We are off to catch the boat down to Bilbao tomorrow, but I can't resist the temptation to comment upon what has been, at times, hard fought and mostly very educational string.   I am not in the property business (nor was I prior to my recent retirement), nor was I in international finance, so my take is that of the hopefully, reasonably intellighent "ordinary Joe". 

We purchased off plan in Formentera about 3 years ago  (moved in last June) and the idea was that we would buy something we could afford, so that if anything went wrong, or in the end we hated Spain, we didn't have to sell our UK home if the Spanish property proved hard to sell.  I guess we have forked out around £100,000 to date including furnishing and to be honest, if we really wanted to rid ourselves of the property, we realised from the start that we would have to be be prepared to take a big hit.  We hope to take that decision within the next 2 months then decide: a, do we want to spend a large part of the year there? Or b, do we just want to use it as a holiday home? )  Or c, are we prepared to let on a long term basis? Or d, do we just want to mothball it and pay the minimum of bills until things improve realising that this may take a long time? Or e, do we just want to get it off our hands at any price?  I would think that there are a fair number of owners a bit like us and also many who love Spain and have no plans to sell and therefore have no problems if the market falls in the medium term unless they sometime want to return to the UK.  Those who look like taking a real hit are the speculators and the developers.  Both knew they were taking a gamble and we shouldn't feel sorry for them if it fails to pay off.

There will always be buyers if the price is right.

In the UK we are obviously looking to sell our 4 bed house, but the market is said to be falling.  Our son who is trying to buy a house (in another area) reports that when he was looking a few months ago there were masses of properties in his price range, now there are hardly any and I think the reason for that is that in the UK we are used to getting pretty much the price we want and frankly if we can't get it we won't sell!  At the same time because of the derth of properties for sale in the low-to-mid price range, the rental market is hotting up.  In the UK there is a limited supply of housing and if there are fewer for sale there will be a greater demand for rental.  So if we decide to stay longer in Spain and can't get the price we want for our house we will just rent it until the property market improves.

Re-reading this I sound very complacent (I thought it was practical), and yes, I know other things can go wrong, but putting on my gambling hat and looking at the risk (that is something I am expert at), the most likely scenario's are catered for above.  Of course estate agents may also be badly affected and yet, like most businesses they surely will have put something aside in the good times to help cover for the inevitable bad times?

The only thing we have not catered for are bent officials, corrupt lawyers and greedy developers, who seem to be endemic, but you can't cover every eventuality!

Mike

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Fair comment,i am an estate agent and therefore totally unoffendable.

I was just trying to say that there maybe 100's or millions of apartments as you say in certain areas but is not neccesarily blanket coverage......

In Guardamar town the owners are predominantly Spanish and therefore it is not overinflated by foreign investment and although the prices are more than others on the CB it is for the reason that the Spanish as well as the foreigners find it really appealing,in saying that you can still get property withina walk of the beach for about €130,000,i think that is a correct market value and will not be slashed,you also have Algorfa which i walked the whole length of on Saturday looking for property for sale and found only 3 in the whole village.

I am going to shut up now because this is starting to sound like an advert...................

I respect your opinion but the market is reliant on confidence and reality,we have the latter but the former is being jumped on which doesn't help the people whom you mentioned that are desperate to sell,i know there are several programs this week concerning the 130 homes reposessed evey day in the uk so i am aware that it does not just affect us here.......

Regards

Georgia

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Oh dear!

Georgia - I am not saying that atall. The fact that I am asking for reasoned debate is evidence of that. Clearly we are also talking generally. When I refer to 50% I am talking generally and its not to say that there are not some correctly priced properties out there, or that everyone has bought badly. I see the Spainish mkt like a car boot sale, probably mostly overpriced and not very attractive with a few bargains hidden away.

I don't know you so I wouldn't like to comment on your experience.

What I can comment on tho is the millions of apartments I see for sale in Spain. Most are worth 50% at best. Just look here on the eye of spain website at the "bargains" section. Hundreds of properties listed that never seem to get sold, they just sit there hoplessly overpriced, the poor owners no doubt suffering by the day.

In the looking to buy thread, I copied a post from a thread on here from a poor lady who is very distressed. She has property on her hands that she can't sell and she is desperate, despite not being a criminal type, she is asking what would happen if she walked away, and that she knows many many in the same predicament. Of these hundres of thousands of properties looking desperatly for a buyer ,  you and I know that these people didn't pay with cash - they have a mortgage and its is bleeding them dry. People talk about quality of life - what quality of life is that. Some folks commit suicide over debt, many more are left in depression.

You don't need red books or to be an agent to see the trouble brewing in Spain and the suffering being caused.

However if I have offended you I sincerly apologise and hope that you will accept that this was not my intention.

 

This message was last edited by TJ222 on 2/4/2008.

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Hi Tj222,

I take it from your last post that you dont consider anyone else who has so far commented to know the market??

I must have spent the last 18 years in estate agency completely wasting my time then,fortunately my knowledge extends to a little more than "cut and paste" from the Telegraph financial section!!!

Yes Rixxy does know the market and i trust her judgement and expertise in her area(costa del sol),but here on the Costa Blanca when you can still buy an apartment for 100,000€ we are expected to beleive they are only worth 50% of that!!

So in essence you will be able to buy a holiday home for approx £35,000 again???

Different areas,different situations,are you saying that in Madrid property prices will plunge as well!!!

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Pheeeeew! I had to double check my posting there for a minute!

Freudian slip meethinks, but if you drive past Banus midnight on a friday night, who knows what you may see.........................................

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TJ, Rixxy actually said "I'm in the game" not ON THE GAME 

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Good factual, unemotional post from someone that knows the market.

Soory to hear however that you are quote "on the game". I had you down as a sucessful property agent.

xx

This message was last edited by TJ222 on 2/4/2008.

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Personally I can see both sides of this arguement. Yes I am in the game, but in a different way. For facts, I am selling properties that are 50% below price, BUT this depends on where you set the price. Brian as you know, the UK and other markets use comparables for their valuations. If you did this in Spain then the valuation of a property would be very much up in the air.

Many agents go out and list properties, with no real idea of how to accurately value, they ask the owners what they want for it and then either add in or usually add on top their commissions - which by the way are now an average of 6.5% I am finding!!!

A current bank valaution is dependant on euros per square metre, using internal measurenments of the property and the terrace, garage, store and land. Some valuers are starting to look around at comparable proeprties of DEVELOPER prices in order to justify their reductions (I had this happen 2 weeks ago so its fact) but many are still valuing duquesa/manilva/casares at way over where they should be if they even knew a little history of the areas. You cannot value those areas in the same price bracket as Marbella.Nueva Andalucia, but they are!

In the past actual sales figures were guarded secrets due to black money, but now its all legal at notaries, valuers will be able to tap into this and know what a comparable sold at - Im sure this system will come in very soon but the banks here are not yet set up to properly process cases now, so yet another change will do their heads in.

I can tell you that I have many buyers some with cash and big budgets who are out to get the best deal they can. They do buy without viewing and based on the differential of a bank val and at the moment they want 35-40% reductions, so it wont be long before they demand 50% reductions.

Balance that with a 'normal' buyer I took out this morning who knows its a buyers market BUT still wants to ensure they are not being overcharged, they mentioned 75-80% reduction from bank valuation.

Take also into consideration that many normal buyers (by this I mean actual users for second holiday homes) want to include their costs in this price and you are down to 65% of bank val.

I have many many sellers now facing reality and for various reasons are offering their properties some at mortgage level. This is from single units up to whole developments - handy for the fund managers - and again these are hovering at 60% of bank val.

Therefore TJ is not far off.

Luckily for us though, Spain is very diversified. Some sellers will sell their properties but at the highest price as they dont need to sell. This is still ultimately a luxury market for many. They are not dependant on rental income, great if they get a rentor but not desperate if they dont.

Some people live here on pensions, others work abroad and others like myself have to work and choose to do so in Spain.

However bad the financial market gets, you cannot beat the lifestyle and the weather, and if that means paying a mortgage on a property in negative equity, then thats what it means. Its the same as renting, alhtough you own the place and can change it as you want and know you cant be booted out by the owner and if the worst comes to the worst, pass the mortgage onto the kids!

No point keeping a dog and barking yourself!

Have a great day everyone - its about 20 degrees, blue sky and sunshine and I have the hood down on the car!

 

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Hi TJ222,  I have just been reading your other post on ABOUT TO BUY so I can understand why your are full of doom and gloom.    I hope things work out for you.  What you are saying is your opinion if other's do not agree so be it.  That is part of life it would be a great world if we all agreed with each other or boring.   You maybe right some property maybe over priced 50% but if our apartment was it would have been a real bargain  So I do not think you can generalise like that.   I do also know about the weather in China and US interest rate and many other things.   But as I said I hope things work out for you                     Pat

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TJ222

You sound a little like a guy who always waits for the market to hit the bottom, but never really knows when it has, and so never buys .....and therefore never gets a good long term investment!!......or enjoys life!!!

Your comments about valuation illustrates that you know nothing about the 'principles or practice ' of valuation

I suggest you read the Royal Institution of Chartered Surveyors ' Red Book' which governs all valuations in UK and is a standard accepted by all the worlds's major banks and in general accepted as a standard in all major economies [ although subject to national variations]

Halifax Espana lending in Spain will be based on the principles they use in UK [ The Red Book] and the RICS Red Book is leading the way in EU

All you appear to be doing is trying to 'put the fear of God' in to the minds of sensible people who are looking to buy for life style reasons, when in reality long term that will not happen

If you want a house in the UK now is a good time to buy, same applies to Spain but 'location and quality' is important

Best to buy in a static market      

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Ok guys I get the message and I won't post anything any more on this topic. But lets all meet back here in say 6mnths time and see what has happened.

By quoting quality publications like the Telegraph or Bloomberg I have been trying to add some substance to my views. I have not seen anyone lese doing that to be fair. I don't think "my neighbours cousin bought a property in Spain and is really happy" adds much weight to the debate about house prices.

I will finish finaly with some unemotional facts to support my case that Spainish houseing is around 50% overvalued, if someone could come back and dispute these facts with facts, not emotion, I would appreciate that.

The best factual way to value property in general is to measure the yield. This has been the case for thousands of years, so its a brave man that argues with it.

Because Spain is now flooded with apartments and there is a total glut on renting ( as many have found to their horror) many apartments are unrentable. If you can rent property here it typically yields around 2 to 3 %. This figure is gross, so by the time you have paid someone to manage and market it, and you have paid for upkeep , community costs etc, you will be lucky to get a nett figure of more than 1-2%

Historically over many hundreds of years property has yielded 10% gross, 6-7% nett. Professionals would see these figures a little on the low side. If you disagree with these figure then have a look at professionally managed property trusts and see what yield they are achieving.

So property is atleast 50% overvalued by this measure.

Another way to value property ( used by banks) is to measure the ratio between local wages and property prices. By this measure property in Spain is the most overvalued in the world, bar none. Does that not ring a few alarm bells.

But don't take just my word for it - see what the International Monetary Fund has to say :

 

IMF warning on Spanish property prices
The International Monetary Fund has once again voiced concerns over the high level of property prices in Spain. In its latest report on the world economic outlook the IMF points out that Spain’s high property prices are especially worrying given that interest rates are increasing. The Fund also singles out The UK and Ireland for their high property prices.

The Telegraph today:

Property market 'heading for a fall in 2008'

By Edmund Conway, Economics Editor

 

 

The housing market is heading for a fall next year, experts have warned, after it emerged that property is at its most overvalued level in more than 15 years.

 

 

If property falls heavily in the UK, you can be sure that Spain will be Toast.

Finally and this is the last time I say this:

If you have bought a house/apartment in Spain and you are happy living here - then THATS GREAT. I love it here too.

However the fact that it costs me half as much to rent a house, than it does to buy it, should be ringing alarm bells. In this situation rent money is not dead money its quite the opposite. I will buy when prices are sensible according to sensible measures.

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Well, I, for one know about the interest rates in the USA and the weather in China I am still at same side as you

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Well, I, for one know zilch about the interest rates in the USA and the weather in China

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Does any of this matter to 'real' people?

If you have your health, you can fed your family and you have a roof over your head; then I would suggest that what really matters you have covered! Anything else, interesting, possibly; but how relevant.

Please no monologues from 'The Cleverer Than Thou Brigade' about how the interest rates in the USA and the weather in China will mean no cornflakes for my grandsons breakfast next week!

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Yes Gina, their are are  a few houses up for sale around Hemel and most of them have been sold, some here are down sizing to move to  Spain and some Bulgaria that I would not advise but each to their own as they say, but some in UK Devon and Cornwall.   So things cannot be that bad maybe it will get worse time will tell.   Pat 

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Very True Pat,

Why do you think that I sell so many houses for people that are down sizing to spend more time in Spain and not to mention the ones that are selling up to move over there full time. I am amazed at the amount of people I come across that are doing this and also many are not far from us in Spain so we meet up over there when we get the chance to go. They can't all be wrong. Re the 50%, I think that is a bit of an over shot. But it depends where and what it is. As we have read on previous posts, there are some agents that are advertising properties over the odds to get more commission, but then this is when research comes in. Trawling the net may be time consuming but could save a fortune when you find the same property cheaper with another agent. So location, research and advice from this forum should help buyers make the right decision. And like Pat, we are very happy with our Spanish retreat. Can't wait to get out of this cold weather. Brrrrrrrrrr

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Yes I agree Gina,   I still believe if you in invest in bricks and mortar you cannot go wrong.   TJ222 are you saying when we bought our apartment we should have got it for 50% less than we paid, I am sorry I cannot believe that.   I understand you are trying to educate us but I do not think it is working.  Their are too many people out their that are happy with their life in Spain and what they have purchased.       If you choose to rent that is fine it is your choice, but to me that is dead money.   Things will pick up it might take time, but I believe it will happen just my opinion.  I am sorry it makes you shudder but we bought on a 4day trip we never intended to but we really liked it and the price was right.      I am so glad we did.    Pat  

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Facts, figures, newspapers, media?????  Read what you will, but I can say from the the practical side not the theory that the market is alive and kicking and not just in Wales, I talk to agents all over the country. Was speaking to a London agent today and he said that they are getting the same positive response. As for the prospective buyers that keep saying that they are waiting for the crash before they buy??? I think they may be backing the wrong horse there!!!  The Spanish market has slowed down, granted, can't argue with that. Over supply outstripping demand and the days of flipping properties for profit are long gone as I have said before in numerous posts. But it was 2 years ago here, so obviously follows on. The market will recover, it always does. It won't be another 80's disaster, (I worked in agency at that time and it wasn't good), Just hang on in there and be positive. Basically if you do buy a property in Spain, just don't rely on rental income to keep it afloat and it'll be great!! Just my experience on the market as it is right now.

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Hi flying cat totaly agree as l said a dozen posts a go there seems to be a conspirey to talk up a recession well l am not going to let them depress me,take no notice and enjoy your home in the sun.Pat.

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Well well well, TJ222,

You are really a negotive old soul, are not you?

Myself is a financial professional (although in different areas). I have had very bad investment i.e.dot com boom bust and very good investment i.e. emerging market BRICK counties and commodities. Property market is like stock market, it is about sentiment. Right now sentiment on Spainish property market may not sound good, but can you show me some hard economic dates such as what is employment rate of Spain y-o-y for last three year? what is repossession rate say m-o-m for last 18 month? One charactor of Spanish property market is similar as UK proterty market which is there are strong purchasing powers from outside, in UK's case the money pour in from Russia, Middle East, newly found rich of East Europe and in Spain there are plenty Brit, German and Northern European. Those purchasing power are not directly correlated with Spain economy.

You keep quote that Spain property is 50% overpriced. That is a huge bubble you are talking about. In reality, until I see those hard dates you are not comvince me the bubble is as big as you say and hence we are not any where near the burst point. And burst may never come if there is not a big bubble at first place. And for most buyers, at least on EOS, I have not seen many speculators. Mojarity of us are genuine buyer. I am buying for 'life style' and not for investment.

I did buy on the back of weekend trip and that is because as a busy professionals I would never have the time to rent and live there for few months before I buy.

Once a famous person said  'you can talk yourselves into recession'. 

 

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