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Spanish Real Estate Bubble Bursts.


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It is now official.

Spanish Real Estate bubble bursts today Tuesday 24th April 2007 following last week's market meltdown of Astroc. Real Estate companies listed in the spanish Stock Exchange are losing over two digits this morning.

Panick is catching on like wildfire over to bank's stocks with heavy interest in mortgages.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

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It is now official.

Spanish Real Estate bubble bursts today Tuesday 24th April 2007 following last week's market meltdown of Astroc. Real Estate companies listed in the spanish Stock Exchange are losing over two digits this morning.

Panick is catching on like wildfire over to bank's stocks with heavy interest in mortgages.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Banks have pulled the rug from underneath the feet of builders this year by charging them higher than normal interest rates - knowing that a collapse was around the corner. Seeing the market stall last summer, it is still incredible the number of cranes you see in every town you drive through.

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It is now official.

Spanish Real Estate bubble bursts today Tuesday 24th April 2007 following last week's market meltdown of Astroc. Real Estate companies listed in the spanish Stock Exchange are losing over two digits this morning.

Panick is catching on like wildfire over to bank's stocks with heavy interest in mortgages.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

The bubble will burst when the prices will have decreased by at least 50%!

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  • 2 weeks later...
Where was this?

I sold in Malaga. In all honesty, I was just lucky and ended up with two English couples bidding on it. They bought it to live in so investment/capital growth didn't come into the equation. I don't think the same luck would bestow me again.

Edited by Nitrode
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I sold in Malaga. In all honesty, I was just lucky and ended up with two English couples bidding on it. They bought it to live in so investment/capital growth didn't come into the equation. I don't think the same luck would bestow me again.

Like everything else if you buy the right property in the right location you will never have trouble selling it.

What makes me laugh about all of this is that property in Spain has been crashing now for two years. It isn't suddenly new news for those who know anything about the market. I know places in Torrevieja that are currently up for sale at £25k and were bought for £75k in 2003. In this area prices have dropped by 60%+ since 2003.

The problem is that these places are undesirable. People on here waiting to buy in Spain aren't interested that prices in these places have plummeted. People holding out to buy are looking for prices to drop in the nice resorts on the nice developments. Unfortunately for them this will never happen. Resorts on or by the beach, away from areas like the Costa Blanca are holding pretty steady in the crash.

Unlike the UK property market Spain was affected by what I call teh affordability threshold. Let me explain in more detail.

We have four locations in an area of Spain. Area A is beachfront. Area B is a mile inland, Area C is 5 miles inland and Area D is 20 miles inland.

In 1998 the situation was as follows (I am using 3 bed houses as an example):

AREA A - Ave Price £70,000 - This area was popular and was affordable for quite well off retirees or top end holiday let investors.

AREA B- Ave Price £40,000 - This area appealed to less well off retirees and lower end holiday let investors

AREA C- Ave Price £15,000 - This area appealed only to a hardcore few looking for a Spanish getaway.

AREA D- Ave Price £5,000 - This area appealed to a few builders looking for a little project or UK doleys looking for cheap escape abroad.

This was the era when Place in the Sun started appearing on TV

In 2001:

AREA A - Ave Price £100,000 - This area suddenly became affordable to more people as UK HPI started kicking in. All of a sudden demand started outstripping supply in this area. At the same time coastal land prices doubled in value.

AREA B - Ave Price £55,000 - This area appealed less because it was now more affordable to buy into AREA A because of UK HPI and MEW. At the same time builders started looking to this area because land was less than half the price of AREA A.

AREA C - Ave Price £30,000 - This area suddenly started appealing to those who used to only be able to Afford AREA D. As a result people saw £30k as a tiny sum of money which = less than a years equity for many.

AREA D - Ave Price £20,000 - Now more and more people after watching Place in the Sun were interested in this renovation game. Local EA's and Farmers took advantage.

In 2003:

AREA A - Ave Price £140,000 - This area again becomes exclusive as it bounces past the affordability threshold of £120,000. Demand decreases rapidly as a result. At the same time supply is also constricted because of falling profits for property Developers in AREA A. Land prices have just risen too much in coastal regions.

AREA B - Ave Price £120,000 - This area BOOMS. Land is as cheap as it was in 1990 and can be bought in bulk from impoverished farmers. As a result supply increases and because of UK HPI tons of Brits are walking around with £100k to spend and desperate to buy a home in the Sun.

AREA C - Ave Price £100,000 - Suddenly this becomes an area of interest for your average joe public looking for a house in the sun or those retirees with little savings or cheap houses in the North with around £100k from their house sale. Over marketed with glossy brochures of artist impression Villas with pools mean hundreds of thousands get sucked into buying in an area which was a few years earlier just a dustbowl nobody would even keep their sheep in.

AREA D - Ave Price £55,000 - Taking advantage of the British belief that you cant lose with property every Spanish farmer tries to offload their crappy barns for as much as £55k. Some Brits are buying even without checking planning consents and with no electricity supply or water supply. The Spanish and lots of British renovators can't belive their luck. The stories of people doubling their money on renovation projects just helps fuel the market.

In 2007:

AREA A - Ave Price £140,000 - As always this area isn't were building is taking place, as a result prices stagnate as a few people resell as a result of death, finances etc. This area includes very few amateur investors and also tends to do well for holiday lets so no panic selling is happening. Retirees here also tend to be financially sound. Quite a lot of beachfront property was bought cash many years ago and over half is owned by Spanish people.

AREA B - Ave Price £75,000 - Prices drop by 35% as people realise they cant let out their homes in the Sun because they are too far from amenities or simply just across a busy road from the beach. Quite a few people were amateur investors and stretched financially. As a result many people fear the crash and need to release any money they have tied up in their Spanish Property. Also retirees sell up as they realise they have bought in a false ghost town development.

AREA C - Ave Price £50,000 - Prices here drop by 50% as again people panic sell but also quite a lot of AREA C buyers can now afford AREA B.

AREA D - Ave Price £30,000 - Prices here are dropping by 40% as the realisation that easy money cant be made any longer from renovating Spanish barns hits home. This area doesnt crash as much as AREA C because it still gives you a Spanish House for less than a garage in the UK. Tends to appeal to Working Class and Unemployed New Life Abroad people.

I watched the market in Spain unfold. As soon as Area A prices went above £120k the focus shifted to cheaper property inland. As a result quite a lot of speculative property tends to be in Area B/Area C and was grossly overvalued. Unlike Area A property - Area B/C required cheap marketing gimmicks to sell as they lacked sea views or beach front amenities. This usually consisted of Golf Courses or some other glossy lifestyle hard sell. These properties soon equalled AREA A prices and this is were the bubble expanded most violently. As a result these areas are now set to drop most dramatically and will most definitely be most affceted by a UK HPC.

For me the sudden influx of people (IMO about 70% of buyers that suddenly landed in Spain between 2001 and 2005) with around £120k or less to spend encouraged greedy developers in Spain to suddenly realise that as long as they marketed properties below this affordability threshold the location was unimportant. The location could always be sold to the punters. There was always some hook they could use "Just look at the Mountain Views" "You are less than 35 minutes away from the airport" "We intend to build three more courses and a Five Star Hotel on this complex" "Every House as its own pool". Just as long as you were below that magic figure these Estate Agents could just keep selling them like hot cakes. And the bonus was that the land was 70% cheaper than coastal land.

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In 1998 the situation was as follows (I am using 3 bed houses as an example):

In 2001:

.

In 2003:

In 2007:

Thanks for the overview.

What would be your prediction for Spain in 2010? Say that interest rate in EU goes up another .5%, there is a mild decrease of property price in UK, USA is completely thrashed and Germany does OK but not too good.

Out of curiosity, which places in Torrevieja lost 60% of the value?

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Thanks for the overview.

What would be your prediction for Spain in 2010? Say that interest rate in EU goes up another .5%, there is a mild decrease of property price in UK, USA is completely thrashed and Germany does OK but not too good.

Out of curiosity, which places in Torrevieja lost 60% of the value?

I think the development was called Villa Martin.

My prediction for what it is worth would be that by 2010 prices will be pretty much the same in certain coastal regions but developments inland will drop 50% + as their is a massive oversupply problem. As construction goes to the wall it will actually work in Spains favour because supply will dry up and the gap between supply and demand will constrict. It will take 5 years perhaps longer for the balance to be returned though IMO. During this 5 years if you wanted to buy a property in Spain I reckon prices in certain areas will drop to 2001 levels. In a few years would be the best time to grab a bargain.

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Thanks for the overview.

What would be your prediction for Spain in 2010? Say that interest rate in EU goes up another .5%, there is a mild decrease of property price in UK, USA is completely thrashed and Germany does OK but not too good.

Out of curiosity, which places in Torrevieja lost 60% of the value?

Probably in the areas of Torrevieja that no one would ever want to rent or would go and never rent back off of you.. There are some really scummy areas of Torry.

Using above as an example of areas in the Torry area for googling.

AREA A - Playa Flamenca / Cabo Roig / La Zenia

AREA B - AREA C - Villamartin

AREA D - San Miguel de salinas / Benijofar / Los Montisenos

There is an absolute abundance of rental property in all 4 areas here. In the winter most areas of the Costa Blanca that fall into the first 3 catagories are like ghost towns.

They all have "for rent" signs or "for sale" signs. It is complete buyers market out here and people who own and are trying to sell are stubborn and do not want to reduce prices, but watch this space... more and more will, and your 50% decrease noted above will eventually happen, especially in this area.

One other point, the spanish build quality is terrible, but you probably all new that anyway, so can you justify paying 200,000EUR for a 2 bed 2 bath that is falling apart??

After all the germans with 2nd homes were caught for tax fraud, 1000s of properties went on the market immediately and most are still up for sale one year later.

I currently live in the costa blanca and used to live in villamartin (as a rental so i could scope out where i wanted to buy) and its like a concrete jungle out here, no space is sacred, every little bit of space thats free has some sort of planning permission on it.

There are a lot of deals to be had out here and some serious haggling can be done on house prices.

There is far too many estate agents out here, so hopefully this price issue, will weed out the good from the bad.

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I think the development was called Villa Martin.

My prediction for what it is worth would be that by 2010 prices will be pretty much the same in certain coastal regions but developments inland will drop 50% + as their is a massive oversupply problem. As construction goes to the wall it will actually work in Spains favour because supply will dry up and the gap between supply and demand will constrict. It will take 5 years perhaps longer for the balance to be returned though IMO. During this 5 years if you wanted to buy a property in Spain I reckon prices in certain areas will drop to 2001 levels. In a few years would be the best time to grab a bargain.

My mother wants ot buy something in mainland Spain in 3-4 years from now, just for the climate so she does not care about being in coastal region.

Which are the best sites to look for Spanish properties? I know of Loquo.com and kyero.com.

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My mother wants ot buy something in mainland Spain in 3-4 years from now, just for the climate so she does not care about being in coastal region.

Which are the best sites to look for Spanish properties? I know of Loquo.com and kyero.com.

Dont fall for the inland hype. Too hot in Summer with no coastal breeze and freezing in Winter without the warm winds from Africa. Coastal resorts at least have some activity all year round and if you are retiring somewhere these are the areas I would recommend. Inland areas tend to suffer from lack of facilities and some of the areas can be a bit backward. My parents bought a house in a place called Alcoy about 8 years ago. It was a very bad decision for them. They fell for the hype and had all the land and the Almond trees, Orange trees etc. In the end they were spending 6 days of the week down by the coast anyway because that was were the life was (English and Spanish).

Avoid the Costa Blanca and avoid certain areas of the Costa Del Sol. Areas such as Mojacar and Vera Playa have restrictions on building heights (3 storeys max) as well as some areas of the Costa De Luz so you avoid the concrete jungle that OFS Spain is describing. Try and avoid the resorts with discos and a reputation for club 18-30 and head for the historic places such as Cadiz, Sevilla, Granada etc visited by 45-60 year olds. These are the areas to buy in IMO.

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My mother wants ot buy something in mainland Spain in 3-4 years from now, just for the climate so she does not care about being in coastal region.

Which are the best sites to look for Spanish properties? I know of Loquo.com and kyero.com.

It depends on a million factors...

But 1 major factor they may consider, is ability to speak Spanish, or the want to learn..

Inner spain or 5 miles plus inland and you will be struggling to find english speaking natives. The staff in the local Supermarket where i used to live, in Xpat-ville i may add, did not speak a word of english, now im fairly good after a good year of tapes, CD's and kids Spanish books, but if your olds dont want to learn, then somewhere Xpatish is probably the best.

Plus also bear in mind the rediculous IHT issue here depending on where you buy.

In a lot of areas IHT is paid "up front" by the inheritor and not taken from the estate, you are unable to take a loan agaist the property to pay it, it has to be registered within 6 months or interest is added at an astonishing rate.

Food for thought.

Totally agree on the above and hear that Granada is a magnificent place.

One place id recommend is Javea in Costa Blanca, about an hour from Valencia, on the coast, very good mix of people from geographical and cultural background plus a very good Spanish feel.

Edited by OFS Spain
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It depends on a million factors...

But 1 major factor they may consider, is ability to speak Spanish, or the want to learn..

Food for thought.

Totally agree on the above and hear that Granada is a magnificent place.

One place id recommend is Javea in Costa Blanca, about an hour from Valencia, on the coast, very good mix of people from geographical and cultural background plus a very good Spanish feel.

We speak Spanish quite well so this would nnot be a problem.

I am trying to find a site with properties, like www.realtor.com or www.rightmove.co.uk but in Spain (most likely in Spanish). Does it exist?

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As much as I agree that the current market place in Spain is in real trouble, (Malaga, Albox and Mojacar) there are still some places in Almeria that are still bouyant and still good value for money, why? The main reasons for this, you must not look at this as a sector but by urbanisation. Quality and good building practices will always sell. The days of making the quick buck are long gone. People who want to use Spain as money making machine are not buying here anymore.

The good builders are now constructing apartment complexes with many extra features, such as gyms, saunas, indoor pools, ect...... They are aiming at the luxury market place, you know that they are getting it right because the Spanish are buying them in droves. All the aparments are fully licensed and legal, the builders understands that they need to offer more than the usaul quick build quick sale rabbit hutch! The location is all important, these builders while others are suffering, are reeping the reward of foward planning and aiming for the right sector of the market place.

In some parts of south of Almeria the investment by local goverment into basic infrastructure has been vast, new roads, hospitals and schools is being pushed forward. In England no matter what the market place, there werel areas that did not get affected by the housing slump. The biggest mistake is that people look at Spain as a whole , and not area by area (a lot of homework has to be done). I would never invest in areas of Torrevieja that no one would ever want to rent or would go and never rent back off of you. There are some really scummy areas of Torry. To quote the the previous posting.

No matter what is said, Spain has been through its apprenticeship, people are still buying here, but now they are better informed and much wiser. There is still some money to be made, but similar to the British market it will take longer.

Probably in the areas of Torrevieja that no one would ever want to rent or would go and never rent back off of you.. There are some really scummy areas of Torry.

Using above as an example of areas in the Torry area for googling.

AREA A - Playa Flamenca / Cabo Roig / La Zenia

AREA B - AREA C - Villamartin

AREA D - San Miguel de salinas / Benijofar / Los Montisenos

There is an absolute abundance of rental property in all 4 areas here. In the winter most areas of the Costa Blanca that fall into the first 3 catagories are like ghost towns.

They all have "for rent" signs or "for sale" signs. It is complete buyers market out here and people who own and are trying to sell are stubborn and do not want to reduce prices, but watch this space... more and more will, and your 50% decrease noted above will eventually happen, especially in this area.

One other point, the spanish build quality is terrible, but you probably all new that anyway, so can you justify paying 200,000EUR for a 2 bed 2 bath that is falling apart??

After all the germans with 2nd homes were caught for tax fraud, 1000s of properties went on the market immediately and most are still up for sale one year later.

I currently live in the costa blanca and used to live in villamartin (as a rental so i could scope out where i wanted to buy) and its like a concrete jungle out here, no space is sacred, every little bit of space thats free has some sort of planning permission on it.

There are a lot of deals to be had out here and some serious haggling can be done on house prices.

There is far too many estate agents out here, so hopefully this price issue, will weed out the good from the bad.

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In England no matter what the market place, there werel areas that did not get affected by the housing slump. .

This is incorrect.

ALL parts of the UK were effected.

People I knew in Hadley Wood on the Herts London border - a posh up market area full of city workers witnessed a 50% fall in value.

In an enviroment of falling prices, people take a wait and see policy, so the prices fall again, so then they wait and see again and again.....

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The Cambridge area did not fall and some parts of London did not drop, plus the facts speak for them selves, one thing that should be looked at is the times web page. There is an excellent article about house prices in Spain. The emphasis is not arguing about the drops in prices, this is happening, but there are area in Spain that still represent good value for money, but not short term capital gains. These will not drop, but will increase slowly, while the rest of market suffers. As stated in my first post it is long term investment and you buy not for capital gain in the short term, but as somewhere you wish to enjoy and visit regularly. With the knowledge that you will not lose money.

This is incorrect.

ALL parts of the UK were effected.

People I knew in Hadley Wood on the Herts London border - a posh up market area full of city workers witnessed a 50% fall in value.

In an enviroment of falling prices, people take a wait and see policy, so the prices fall again, so then they wait and see again and again.....

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We speak Spanish quite well so this would nnot be a problem.

I am trying to find a site with properties, like www.realtor.com or www.rightmove.co.uk but in Spain (most likely in Spanish). Does it exist?

A good friend of mine owns a property company in Almeria, he can be found on the following website.

www.realexpectations.eu

He has some lovely properties on the website but these are just the tip of his iceberg.

Bobby and Maggs offer a service unparrarelled by most estate agents and will source property for you, depending on your budget, your wants and your needs.

Please give them a call, just for a chat and tell them Alan Macdonald of OFS Spain recommended you. He will run through the pro's and con's of buying in Spain and you can take it from there.

Alternatively there are millions upon millions of websites, its all dependent on where you want to be.

A client of ours owns a property business in the Costa Blanca / Calida area his website is www.pilgrimpropertiesspain.com , his name is Derek, feel free to email him also and let him know again that i forwarded you on to him.

Hope this helps.

My personal advice would be, if you have the money to straight purchase the property, dont pay for it outright. Take out a mortgage interest only and invest the money offshore. If you invest the money in say, the isle of man you will get low risk realistic returns of 7-9% tax free. You may need to make the first years payments as the investment needs time to grow but you can keep money aside.

Mortgage rates in Spain can be found anywhere between and around 4.5 - 5.5% so your borrowing is covered and you are gaining on any property value increase plus investment increase. You may also consider a mortgage in Swiss Francs instead of Euro's. The interest rate in Switzerland is around the 3 - 3.5% mark.

By doing this, you will also negate any potential IHT liability* in spain as you hold no equity in the property.

*dependent on location.

Once again food for thought.

(What has been written above is my personal opinion and is not to be deemed as Financial Advice as i do not know your personal circumstances, if you would like to know more please email me on alan_ofsspain@yahoo.com or visit our website at www.ofsspain.com)

Edited by OFS Spain
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A good friend of mine owns a property company in Almeria, he can be found on the following website.

www.realexpectations.eu

A client of ours owns a property business in the Costa Blanca / Calida area his website is www.pilgrimpropertiesspain.com , his name is Derek, feel free to email him also and let him know again that i forwarded you on to him.

Thank you, I would prefer to purchase from Spanish agents/owners. That way I avoid paying the foreigner surplus.

I have founf a good site with lower prices at

/www.compraventa.com/

I shall follow the listings for some time.

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Talking of sites a good site based in Spain that offers alot of good property is WWW.inmobiliariadigital.es. I hope this helps. There is a real mix of adverts from estate agents to individuals. Plus anyone can put a property in free of charge. Great little web page well worth a visit. I cannot recommend it enough.

Thank you, I would prefer to purchase from Spanish agents/owners. That way I avoid paying the foreigner surplus.

I have founf a good site with lower prices at

/www.compraventa.com/

I shall follow the listings for some time.

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My mother wants ot buy something in mainland Spain in 3-4 years from now, just for the climate so she does not care about being in coastal region.

Which are the best sites to look for Spanish properties? I know of Loquo.com and kyero.com.

Take a look at inmobiliaria-tropicalbeach.com. They specialize in luxury apartments in golfresorts, especially in Motril (Costa Tropical, Granada), which is still relatively unspoilt.

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My mother wants ot buy something in mainland Spain in 3-4 years from now, just for the climate so she does not care about being in coastal region.

Which are the best sites to look for Spanish properties? I know of Loquo.com and kyero.com.

You have been offered some very good advice here with regards to your mother.

If she is moving to Spain for the climate, you need to do a bit more research before buying away from the coast. Summers are unbearably hot and winters freezing cold. And I'm talking only a few miles inland.

The Spanish say of Madrid's climate, nueve meses de invierno, tres meses de infierno - nine months of winter, three months of hell.

I was also in Teruel in January and it was absolutely freezing cold (Place In The Sun ramped this largely barren inhospitable area a few years ago) - and that's coming from a Scot. I was chilled to the bone.

You don't need to go more than a few miles inland on the Costa Blanca to see snow in winter either.

So many Brits buy in Spain on price only to regret it later. Adibrown's remarks about marketing anything anywhere under a certain price tag and the Brits will buy rings so true. Selling those properties again however is nigh on impossible. And this is a real feature of the Spanish "crash". A lot of people are discovering that they simply cannot sell at any price.

Edited by margesimpson
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