I recently read an interesting interview with Mikel Echavarren, head of Irea, a Spanish real estate consultancy, talking about the state of the real estate sector in Spain. As an experienced professional in touch with many different companies in the sector it is worth listening to what he has to say. Here is a selection of comments from his Q&A with Idealista News, the news section of the property portal Idealista.

Do you think there are any good investment opportunities in Spanish real estate today?
I think so but they are risky. In three years we’ll probably be kicking ourselves for not advising investors to invest now. There aren’t many opportunities in commercial real estate because there isn’t much product and rents haven’t yet adjusted. In residential, on the other hand, the correction has been very strong and fast. The ideal profile now is an opportunistic investor buying properties off banks by taking on the existing debt, a type of real estate venture capital.

So you think there are opportunities in a residential sector because the adjustment has already taken place?
There are hundreds of thousands of possible transactions, but not many genuine opportunities. What there is not is any financing, so anyone who wants to take advantage of this market has to take the debt with the asset, but there are still very few people prepared to do that today.

Has the price of housing and land touched bottom?
House prices touched bottom some time ago, they have already fallen all they had to fall. And the price of land has fallen faster than house prices although it could even fall a bit more. We have been saying at the top of our lungs that the price statistics published by the government are worthless, and damaging to the sector because they give international analysts the impression we are a country of idiots. In the US and the UK prices have fallen around 20% from the peak whilst here we have only fallen by 8%. We work with close to 28 property companies that have been restructured, and you see that valuations are down 30% in 2 years, and then banks buy those assets with discounts of 10-15% off valuations.

Do you think there is any residential property that will never sell?
What there is is a stock of land that will never be sold, at least not in 10 years. There are areas of Spain where the town plans look like they were designed for an invasion of extraterrestrials, parts of Almeria, Murcia and Alicante. There is an overdose of land that will lie in the warehouses of banks for many years. On the other hand, the stock of finished property will be absorbed sooner.

Is there any real demand for housing at the moment?
Yes, quite a few homes are being sold. We would have to place it at more than 200,000 homes a year. What is not selling is off-plan, as there you take the risk of the developer or builder going bankrupt. It’s a good time to buy newly built homes with Euribor at 1.24%. They won’t be any cheaper next year. And when prices start to rise they will do so at a rate of 10% per year.

How does one get the Spanish property sector to recover?
The residential sector is already recovering, just not the developers, who won’t see the light at the end of the tunnel for three years; it is very bleak for them. Clients of ours tell us they have sold a lot this summer, and some banks tell us that they have had more mortgage requests this summer than in all 2009. Furthermore, we believe that developers have dropped their prices to the minimum. There is mortgage financing available, not much, but there wasn’t any at all in 2008, and now there is. Mortgage costs are low, and it appears that the future is not going to get any worse. The recovery is underway, although this won’t show up in the official statistics until the first half of 2010. As soon as there is a general perception that things are getting better, house prices will stop falling and start rising.

Story from Idealista News

Tags: buying property in Spain, Euribor, House prices, Interest Rates, Property market trends, Realistic House Prices, Recovery, Spanish property
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The sharp housing correction that has sent Spain’s economy into a tailspin is bottoming out, Housing Minister Beatriz Corredor told parliament Wednesday.

“Recent indicators show a trend toward stabilization in the housing market,” Corredor said.

Spain’s once-buoyant housing market collapsed last year as the global financial crisis worsened a correction that was already underway after years of overbuilding and spiraling house prices.

Data Tuesday from Spain’s national statistics institute showed the number of houses sold in Spain rose 4.7% in July, their third consecutive month-on-month gain, though they were down 20% from July last year.

Falling housing prices and interest rates are helping to improve the affordability of housing, Corredor added, saying this should stimulate demand.

The government has offered incentives to convert unsold homes into rental properties or to sell them to qualified buyers in social-housing programs. It has also said it will limit current tax incentives on home purchases from 2011 in an attempt to bring forward decisions to buy.

In a note to investors Wednesday, Citigroup economist Giada Giani said the rise in July home sales points to an improvement in Spanish property demand, but noted that housing construction indicators continue to “decline sharply, depressed by the huge amount of unsold inventories.”

Story from Nasdaq

Tags: House prices, Interest Rates, Property market trends, Recovery
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UK based Almanzora Group says that there are signs that in some sectors the market is improving, after it announced that it has sold properties worth almost €5 million in the Almeria region of south-east Spain in the past three months.

‘Over the years, the property market in Spain has proved to be extremely cyclical, much more so than it is in the UK. This recent market activity suggests that the wheel is turning again, at least for the better quality, more individual, properties in new and progressive upwardly mobile locations,’ said sales and marketing manager, Simon Coaker.

‘Prices have been at their lowest for six years but are bound to start rising again if sales of such properties continue at this level. No matter how great the oversupply of poor quality, mass built apartments, in secondary locations around the old tourism centres, the actual supply of good quality individual properties in relatively new, less developed, locations which are the future of residential tourism in Spain remain in short supply,’ he added.

Tags: House prices, Property market trends, Recovery, Spanish property
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Last month’s House Price Index report fell a little flat because of the hope it would show that the decrease in house prices had reversed. Actually, both the March and April reports showed that Spanish property prices had remained at a relatively stable 10% down on an annual basis. While this is far from exciting – and a far cry from a complete turnaround – the data does suggest that house prices in Spain have bottomed out.

For the past four months, the House Price Index has been steady, 10% down Y-O-Y. Compared to the dramatic decline measured between the middle of 2006 and the start of 2009 -a 28% decline from peak to trough-, that’s quite a significant change in trend.

Even if the House Price Index for the rest of the year shows the Spanish property market bumping along the bottom at the current levels, many people will be relieved to have actually found the bottom – rather than worrying about how much worse things can get.

Tags: House prices, Property market trends, Realistic House Prices
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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: House prices, Property market trends, Spanish property
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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.

Tags: House prices, Property market trends, Realistic House Prices
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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

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.

Tags: bargain prices, House price index, House prices, Property market trends
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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

Tags: financial crisis, House prices, Recovery
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Homeowners across Europe saw the value of their properties slide last year as demand for new homes plummeted because of the impact of the credit crisis on mortgage supply in the major economies.

House prices were falling in every European market by the end of 2008 when adjusted for inflation, according to the Royal Institution of Chartered Surveyors, although a few such as Greece and the Netherlands were still slightly positive for the year as a whole after initial growth.

Core markets are set to suffer “marked downturns” in 2009, according to he report, written by Professor Michael Ball, who blames significant falls in mortgage lending, coupled with the economic downturn.

Professor Ball said: “The world financial crisis and economic downswing have hit European housing markets badly. Some countries, like Ireland and the UK, led the decline but by the last quarter of 2008 the effects had spread across Europe.

“There is greater synchronisation of housing market decline in Europe than has been seen in the past and there are going to be some tough times before marked recovery occurs.”

Rics said that any future revival of European housing relies on the ability of European governments to cope with the mortgage credit shortage as well as the scale of the economic recession.

The UK was one of the worst performing markets, where house prices fell 16 per cent in 2008, second only to Baltic states such as Estonia, where prices dropped 23 per cent but which has a relatively small residential market.

The UK housing market continued to weaken last month according to the Halifax house price index yesterday. Prices fell by 2.3 per cent in February, more than reversing an upward bounce in January. In the three months to February, the decline was 3.6 per cent.

House prices also fell significantly in central and eastern Europe, Ireland, France and amongst the Nordic countries last year.

In contrast, previous years saw house prices in countries such as Estonia as well as Scandinavia, central and eastern Europe and parts of the Mediterranean outpace other European countries.

Rics said that even those economies that did not experience a boom in house prices have not been spared from the squeeze in the market. In Germany and Austria, it said, a lack of credit has hit demand and it predicts a further fall in house prices and activity in 2009. Sales also declined in Italy, where mortgage growth was negative in 2008 for the first time in more than a decade.

Spanish house prices surprisingly recorded only moderate price falls. In central and eastern Europe, Rics said that the worsening financial turmoil has hit residential markets very hard, with both transaction levels and prices down significantly.

From: Financial Times

Tags: House prices, Property market trends
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The latest Spanish House Price Index from Kyero.com reflects average asking prices for Q3 2008 – and it contains some surprises.

Overall, the average house price in Spain appears to have increased from €240,000 to €245,300 – in just three months. In the current market conditions, how can an apparent increase in house prices be explained?

Digging a little further, the overall increase can be narrowed down to 10 provinces which have experienced sizable quarterly increases themselves.

In Malaga province, average property prices have increased 4.3 percent during the third quarter, while showing an average yearly increase of 1.4 percent. Especially properties with 2 to 5 bedrooms seem to enjoying increasing popularity among buyers.

Tags: House prices
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