Archive for May, 2009

 

May 28th, 2009

According to the latest house price analysis from Knight Frank, the Spanish property market isn’t faring too badly compared to some other countries.

Just focusing on countries which have experienced a year-on-year decline in house values, Spain is far from the worse affected.

At the bottom of the chart are Dubai and Latvia, both with whopping 30+ percent annual decreases in house prices.

Faring worse than Spain are Norway, Ireland, Denmark, Poland, Hong Kong, Estonia, UK, United States, Singapore, Dubai and Latvia with annual decreases between 9% and 36%.

Spain’s modest loss of almost 7% is nothing to shout about – except that, looking at some of its neighbours – it could be a lot worse.

Even though the Knight Frank report sees little reason to be cheerful, countries such as Israel and the Czech Republic actually managed a 10% increase in house prices comparing Q1 2009 with Q1 2008.

The bad news for Brits wanting to buy property in Spain is that over the last 12 months, UK house prices have slumped 10% more in the UK than in Spain. To make matters worse, Sterling is now worth 16% less in Euros than it was at the start of 2008.

A year ago, selling a UK home for £200,000 to buy a property in Spain would have yielded approximately €270,000 of buying power in Spain. Today, that same home would sell for 16% less – £168,000 – and translate to just €190,000.

However, due to the fact that Spanish property also reduced by 6% in value over the same period, that €190,000 would have a purchasing power of €201,000 when compared to 2008. Even so, that represents a drop in real terms of €70,000 or approximately 26% in just 12 months.

Data from Knight Frank

Tags: , ,
Posted in Property market | Comments Off

May 16th, 2009

* House sales fall at slowest pace in 11 months

* Follows improvement in March mortgage lending

Spanish house sales fell at the slowest pace in 11 months during March, the National Statistics Institute reported on Tuesday, marking the latest data to suggest Spain’s severe recession may be easing.

Home sales fell 24.3 percent to 34,895 in March in what was the 13th straight month of decline, but well below rates of 37.5 percent in February and 38.6 percent in January, INE reported.

The March result was the slowest rate of decline since April 2008 and followed Bank of Spain data showing banks lent 7 billion euros in March for mortgages, the most since July 2008.

Economists expected the sales trend to continue as real estate firms and banks repossess homes due to soaring debt defaults and put them on the market at ever lower prices.

“It’s not that things are improving, there’s just less deterioration,” said economist Carlos Maravall at the AFI consultancy. “We’ve had a very sharp fall in terms of house sale numbers and what remains to be seen is a price fall.”

March housing results were flattered by the statistical impact of a sharp, 39 percent fall in March 2008 sales and the fact Easter fell in March last year.

But they mirrored data showing a slowdown in the rate of decline in April service and manufacturing sector activity, as measured by the Markit Economics Purchasing Managers’ Index.

Spain’s Socialist government last week said it saw green shoots of economic recovery after Spanish consumer confidence hit a year high in April as new jobless claims rose at their slowest pace in nine months.

The International Monetary Fund expects Spanish house prices to fall 30 percent from peak to trough and estimates Spain is around half way through that process.

Story from: Reuters

Tags:
Posted in Financial & Mortgages, Property market | Comments Off

May 15th, 2009

As part of a raft of useless gestures to deal with the economic crisis, José Luis Rodríguez Zapatero, Spain’s Socialist Prime Minister, has announced that mortgage relief will be eliminated on mortgages taken out after 2011 by borrowers with incomes of 24,000 Euros or more.

The measure is supposed to stimulate the housing market by giving buyers a reason to bring forward their purchase, rather than wait and potentially lose their right to mortgage relief.

If it were to succeed, this would help mop up Spain’s housing glut of 1 million new homes, and eliminate a fiscal incentive to buy rather than rent, something that organisations like the IMF and OECD have been calling for for some time.

Zapatero announced the measure during the annual state of the nation debate in Parliament this week as a way to deflect attention from Spain’s economic problems. In typical Zapatero style it was presented as a ‘progressive’ measure that only hits ‘high earners’.

In reality, however, the plan hits the middle class, and given property prices and incomes in Spain, will affect almost anyone with enough money to buy a home. Mortgage relief will be reduced after 17,000, and eliminated after 24,000 Euros income per annum.

The opposition leader Mariano Rajoy called it an “attack on the interests of the middle classes” and said his party would retain and increase mortgage relief to stimulate the market.

Developers have criticised the plan, calling it a negative stimulus. Though it may help them shift some stock in the short run, it will harm them in the long run, reducing the incentive for people to buy homes from developers.

Some experts are claiming that banks will be the biggest, and possibly only beneficiaries of this measure. “The banks are the ones with the key to financing and with the cheapest property,” Eduardo Molet, President of the Network of Property Experts, told the Spanish press. “But thinking that the banks will sell their stock rapidly is a mistake, as their product isn’t exactly the best,” Molet points out.

Mortgage relief in Spain is only available to residents with mortgages on their primary residence. As such, Zapatero’s plan will have little impact on the second home market on the coast. Nevertheless, it could affect Britons and other foreigners relocating to Spain and buying a main home with a mortgage, if they have incomes above 17,000 Euros per annum.

Eliminating mortgage relief does little to address the real problem of the Spanish property market, namely that too much inappropriate, unattractive, and overpriced property has been built, especially on the coast.

Story by: Mark Stucklin

Tags: ,
Posted in Financial & Mortgages, Property market | Comments Off

May 13th, 2009

The Spanish house price index figures for April 2009 have just been released. See the graph and the table below for an up to date overview of the real estate market trend in Spain.

Spanish House Price Index April 2009 (C) Montes de Malaga Real Estate

  Spain Coastal Inland
04-2008

05-2008

06-2008

07-2008

08-2008

09-2008

10-2008

11-2008

12-2008

01-2009

02-2009

03-2009

04-2009

-0.6

-2.0

-2.5

-3.9

-4.6

-4.9

-6.5

-7.8

-8.8

-10.1

-9.0

-9.7

-10.1

-1.2

-3.2

-3.0

-6.2

-8.3

-5.3

-8.9

-8.5

-14.3

-12.6

-10.7

-11.5

-13.5

2.0

-0.7

-0.5

-3.1

-1.0

-1.7

-5.3

-6.3

-6.6

-10.0

-7.9

-8.9

-8.9

Tags: ,
Posted in Property market | Comments Off

May 12th, 2009

Many Britons who let out their second home in Spain could now be eligible for a tax rebate windfall from HM Revenue & Customs.

From 6 April, 2010, furnished holiday lets in the UK will no longer be treated as business assets, against which owners can offset losses against their other income and roll over capital gains tax to reduce their tax bill. The break was originally introduced in the 1980s as a way of encouraging British tourism.

The Government withdrew the concession after the European Union ruled that it breached EU law by discriminating against non UK owners of second homes in other European countries.

Although the most published elements of the recent Budget concentrated on tax increases, much less published is a new opportunity for owners of holiday lets in Spain, who have been given the chance to apply retrospectively for tax repayments going back up to a full five tax years. Property owners who thinks they may be eligible should act quickly, as the tax breaks will cease in April 2010.

This change in taxation is applicable where either of two circumstances has arisen:

  1. Where owners have incurred losses from the letting of the property since 6 April 2003
  2. Where a property used for holiday lets has been sold at a profit since 6 April 2003

Example 1

Mr Smith owns a Spanish villa that, apart from a couple of weeks’ private use, is let commercially throughout the year. Whilst Mr Smith tries to let the property all year round, the seasonal nature of the business means that, year on year, a loss of around £5,000 is incurred. Mr Smith may now be able to make a claim to offset this loss against UK income tax over the last five years. As a higher rate taxpayer, this would generate a tax repayment of around £10,000 (5 years x £5,000 x 40%).

Example 2

Mrs Jones acquired a holiday property in Portugal in 2001 for the equivalent of £100,000. The property was let out for five years, on a holiday-let basis, and sold in 2006 for £200,000. She paid capital gains tax in the UK of £30,000 on the sale, after all available tax reliefs. It may now be possible to go back and amend the calculation to include further reliefs, which would reduce the taxable gain to around £2,000. This would save Mrs Jones £28,000.

More than two million Britons currently own a property abroad, and a number may recently have become eligible for one of these tax breaks. Many owners who previously kept their homes for private use have been renting them out to holiday makers over the last couple of years, to generate an extra source of income during the economic downturn.

This is a one-off opportunity in the 2009/10 tax year to secure a unique tax rebate. In 2010/11 the set-off or carry back allowances which create the rebate will no longer apply. To be eligible for the allowance, properties must have been let for ten weeks a year and available to let for 140 days.

Target Chartered Accountants are offering a free tax consultation with a fee only chargeable if a successful tax refund or reduction is achieved.

Landlords who think they may be eligible and would like to take advantage of the free tax review should contact Target Accountants

Tags: ,
Posted in Financial & Mortgages | Comments Off

May 6th, 2009

Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell from 1.909% in March to 1.771% in April, a percentage change of -7.2%. This is the lowest that Euribor has ever been, and is 63% lower than it was a year ago. Compared to July last year, when Euribor peaked at 5.393%, Euribor has fallen by 67%.

After the latest drop in Euribor, borrowers with annually resetting mortgages should see their annual mortgage repayments fall by between 3,000 and 5,800 Euros, in theory at least.

In reality, however, some borrowers complain that their payments haven’t fallen at all, and in some cases, have actually risen. This may be due to banks using a derivative of Euribor, such as a moving average, that lags the fall, or due to other malicious conditions buried in the small print (and so beloved by mortgage lenders), such as interests rate ‘floors’ below which mortgage rates cannot fall.

Euribor is derived from the European Central Bank (ECB) base rate, which is currently at 1.25%. The markets are expecting another interest rate cut in May, so that is already baked into the current Euribor rate. Experts expect Euribor to keep falling in the coming months to around 1.25% at the end of the year.

Story by: Mark Stucklin

Tags:
Posted in Financial & Mortgages | Comments Off