Archive for April, 2009

 

April 28th, 2009

For buyers with access to capital, this may be the best opportunity in decades to load up on property in Spain.

Everywhere you go in Madrid, For Sale signs on half-built apartment blocks dominate the Spanish capital. No surprise: The global recession has hit the country’s once-booming real estate market harder than most. Property prices from Barcelona to the Balearic Islands fell 6.5% in the first quarter of 2009 alone. They are expected to drop 35% or more from their 2007 peak by the end of this year.

The economic downturn—in Spain and dozens of other countries—has left many homeowners struggling to keep up with their mortgage payments. But for well-funded property buyers, the recession is opening up a bonanza of cut-price deals. When times were good, cheap credit fueled almost insatiable demand for second homes and investment properties. Now, financing is harder to come by, and developers are slashing prices to offload stock built for a dwindling number of buyers.

The power shift in property sales is gradually enticing investors back into the market. Double-digit price declines since 2007 and the renewed strength of the dollar against foreign currencies make buying overseas more affordable for Americans.

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April 28th, 2009

It could take as long as three years to absorb the estimated glut of one million new homes in Spain, according to a Spanish official from the country’s property register.

The oversupply of newly built property in Spain is so severe that even if no more new homes were constructed, it would still take two years to clear the current flood of residential units. However, Spain is on course to start around 200,000 new homes this year.

The same official also claimed that a fall in Spanish birth rates was partly to blame for the recent drop in Spanish property sales, despite the huge immigration of recent years.

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April 21st, 2009

A recent Reuters housing poll of Spanish and foreign-based economists found that on average prices were expected to fall 32 percent from their 2007 peak. While that won’t much of a comfort to people who bought a Spanish property at or near the 2007 peak, most other property owners wishing to sell sooner rather than later know what they need to do. To sell their property, they just need to take 32% off its peak value in 2007.

An example: You pay €210,000 for a Spanish property in 2003 and it increases in nominal value to €395,000 in 2007. Most vendors wanting to sell that property today would be tempted to advertise it at around €320,000 – but that won’t work. Most people won’t bite at that price. Instead, advertise it at €270,000 and you’ll have a queue forming outside your front door. Hopefully, you’ll find more than one who is serious – and you can stick resolutely to your asking price.

Clearly, not every Spanish property owner is able to take this kind of ‘hit’ when selling – but many can. The reality of the situation today is that property prices in Spain won’t recover for a good few years – and it will take even longer for the highs of 2007 to be reached again – if at all. Vendors can either sell now at a realistic price or wait a long, long time for their ‘ideal’ price to be realistic again.

There is no shortage of people ready, willing and able to complete on a Spanish property – they simply need to be convinced it represents good value. Despite the lack of reliable official data about the Spanish property market, despite the gloom and doom of most news stories in circulation, vendors have all the tools they need to be able to price their Spanish property to sell – and sell quickly.

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April 21st, 2009

House prices in Spain fell 6.8 percent in the March quarter, compared with the same period in 2008. On a quarter-on-quarter basis prices declined by 3 percent — the fourth consecutive fall and the biggest yet.

House Price Index March 2009

House Price Index March 2009

Credit Suisse analysts said supply and demand were out of kilter, with one in six people out of work and 1.5 to 2 million houses sitting unsold. The average Spanish home costs 7.2-times the average household’s annual income, against 4.6-times in Britain and 3-times in the United States, the bank said.

‘Unemployment is fast increasing and that is a leading indicator of future delinquencies in the banking sector and potential declines in house prices,’ the Swiss bank said in a note after the figures were published.

Most industry experts say government data underplays price declines in the Spanish property market, which saw a 39 percent fall in the volume of sales in January, year on year.

However, to put Spain’s price drop of 6.8 percent in perspective, house prices in Ireland, whose housing boom is most frequently compared with Spain’s, fell 9.7 percent year on year in February — the 24th consecutive month. In the UK, prices had dropped 12.3 percent over the same period.

‘I think we are all aware that prices had not adjusted to their true value. This tendency shows the adjustment,’ Anunciacion Romero, housing ministry director general told journalists. She declined to say were prices would go from here.

A recent Reuters housing poll of Spanish and foreign-based economists found that on average prices were expected to fall 32 percent from their 2007 peak.

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April 15th, 2009

An article in ‘El Mundo’, one of Spain’s leading news papers, suggests there may be signs of recovery in the Spanish property market, in one of the first positive articles on the outlook for the market since the crisis began.

“It appears to be the beginning of the end of the worst period for property sales since the crisis began,” says the article. Pointing to encouraging signs that real estate markets may have bottomed out in the US, the UK, and France, the article suggests that Spain may be part of the trend.

The optimism also comes from a new report by Gonzalo Bernardos, a property market expert and professor of economics at the University of Barcelona, who argues that Spanish property market will come back to life this year, after a dismal 2008.

“There are five key reasons for saying that there will be more home sales in 2009 than there were in 2008,” writes Bernardos in his report. “Interest rates are lower; house prices have fallen back to their 2003 levels; banks are lending more; investors are coming back; and many people who were thinking of renting have decided to buy.”

Demand for housing is tempered by the cost of mortgage borrowing. With interest rates declining, Bernardos expects sales to pick up. “There is a fundamental variable,” explains Bernardos. “People buy homes in response to mortgage costs, which have gone from rates of 6.25% in September to 3.25% today. We are talking, in general terms, of a fall in mortgage repayments of 40%.”

There is, however, a flaw in this argument, which the article in El Mundo does not pick up. Euribor – the base rate normally used to calculate mortgage rates in Spain – may have fallen rapidly to historic lows, but the average interest rate charged on new mortgages is actually rising, and credit terms getting tighter, making it more expensive for new borrowers to buy homes. Falling Spanish mortgage rates are only benefiting existing borrowers, who already have a home.

Another positive sign, says the article, is that housing starts picked up in the last quarter of 2008, rising by 7% compared to the previous quarter.

The recovery is already underway, suggests Bernardos, who says that, so far this year “sales have been between 25% and 40% higher than in the same period last year.”

So the market bottomed out in 2008, goes the argument, when house sales fell by 28.8% whilst property prices fell by 5.4%, all according to official figures. On the question of prices, Bernardos doesn’t believe the official figures. “The fall in prices hasn’t been less than 20%, and in some places much more,” says Bernardos.

Another real estate expert cited in the article says that sales rates at new developments have picked up significantly. “In many developments they have sold more in the first quarter of 2009 than in the whole of 2008,” he says, also arguing that “prices have already bottomed out.” “Banks didn’t know where the bottom was, now they do and they are giving 80% mortgages because they feel the market has bottomed out,” he goes on, whilst also warning that “nobody should expect bargains at 50% discounts. That’s not going to happen.”

Whilst Bernardos expects the market to return to life this year, that doesn’t mean he expects prices to start rising soon.

“Sales will start to rise in 2009, whilst prices will stop falling in most places by the end of 2010,” writes Bernardos in his report.

But if Bernardos is right, and prices continue to fall this year, that will encourage people to delay their purchase decision, and reduce the number of sales. The article does not pick any holes in his arguments.

And at no point does the article mention of the second home market, which operates differently to the primary housing market. Given the present state of the economy, with unemployment rising across Europe, it’s not hard to imagine that it may take a while longer for sales of holiday homes to pick up.

Story from Mark Stucklin

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April 14th, 2009

Nederlanders die dromen van een vakantiehuis aan een van de Spaanse costa’s, kunnen nu hun slag slaan.

Door de wereldwijde economische crisis en het in elkaar storten van de huizenmarkt in Spanje, liggen de koopjes voor het oprapen. Spaanse banken lenen geen geld meer uit, maar dumpen (vakantie)huizen van mensen die hun hypotheek niet meer kunnen betalen. Volgens onroerendgoedadviseur Michel Geutjes van LandCapital moet je wel over cash geld beschikken om voor een prikkie een huis onder de Spaanse zon te kunnen kopen. Geutjes: “Spaanse banken willen juist nu geld en zekerheid. Kun je dat bieden, dan word je met open armen ontvangen.”

Lees verder: De Telegraaf

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