Spain's Ghost Towns: Built During The Boom Years But Now Lying Empty...

[Trampa501]

Here's the promo vid that Santander made for those flats. Look ok inside, but still looks very grim from outside.

http://www.youtube.com/watch?v=w748QMOwmSs

[The Masked Tulip]

Here's the promo vid that Santander made for those flats. Look ok inside, but still looks very grim from outside.

http://www.youtube.com/watch?v=w748QMOwmSs

Looks very grim outside.

[Zorba]

[The Masked Tulip]

It is as if they did not know whether to build appartments, office blocks, car parks or hotels for Brits... so they made something in between?

[RufflesTheGuineaPig]

That "apartment complex" would make a great prison...

Is this the European equivalent of the FEMA-camps?

I was about to write that - then I scrolled down and saw you beat me to it!

[rxe]

Just got back from Spain, and it is much worse than "ghost towns". I've written about this before, but we know the area very well, been going there for years. The post euro bubble was fearsome: 4 bed town houses (very average) going for more than the price of a similar house in central London (Eur 1M), a very average development plot (2 houses, serious engineering needed), EUR 750K. Our shambles of a place was allegedly worth EUR 1.2M+, solely due to plot and view. It literally was valueless in the 70s.

So this year some friends came with us, looking to buy. I said they were bonkers, shouldn't touch the place, but we looked at some houses. Lots of 50% reductions from peak - and that is the advertised price in the window. The sellers are desperate and will accept lower. We looked at one that used to be on for EUR 1.3M, now at 600K, sellers would probably accept 500K. Not a tickle. Nice place, pool, OK view. The numbers still don't add up. You could rent that place for EUR 15K for the whole summer, have a whopping party, then pack up and leave the maintenance to the owner - which would consume the entirety of the 15K. Yield: sub zero. Another place, divorcing and "underwater" owners, initially on for EUR 800K, listed at EUR 400, agent suggested an offer of EUR 300k would do the job - and it is still unsaleable.

Layer onto that woe the quality of the recent construction. Houses literally sliding down hillsides, huge cracks opening up. Places bought for EUR 600K, now unsaleable at any price. For the 5 houses we looked at, the Spanish banks were in the red to the tune of something like EUR 2.5.million (the EAs are wonderfully open about the vendors situtation "these people are totally desperate, no offer refused").

[Trampa501]

Yes, I can imagine things are a lot different on the coast. I can't see 400 properties on the same site being bought up in days as in Seseña, even with the hefty discount. But, there again, maybe the right price will always find a buyer?

[Redcellar]

400 units sold in a few days according to (Spanish) news report.

apparently the minimum price has risen from 65k to 78k. I wouldn't buy there even so, but it will suit some local workers I suppose

spanish news article

Think about the neighbours who will buy at this price.

[Trampa501]

Think about the neighbours who will buy at this price.

ha, not sure that a Spanish equivalent of a chav could rustle up 65k.

But it is possible that one of the many migrant groups working in Madrid (Ecuadorians, Rumanians, Peruvians etc) may make up a large element of the buyers. If they're working I don't see the problem. So far as I know you don't get housing benefit there.

[South Lorne]

ha, not sure that a Spanish equivalent of a chav could rustle up 65k.

But it is possible that one of the many migrant groups working in Madrid (Ecuadorians, Rumanians, Peruvians etc) may make up a large element of the buyers. If they're working I don't see the problem. So far as I know you don't get housing benefit there.

...they get here....why not there ...we are all supposed to be Euro together...no...?....

[South Lorne]

Morgan Stanley have published a reports saying that Spanish property prices have further to fall.

http://www.elmundo.e...1326132997.html

....

the widespread assumption by bureaucrats, senior politicians and commentators alike that eurozone countries could never go bankrupt is simply wrong. In fact, the opposite is the case.

...they Bankers go it wrong in South America decades ago ...some people never learn....

[LiveAndLetBuy]

ha, not sure that a Spanish equivalent of a chav could rustle up 65k.

But it is possible that one of the many migrant groups working in Madrid (Ecuadorians, Rumanians, Peruvians etc) may make up a large element of the buyers. If they're working I don't see the problem. So far as I know you don't get housing benefit there.

Nope there's no housing benefit in Spain, and no family support/tax credits/whatever either. Relatively high unemployment benefit though.

[tinker]

Another country having a housing crash. Resetting itself.

Of course it couldn't happen here, not whilst our MPs and their families are property investors.

[rxe]

I would entirely agree that they have a lot further to fall. Probably more than most think.

It is interesting applying the same logic to the UK, and I think it falls down.

Certainly on the coasts, properties went in some mental bubble fuelled by two markets:

1) Locals, buying off plan and with reckless bank finance behind them. We have "liar loans" here, but it was a lot worse over there. The banks were financing the developments, as long as the prices were going up, they would lend any amount on any property.

2) Expats, flush with the sale proceeds of their houses elsewhere, thinking that a 4 bed house for EUR 750K was a bit of a bargain.

The problem is that when you run the rental numbers, both groups are utterly insane. Also the expats quickly realised that for about 6 months of the year their marble floored house, so nice in August, is cold and damp. So you'er paying EUR 750K for an asset that you will use for 2 months of the year, and then fail to rent for the rest of the year. Simply doesn't add up.

Does this apply to London? Not as much. Rental yields are piss poor, but at least positive, and actually probably slightly better than bank interest. There is also a reason to be in London, because there is work there. In Spain, you're making a EUR 750K downpayment on future holidays - which buys a shit load of really exotic holidays.

[pyewackitt]

Does this apply to London? Not as much. Rental yields are piss poor, but at least positive, and actually probably slightly better than bank interest. There is also a reason to be in London, because there is work there. In Spain, you're making a EUR 750K downpayment on future holidays - which buys a shit load of really exotic holidays.

The problem with London and much of the South East is that buying is much more expensive than renting. Rents have gone up but still haven't matched up to the mortgage prices when a normal 10-20% deposit is considered - There is only an upside risk to rates they wont go lower. The only way we can go other than lower prices is currency debasement - whatever happens next in the UK even more people will be impacted.

[South Lorne]

The problem with London and much of the South East is that buying is much more expensive than renting. Rents have gone up but still haven't matched up to the mortgage prices when a normal 10-20% deposit is considered - There is only an upside risk to rates they wont go lower. The only way we can go other than lower prices is currency debasement - whatever happens next in the UK even more people will be impacted.

...simpler than that ...why consider buying in a falling market....?....

[kev-all-in]

Hey - I thought Portugal was next!

bloody Europeans - just push in, no concept of queuing

[Debbie568]

ha, not sure that a Spanish equivalent of a chav could rustle up 65k.

But it is possible that one of the many migrant groups working in Madrid (Ecuadorians, Rumanians, Peruvians etc) may make up a large element of the buyers. If they're working I don't see the problem. So far as I know you don't get housing benefit there.

If you are a young person, up to the age of 30, you can get some rent assistance under certain circumstances in Spain. The purpose of housing benefit - and the reason we still have it as a separate benefit - is to induce otherwise unwilling property owners to rent out their properties to Jack the Lad, whom they otherwise would have nothing to do with, in return for a guaranteed rental income. So even though LHA looks like it is paid to the tenant, if the tenant then reneges on their lease with the landlord, the landlord can then go and recover the outstanding rent from Westminster, via their local city council.

And why did they (and still do) need to do this? Well, if they just paid a universal benefit like they do in Spain and which Cameron would like to do here, then probably most landlords wouldn't rent to people getting benefits, on the basis that if they chose to drink/eat/enjoy all their income away prior to paying the rent, the landlord would have nowhere to go for the money, these tenants being people with a max of £15,999 iin liquid assets (and a minimum of minus however much money they are into the banks and loan sharks (Wonga/pay day loan companies) for). But surely the main reason is because the Government, on behalf of the taxpayers, have decided they don't want to invest directly in social housing.

In Spain, in contrast, there are so many surplus to requirements ghost homes. I'm sure Spanish landlords would love to have an incentive to rent to poor people, in which case those housing estates on the edges of town would by now look like the ones to the north of Paris. Instead you get shanty towns, like Canada Real, near Madrid. No running water or sewage services. Thousands of people live there. So much for a constitution that guarantees "adequate housing" for everyone!

http://www.thepolisblog.org/2009/11/slums-in-spain.html

Can you imagine Brits tolerating slums like these on the edges of London or Edinburgh?

[witsended]

The purpose of housing benefit - and the reason we still have it as a separate benefit - is to induce otherwise unwilling property owners to rent out their properties to Jack the Lad, whom they otherwise would have nothing to do with, in return for a guaranteed rental income. So even though LHA looks like it is paid to the tenant, if the tenant then reneges on their lease with the landlord, the landlord can then go and recover the outstanding rent from Westminster, via their local city council.

I think you will find most landlords will not accept direct payment of HB from the council for the simple reason that if a tenant has made a false claim the council comes after the landlord for their money back on the grounds that they have taken stolen money. Landlords would rather risk losing a few months rent in non payment and evict the tenant, than face the prospect of repaying what might be years of rental income back to the council. As for a landlord getting outstanding rent paid to them by the council, they would be told to take a long walk off a short pier.

[Debbie568]

I think you will find most landlords will not accept direct payment of HB from the council for the simple reason that if a tenant has made a false claim the council comes after the landlord for their money back on the grounds that they have taken stolen money. Landlords would rather risk losing a few months rent in non payment and evict the tenant, than face the prospect of repaying what might be years of rental income back to the council. As for a landlord getting outstanding rent paid to them by the council, they would be told to take a long walk off a short pier.

Yes, I take your point. http://www.propertyinvestmentproject.co.uk/blog/fact-landlords-refusing-dss-tenants-is-well-justified/ illustrates the problem for landlords who rent directly to tenants. But landlords usually wouldn't rent to DSS tenants directly anyway, would they?

What happens up here is say you get evicted. Not necessarily due to not paying rent - the council could then argue you have intentionally made yourself homeless. But it could be something like coming in at 2 am in the morning and the landlady lives downstairs. You have to be homeless to even get onto the social housing list sufficiently up the queue to get something. Assuming the council don't have any suitable social housing in the part of town you are settled in, they will then rent the house for you. You still may have to make rent contributions, (e.g. if you are the working poor) though they would usually be paltry. But if you don't pay up, it's the council who starts to arrange to dock your other benefits. The landlord's contract is a commercial lease, directly with the council.

it's the same with if they can't find a suitable place to rent for you and put you up in a B&B. yes, you're still a DSS client, but the B&B owner's contract is with the council, not with you. Including appropriate restitution/repair if you make a mess of their place. "Normal wear and tear" doesn't come into it. These are commercial leases, i.e. the premises must be restored, and the end of the occupancy, to the state they were in at the start of the lease, at the lessee's (i.e. the council on behalf of the DWP) expense.

Why would any landlord rent directly to housing benefit recipients rather than to the local council, if they have properties suitable for DSS tenants? Surely the only way anyone would accept a DSS tenant is if the housing benefit was paid directly to the landlord, and if there were assurances from the council that there was no shortfall that the tenant had to pick up AND, as for commercial leases, that any damage to the property would be covered by the council when the tenant vacated. Otherwise, why rent to this kind of tenant at all? I'm mystified by the stupidity of it.

Edited March 29, 2012 by Debbie568

[Venger]

Surely the only way anyone would accept a DSS tenant is if the housing benefit was paid directly to the landlord, and if there were assurances from the council that there was no shortfall that the tenant had to pick up AND, as for commercial leases, that any damage to the property would be covered by the council when the tenant vacated. Otherwise, why rent to this kind of tenant at all? I'm mystified by the stupidity of it.

Well you're wrong. There are many landlords do accept tenants who don't work and claim LHA and other benefits. Benefits as claimed by the individual. A landlord isn't there to claim it directly on their behalf, so they have no commercial risk.

It's perfectly right any LHA is paid directly to the claimant, and they have responsibility for paying the proceeds towards rent to the landlord.

Why rent to this kind of tenant at all? Because many properties couldn't be let out to anyone other than those claiming benefits. Or they wouldn't be able to get the same level of rent for them. If you want it your way, then rents by by government in LHA must be lower.

In some instances if a tenant claiming LHA, isn't paying the rent the landlord, the landlord can seek payment from the council, and arrears; but not always. If they don't want commercial risk then don't become a landlord. It's the same for all tenants, not just those claiming LHA. My friend's firm earn good fees recovering possession for landlords. There is commercial risk.

Everything is so simple in Debbieland. Apartments can't crash in value because of growing population. Banks must loosen credit to write mortgages to people who can't afford to buy else the banks won't make money. Millions of people, including owners, in precarious financial situations can't be house prices down.

[Montauk]

Wow! I'm floored! When was this video taken?

[The Masked Tulip]

Wow! I'm floored! When was this video taken?

They will never fill them - looks like some Soviet era city.

[Trampa501]

Wow! I'm floored! When was this video taken?

Taken a few years ago now.

There is a thread on HPC about it now

Remember Soto de Henares?

Posters on various boards were making assumptions based on the Youtube video, and repeating the same message "A whole town in Spain, built on speculation, unfinished and idle. "

Yet a few years on there's a lively residents' forum, where the major complaint appears to be slackness in putting in the metro link to Madrid (jobs there you see). The forum's in Spanish (obviously)

Spanish forum link

Soto de Henares was a new suburb built on the outskirts of Torrejon. They've also built a new hospital, industrial estate etc there. Not a place I'd choose to buy unless I worked in Torrejon, and to be honest I doubt anyone here would want to buy there either. But it's far from being the disaster some punters predicted based on a video... Speaking of videos, here's one put out by the local council of Torrejon, publicising what's improved in 4 years there. Not aimed at speculators or Brits - it's for local residents. Interesting intro music they put onto the vid.

Madrid's a bit like London in that migrants (from within Spain and without) flock there, as that's where the jobs are. Good in some respects, but it means that prices are still way too high, although they have slipped back a little over the last year or two I believe.

[winkie]

Other points of discussion:

Large euro mortgages with income in pound.

Equity taken from property in UK to purchase foreign property in Euros.

Pensionable income falling, the pound weak.

High price increases in Spain, fuel, and food.

Higher future cost of airline tickets, airline green taxes.

Security problem of leaving property for long periods unlived in, with poorer surrounding economy/autersity.

Condition of property that is left for long periods without money being spent maintaining them, gardens, pools, wood preservation, dampness, poor building spec....pulls surrounding properties down further.

Loss of communities as local shops and facilities close...people up and leave their unsaleable empty homes.

The possible high chance that property taxes could increase.

Huge oversupply of property built mainly for the northern European market with bottomless pockets that thought than any 'investment' in property was a good investment, until it works out not to be, it can workout to be a money pit like a migraine headache that is difficult to shift and hard to cure.