Blakemore Walker Chartered Surveyors & Legal Consultants
SPECIALISING IN PROPERTY PURCHASE AND SALES IN ASTURIAS, CANTABRIA & GALICIA
MEMBERS OF THE ROYAL INSTITUTION OF CHARTERED SURVEYORS
| Blakemore Walker Chartered Surveyors & Legal Consultants |
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SPECIALISING IN PROPERTY PURCHASE AND SALES IN ASTURIAS, CANTABRIA & GALICIA MEMBERS OF THE ROYAL INSTITUTION OF CHARTERED SURVEYORS |
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| SPANISH PROPERTY VALUES MORE TRANSPARENT- FEBRUARY 2012
100% MORTGAGE STILL AVAILABLE!!- JANUARY 2012 Spanish banks are said to have upwards of 300,000 repossessed homes on their books and this figure is probably at the conservative end of the scale. There has been wide publicity about the numerous unfinished developments on the mediterranean costas and the high levels of bad debts that the Spanish banks own and therefore logic would dictate that there is little liklihood of them offering mortgages without substantial deposits, but they are and in some cases as much as 100%. Many banks are offering deals to offload their own repossessed property in order to reduce there balance sheets. If one were to apply for a mortagage from a particular bank on property not owned by them, then the answer would be less positive and a large deposit would be required in the event that they even made a mortgage offer. This behaviour is skewing the natural market price levels along with the reluctance of the banks to release all the property they have on their books. CAPITAL GAINS TAX - JANUARY 2012 Effective from the beginning of the year capital gains tax (CGT) for non-residents has risen from 19% to 21%. The rates for spanish residents has also risen. Careful tax planning is always important if you are considering a property purchase. There are different options available in reducing tax liabilities and one of the most popular in recent times has been the purchase of property through company vehicles. As ever advice should be sought. SEASONAL CHEER - DECEMBER 2011 22nd Dec. The economic minister Luis de Guindos appointed by Mariano Rajoy the new Spanish prime minister, potentially has one of the most challenging jobs in Europe. De Guindos is a banker which is probably apt when considering the current plight of the Spanish economy. Spain has suffered a severe downturn in the property market since 2007. Prior to this the property and construction sectors helped drive stong growth, but this higher than acceptable growth was uncontrolled by the Spanish authorities which resulted in a classic property bubble. This unmanaged boom and bust cycle was perhaps caused by the inequalities in the european monetary system which have only become evident in more recent times. Spain did not have the power to increase interest rates, for example, as these are controlled by the European Central Bank. The imbalance between the so called periphery southern european countries and the richer north has now come home to roost. There still remains the unknown amount of debt that Spanish banks hold on bad property loans. The bank of Spain has indicated that there is approximately 180 billion euros, but it is likey that this, if accurately assessed, could be as high as double this figure. The Spanish property market still has downside risks and 2012 will probably not see much seasonal cheer. THE FUTURE OF SPANISH PROPERTY - DECEMBER 2011 Following the summit last Friday not a lot has changed. The financial markets are saying that there is little flesh on the bones of an EU agreement and Spanish newspapers have reported, along with the rest of europe, that the UK is at risk of being marginalised. One point to note is that sterling has quickly risen to over 1.18 and there seems a real chance now that sterling will be regarded as a safer currency compared with the euro. This is of course good news for those sterling purchasers of euro products, including Spanish property. The coming months are likely to remain volatile, but as always time will tell. HOW MUCH MORE CAN THE EURO TAKE? - DECEMBER 2011 Still no resolution as long-term measures are being discussed, but the six central banks have eased credit lines (dollar rates) to try to avoid severe economic difficulties within the eurozone in the short-term. The December 9th European summit seems to be the date that the markets are now waiting for, but Angela Merkel is playing a tough game in aiming for greater fiscal consolidation. What will the likes of Spain have to do if Merkel gets her way? WILL THE FINANCIERS WIN THROUGH - NOVEMBER 2011 There seems to be an emerging battle between the financiers of the world and the political elite. In many cases their paths cross, but the pressure that the financial system is exerting on Italy for example, is immense. Italy and Spain do have structural issues to resolve like many european countries, and these issues can only be resolved by the political system, but both these countries are potentially stable and powerful economies that, if given a chance, will prove invaluable in future years to the eurozone. Short term market reaction has done no favours for the euro experiment, and it remains to be seen if the current events will streamline the euro experiment into a euro success. UNCERTAINTY FOR SPAIN - NOVEMBER 2011 Italian bond yields are trading at over 7% and Spain seems to be next in the firing line. As the european issues "hot up" the politicians may be forced to provide a resolution to the crisis, which would be a good thing. Germany is now considering proposals that may be required in the event of orderly exits by countries from the euro currency. All the while the pound is gaining strength against the euro whilst it is still perceived to be a safe haven. The Spanish property market as an asset class, similar to certain equity markets, is moving into the good value range. How much more good value could depend on the future of Spain within the euro currency. A return to the peseta would likely devalue property prices in Spain from the UK purchaser point of view. Imagine an equilavent rate of over 150/160 to the pound. Whatever the outcome of the euro issues it is likely that the spanish property market, as with other similar markets in europe, will potentially become, once more, the second home location of the richer northern europeans. REFERENDUM AND DELAY - NOVEMBER 2011 The uncertainty in europe continues. The Greek government are calling for a referendum which may decide whether the greeks stay as part of the euro. There may not be a vote until early next year. Spain's economy has stagnated as growth is recorded at 0% and this could still assert downward pressure on property prices that have already fallen by up to 50% from their peak values. We will have to watch the bond markets and how they perform with special note on Italy's plus 6% current rate. EURO CONFIDENCE - OCTOBER 2011 In the early hours of 27th October the euro leaders have finally agreed on Greece, or have they? In a decisive manner, the capitalisation of the banks and the soveriegn debt issues in Europe have all been dealt with - for now anyway. The lack of confidence that has been produced by the euro-political manoeuvrings over the past months which has culminated in a last minute deal, has all put paid to the desire for any property transaction. The desire and confidence is certainly required within the spanish property market and whilst transaction levels remain low the volatility in the price level of market transactions cannot be ignored. In times when the market place is not working efficiently and, it can be argued that the spanish property market is a case in point, there is ever the need for market knowledge gained from good advisors. TO BUY IN NORTHERN SPAIN - SEPTEMBER 2011 There are expectations of higher than market values by some Spanish owners. There is also an increased supply side which is providing a growing selection of properties for sale especially in the more rural parts of the Costa Verde. Purchasers are experiencing a wide range of prices for seemingly similar properties, and the supply side remains good which is undoubtedly putting pressure for prices to remain low and possibly get lower. As ever, location is the key but for example, in the interior part of Galicia there are many rural stone properties available within price ranges as low as 15,000 euros. Our advice at Blakemore Wallker is to set a price limit of say 70,000 euros to seek a rural property with charm, but in need of renovation. The cost of the renovation should be more than the purchase price of the property - if done properly! TELEPHONES AND INTERNET - SEPTEMBER 2011 There are many issues that have to be considered, which may not immediately spring to mind, for property owners in northern Spain. Although generally there is extensive broad band internet cover some rural locations have connection speeds not be much more than 1MB. If there are no telephone lines then a satellite connection is efficient but the cost can be prohibitive. Generally telephone costs, for all modes, are more expensive in Spain than in the UK. Access to the internet can also be provided by the mobile operators but unlimited access is still expensive although there is pressure for price reductions. PURCHASE TAX REDUCED ON NEW PROPERTY - AUGUST 2011 The Spanish government is attempting to boost the sale of new homes by reducing the purchase tax on new property. The reduction from 8% to 4% has been put in place immediately and will apply until the end of the year and it only applies to the market for new homes and not to the second hand market. There are reported to be over a million empty new homes in Spain and this tax incentive will be welcomed by some, but whether this sort of measure will make any real difference is uncertain. With more than 20% unemployment and the crisis in the banking sector, there is little demand to borrow money to purchase new property and there is no reason to expect the situation to change in the short term. A measure like this may encourage a few to make a purchase that they were perhaps considering anyway, but it is unlikely to make any substantial difference as a short term measure. Perhaps if the tax break was put in place for a couple of years then there may be a more positive reaction and why not include non-new homes.
GREECE OR SPAIN, THE PROPERTY MARKET - JUNE 2011 Greece has been in the news for some time now due to its national debt problems. The problems of Ireland, Portugal, Greece and to a lesser extent Spain and Italy, have been well publicised, but it is only now that matters in Greece are coming to a head and more commentators are stating that a "default" is inevitable. What are the implications of a Greek default on countries such a Spain? Spain so far has managed to avoid the crippling rise in borrowing rates (bond yields) experienced by Greece but if contagion spreads to countries such as Spain then the current euro system could be under threat. Under these circumstances some say that these countries might return to their original currencies which would most likely have the effect of reducing asset values. Property values in Spain are already up to 50% less than the last property peak in 2006/7. Could values fall further and who would benefit and who would suffer. Simplistically, property owners will suffer and purchasers will benefit but the implications are far more reaching than this. ESTATE AGENTS OR GOVERNMENT? - MAY 2011 At the beginning of the month the spanish government sent one of its ministers to London on the first round of a spanish property sale in Europe. Unusual as it may seem the spanish government are trying to offload some of the excess housing stock in Spain to european buyers and Russia. Figures vary but it is certain that there are currently over a million homes on the books and the spanish banks are "up the creek without a paddle". The spanish government are now admitting that prices have fallen drastically and are promoting that the time is right to buy. The big question is however, with excessive supply and seemingly little demand, will prices reduce further? At the moment there is a feeling that a 40% reduction has taken place. Also, tied up in all this are the disgruntled british who have fallen foul of the spanish property legal system and in some cases lost their homes that were apparently illegally built. The spanish are giving assurance that they are dealing with the illegal property problems. It must be remembered that the majority of foreign owners in Spain are more than satisfied with their property. Most importantly, any purchaser of property in a foreign system should seek authentic independent legal advice before parting with any money. In the UK would you buy a property without proper legal advice? LOST IN TRANSLATION - APRIL 2011 Below is an actual example taken from a spanish agent's english home page. The adage "if a job's worth doing it's worth doing well" perhaps doesn't apply here! "Our system allows you to be to the current of all the new buildings that interest to you. We have more than 2,500 buildings in the North zone of Spain. Also we constructed your house to you in one of our exclusive parcels with views to the Bay of Biscay or the Tips from Europe to the best prices." I think I understand what they're getting at.
The banks and building societies (Cajas) in Spain have been at the forefront of the economic issues much talked about in recent months. Although there are still the inevitable advertisements offering mortgages on property purchases in Spain, the reality is that financing a purchase has become far more difficult. Many of my clients purchase rural stone properties that need renovation and it is this type of property that is probably regarded as one of the higher risks to any spanish lender. Property financing is cyclical along with the rest of the market and good times will return but until then the banks are imposing stringent requirements on any borrower. The biggest problem that the banks have is in valuing the product against which they are lending and this particularly applies to older rural properties. One of the signs that prices have reached the bottom and are predicted to increase will be when the banks start to dip their toes back into the lending market without imposing such stringent requirements. We are not quite there yet.
The northen Costa Verde including Galicia, Asturias and Cantabria provides a completely different environment and therefore a different property market compared with the Spain known by many. This is an area where there is little foreign influence and some knowledge of the language is ideal. I am often asked by prospective purchasers where the best areas are to focus their search. The initial advice is always that they should take time and visit the whole region. Ideally, they should consider renting initially if they propose to live here. If the property purchase is for a holiday home then they should ask themselves if rental income is important. There are mountains and beaches, there are cities and there is culture, there is open country where wine is grown and there are more temperate coastal climates more akin to Cornwall or Devon. There is fishing, hiking, canoeing, riding and most anything else you can think of but it is certain that there are no over developed concrete jungles where half the properties are empty and no spanish language can be heard for miles. Many of my clients decide to purchase pretty stone built country retreats in need of renovation. Consideration therefore needs be given to the practicalities of carrying out building works and the inherent system of required licences and permissions. The habitual cry of "my husband is a builder and therefore we'll do most of the work ourselves" can cause unwanted exposure to the realities of a dream gone wrong. One thing is for sure - not taking the proper and relevant advice at an early stage can expose potential northern misery. EURO CRISIS / SPAIN'S PROPERTY MARKET - NOV 2010 The crisis in the euro zone is at the forefront of all financial news bulletins with the UK particularly focusing on the current problems in Ireland. Will the contagion spread to Portugal or even Spain? Spain's housing market is on its knees even though lending criteria applied by the banks during the boom years was more strict compared with other countries such as Ireland. The pound's strength against the euro is set to increase but this will only remain if the UK can prove that its economy is sound over the coming months. ASKING PRICES IN SPAIN AND ESTATE AGENTS COMMISSION? - SEPT 2010 UK and other foreign purchasers mainly find properties in northern Spain via websites. The asking price always reflects a level of commission and sometimes this can be a substantial part of the final agreed price. For example, some sites aimed at the UK source their supply of property for sale from local spanish agents who already have agreed levels of commission with the owners. On top of this the website owners will add their commission, so the purchaser may end up paying as much as the equivalent to 15% or even 25% over the price received by the vendor. For more detailed discussion please visit our "COMMENT ON AGENTS" page. BARGAINS IN IBERIA- AUG 2010 During the course of my work I have been increasingly coming accross properties that seem to be realistically valued for a quick sale. I have, for example carried out a survey this August of a house where the owner, who is English, is keen to sell and has priced accordingly. The three bedroom house and barn is set in the hills close to Cangas de Onis with views to the Picos de Europa. The house has been restored with a new roof. In my view it would have been worth at least 250,000€ in 2007 but now it is on the market for 135,000€ and I suspect offers will be acceptable. Anyone interested can contact me for further information. At this price the value per sq. m is around 843 euros !! ACTUAL PRICES PER SQUARE METRE - MAY 2010 Transactions are currently taking place on second hand properties at prices as low as 900 euros per square metre in comparison to 2,000 euros in 2007. The Spanish eceonomy with it's high unemployment rate is weighing heavy on the property market. WHAT INFLUENCES THE FUTURE MARKET - FEB 2010 The exchange rate between the pound and the euro, the general economy at home, the general election and the spanish property market. All of these will provide different influences on the prospective UK purchaser or even seller in northern Spain. Activity levels and levels of enquiries currently remain low and until after the UK general election the northern Spanish rural estate agents will continue to suffer from a lack of UK purchasers. What about other foreign buyers? - there are some euro based buyers but at a very low level of activity. In my view the UK will dominate this niche rural market in the future but as always at a very sustainable level. This time next year could see significant changes in the levels of activity. |
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SOURCE : MINISTERIO DE VIVIENDA - ASTURIAS PROPERTY PRICES 2010 = 1,544 euros sq.m ----------------------------- SOURCE : BLAKEMORE WALKER - PRICES (ACTUAL TRANSACTIONS) 2010 Galicia = 1,100 euros sq.m., 2010 Asturias = 1,240 euros sq.m AVERAGE COST OF CONSTRUCTION - : TRADITIONAL STONE BUILT = 700 - 1,200 euros sq.m.NEW BUILD = 1,000 - 1,400 euros sq.m. -------------------- The price of land as a percentage of the total cost of house and land rose from 7.6% in 1996 to approx. 30% in 2010.
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Blakemore Walker 2004 |
