasing as people can no longer sell by just reassigning their mortgages. Also because of the need for a 20% deposit or Bond the number of buyers have reduced which means that the only way to kick start the market is for big price falls so that the 10% cash the people had before will be 20% of a lower value. HPC on the way and now in full swing! But that is not all. The banks are now saying brits not resident have to put up to 40% into a bond to reassign the mortgage or put up 40% of the property value.

The net effect is that the price falls are now seeing over 40%, in fact I have today seen 60% from peak. The EAs have lots of bargain hunters with some cash. However including the 7% Tax on property purchase and other costs you need 11% before a deposit. In the past UK people Mewed to pay this. Now they only have cash and not enough to cover 20% +11% fees and definitely not enough to cover 40% + 11% fees. It will be carnage.

The Properties were selling for €3500-€5000 per sqm in the good days. Today a friend bought a luxury property in Soto for €1850 per sqm! There were only two bidders despite a 48% discount off 2006 Sales price...and it is top end stuff in an amazing location.

So that would mean that properties in less desirable areas will be €1600 sqm by the end of the year.

I think the death knoll for larger properties is calling. A 3/4 bed Villa was double the price of a 3/4 bed similar size town house. Today that is down to 50% more. A 3/4 bed Townhouse was 75% more than a 3/4 bed apartment. That is down to 25% more.

What I can not understand is that the Banks are killing the market which will turn off the cash flow back to them. Spain and it's banks are going to make Northern Rock and RBS look solvent in the next two years. In the CDS 33% of all completed properties are for sale. That is a lot of defaults waiting to happen. I have cash, a good income and I can not get credit to buy a repod house even at 3 times salary as I do not have a €160k deposit. So the bank is left with it! Adios Espana, Hasta Luega

N.

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Well,

Here is an update. Today I saw my first 1000€ a sqm property! 3 bed town house about 1 mile inland from Estepona. Nice development (all finished), good quality build, nice finish and a good size at 234sqm (excluding garage). On the Market for €234k! All units were reposesed and finished by bank who are just trying to recoup the money.

Also saw a detached Villa near Sotogrande. Originally 2 beds, half way through extension to make 5 bed and brit 'developer' has had it repossesed. All expensive work done and original 2 bed still usable as extension built as a seperate block. Currently 125sqm on one floor. Extension will be 256sqm. Total finished would be 381sqm plus 35sqm detached garage (finished). Stunning views, about 500m to beach and not overlooked. Bank had it on Market for €500k, now €385k and will take offers. Really tempted but there are lots of thes half finished developments so will wait until more hit the Market.

Prices are coming down fast now. Banks will only lend at 50% of any part developed house.

N.

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Nothing to add, just to let you know that these direct experiences are always interesting to read and you're not just talking to yourself.

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Nothing to add, just to let you know that these direct experiences are always interesting to read and you're not just talking to yourself.

DITTO!

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The Spanish market deserves to fall apart. Overdevelopment, lack of taste, lack of quality and circumstances, like cheap air fares turning against them, it is doomed.

£200,000 for a townhouse does not seem value to me, but if it is what you want, good luck.

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The Spanish market deserves to fall apart. Overdevelopment, lack of taste, lack of quality and circumstances, like cheap air fares turning against them, it is doomed.

£200,000 for a townhouse does not seem value to me, but if it is what you want, good luck.

Yep. Prices will fall - massively. Once the banks turn off the credit taps, only savers will be tempted into the property game. We're going back to the future. Pre-1990s. 3.5x salary at max for FTBs. Locally in Spain, that must equate to 50K euros max, outside the big cities..........

Edited by Agentimmo

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