What really is the current state of the Spanish market?

Hi all, I don't know about anyone else but it seems to me that there is a lot of speculation and rumour around at the moment about what is really happening in the Spanish real estate market at the moment. Some say there are signs of a revival others say prices have further to fall and no one is buying, it is difficult to know what is really happening right now and whether to buy now or wait.

I thought it might be useful and interesting if members of this forum, agents, lawyers, buyers, sellers etc, all gave their views and personal experiences about how they see things right now from their own point of view. Some questions we could address:

Agents - are new enquiries from buyers increasing or decreasing?

Is anyone prepared to buy right now or are you waiting until later in the year?

Are prices still falling or have they stabilised?

Agents - are your sales levels increasing, falling or static?

Sellers - have you had any enquiries from buyers, have you had to lower your asking price?

These are just examples. If everyone shared their own experience (and be honest!) then we might get an idea of the true state of the market right now.

I hope this makes for some intersting reading that will benefit us all here and thanks for contibuting.

feel it is the same as here, wont get any worse but will take 12-18 months to recover, definitely the right time to buy providing one has done their sums and taken all worst case scenarios into account.

I am considering a resale - actually bank repossession - I think it is a bargain - 40% down on the price 3 years ago but there are issues for me. However, for most people this is a lifestyle thing and emotions also come into it. Logically with the euro I suppose we should wait - we also have a property contract we are trying to get out of due to poor quality - I think you are right advisor however - you have to think of worst case scenario - for us - at the very least it looks as if we lose our deposits - even worst might be if we had no legal ground to pull out and are forced to complete - trying to find out if that is possible.

On the whole I think there are buyers if the price is right and I have been told that the Spanish are buying - I lost out on a better buy last month - it went to a Spanish buyer. We don't hear about the bargains until it is too late I think.

Roybud,

It seems to me has a purchaser that spain will not drop there prices like we have got to in the UK .

Don't know if this helps, but town houses are selling quite well near to our house on the coast.  Those sellers holding their asking prices are not getting a sniff,  but those dropping asking prices are selling quickly.  The buyers, according to the local agent , are all Spanish.  The agent has done more business in the last couple of months than over the last year.  The Spanish are choosing the best locations and know what they're doing.  The agent says the Spanish buyers think it's bargain time for desirable properties not waiting for further reductions.  Less desirable, eg same houses but facing the wrong way, on the wrong road etc, are not moving at all.

The local Spanish residents selling their larger detached properties will not even consider negotiating the price let alone drop.

Hola Adosado,

Seems to me that they only want spanish people to buy  !!!

along the same lines I've been reading articles about bank repossions (from developers not owners) going for 30-40 percent less but haven't really seen any ads.

Still according to Edward Hugh of spanish economy watch house sales, and mortgages (in euros) continues to decline.

Wow, didn't think the images (from his blog) would copy over. It's fairly lengthy but it gives a proper and accurate view of the Spanish housing market.

House Sales Continue To Fall (More Slowly)

Spanish house sales fell again in March, but as the desperate seekers of green shoots are so eager to point out, at the slowest pace in the last 11 months, according to data from the National Statistics Institute. Home sales fell 24.3 percent to 34,895 in March in what for what was the 13th straight month of decline, but the level was below the rates of 37.5 percent in February and 38.6 percent in January. Of course, once contractions have been running for more than twelve months you start to get what are known in the trade as "base effects" (since this years figure is simply down from an already reduced number the year before), and it is possibly more interesting to follow the actual number of sales, which you can see on a three monthly average basis (to iron out some of the seasonal quirks in the data - an old economists "quick'n dirty" trick) in the chart below. It's not too clear that we can talk about any "easing" in the recession looking at this chart. Even with monthly sales running 10,000 or so higher than the present level, the construction industry would still be in a huge slump.

 

In fact some increase in sales is only to be expected as banks repossess homes from houseowners and property developers due to the soaring rate of debt defaults, only then to put them on the market at ever lower prices. And again, the March housing results were influenced by the statistical impact of a sharp, 39 percent fall in March 2008 sales (the base effect) and the fact Easter fell in March last year. Nonetheless the number of sales was slightly up on February.

So what we are talking about is less deterioration, not any visible improvement.

While The Number Of Mortgages Goes On Dropping

The average value of the mortgages signed in February was down by 12.1% year on year and reached 148,798 euros The number of mortgages that change conditions increases 24.6%, while registered cancellations decrease 29.7% During the month of February, the average amount per mortgage constituted stood at 148,798 euros, 12.1% less than for the same month the previous year, and 1.2% lower than that recorded in January 2009. The average value of housing mortgages was 123,643 euros, down 17.0% year on year, but up 1.3% on January.

The number of new mortgages was down 28.5% year on year.
 

While the total value of mortgages issued was down 37.2%.



Bottom Line: No End In Sight (Far From It)
 

So basically, while it is true to say that we undoubtedly saw a moderation in a number of indicators in April, this is still a far cry from any kind of green (or even Brussels) sprout, or anything vaguely resembling one. And the key to the story is to go back to where we started - the credit crunch. It may all seem like a long time ago now (like in August 2007) but all this started after many years of exaggerated bank lending to Spanish households and corporates sent property prices, and with them relative wages and prices, way out of line with the true net worth of the underlying economy and labour force. It is like Spain suddenly developed a version of "twisted vertebrate illness". And now all these distortions need to correct themselves. And since for two years now the Spanish government and people have vigourously failed to face up to the underlying cause of the problem, there is little alternative at this late stage in the game to a pretty violent correction.

The heart of it all has been excessive bank lending, lending which basically came from the exterior (since Spain was low on domestically generated saving, everyone wanted to "invest" in property) and basically made possible and funded a large external deficit (which is now also closing, again painfully, since exports are not rising, and all the work will be done by falling imports and living standards). Basically to get 4% annual GDP growth Spain's corporates and households were increasing borrowing at a rate of around 20% per annum. The credit crunch has put a stop to all that, and year on year household borrowing is gradually dropping to zero (before going negative, see chart below).
 

In fact total household borrowing is now below the level of June 2008, so the rate will turn negative in June at the latest.

n fact, total Spanish debt reached something like 250% of GDP before this burst (with a 20% y-o-y growth rate in loans and a 10% of GDP annual current account deficit) and this level is evidently completely not sustainable. During this correction the net indebtedness of the Spanish nation will have to drop significantly as a proportion of GDP. Ironically, as GDP contracts, debt has still been rising, as government has simply stepped in to take on the burden with more or more state borrowing. Ultimately this won't work. The EU commission estimate that the Spanish deficit will hit around 9% of GDP this year, and my guess is that this is the last year where such abuse of borrowing will be tolerated. I say abuse, since while no one would argue Spain doesn't need to run deficits at this point, there is simply no sense at all in running them without a plan, simply to buy time, and hope. This in Spanish is called a "huida hacia adelante", and this is exactly what Spain's policy has been about - running ever faster to try to catch up with your own shadow.

So as I say, debt to GDP is most probably rising even now, but it is obviously going to have to come substantially down, which is why I insist on saying, this correction has hardly even gotten underway yet.

For those interested here's the link to the whole much longer post
 

http://spaineconomy.blogspot.com/2009/05/spains-contraction-moderates-in-april.html

I am based in a large agency in Torrevieja and we are seeing an increase in interest from buyers but mainly at the lower end of the market.  We have lots of interest from Irish, Russian and Scandinavian buyers, as well as Spanish.  Not so many Brits but we all know why that is!  Most of our properties have been reduced significantly and these are the ones which are selling - ie 2 bed properties from 50,000 - 90,000€.  We also have some really good deals from builders who need to see some return on their investment and are willing to drop their prices considerably or offer extras within the price. 

There are some sellers who don't accept how the market has changed and who insist they won't sell for less than they paid a few years ago - those are the properties which will not sell, unless there is something particularly special about them.  There are also some builders who won't drop their prices either, and again those properties won't sell.

Repossessions are available but are often being sold at debt value which may be fantastic value or they not be a good deal at all - it all depends on the level of the mortgage.  I have had to decline properties because the mortgage was way above market value and I wouldn't have been able to achieve a sale at that price.

You would expect me to say this, but I'll say it anyway - I think now is a great time to buy. Just take the time to do your homework and find the real bargains, rather than being attracted by the fact a property has been repossessed.  Most prices are negotiable too, unless they have been reduced already several times, so don't be afraid to haggle a bit. 

to CS

I am sorry that you may lose your deposit, that siad you would potentially have lost it had you completed in that values are way down, you could buy a repo and hence achive your home in Spain and if bought as a a repo have on apper in the longer run got your deposit back.

I believe that eventually values will rise, Spain is still very popular and they arent building anymore land!

Good luck either way

Thanks Advisor

I am just worried I might be asked to complete on the apartment I don't want - hard to get clarity on whether this is likely.

CS

check out some posts from Maria who is a very helpful lawyer in spain?

 I have certainly noticed a change recently, it started at Easter and it looks like it it coming back to what every agent wants....a normal steady market.

Clients are all nationalities at the moment.....Dutch,British,Irish, French etc etc..

With the fall in prices, the low mortgage rate all we need now to get full stability back is the climb and strength of the Pound.

I think the Pound will steadily rise now for the next few months.

With some of the prices slipping back 5 years we could see a mini revival especially with the legal sysytem finally getting it's act together.

Hopefully a hard lesson will be learned from all involved and developers, banks and agents will help create a steady market again.

Thanks to everyone that has replied, especially Rob in Madrid for an excellent post. There are certainly some interesting views. It would seem that things are improving slightly in some areas of the market, the Spanish seem to be buying for example and the levels of enquiries are increasing, but the Brits have yet to start buying in any significant numbers. On the whole, I believe there is still a lot of stuff still to shake itself out and I personally don't see things improving until at least Q4 of this year and maybe even Q1 2010. My main concerns are:

1. There is going to be a huge glut of unsold property that could take years to sell through. While there is significantly more supply verses demand then prices will continue to fall.

2. There is still a great deal of uncertainty about job security both in Spain and in the UK.

3. There are still very high levels of personal debt - people will be reluctant to take on further committments until their current levels of personal debt is reduced.

4. Mortgages are still very difficult to obtain and the market will continue to be constrained until banks are lending more freely.

5. The poor pound/euro exchange rate is unlikely to improve in the near future and with the UK economy in such a fragile state, any further economic or polictical shocks could weaken the pound further.

I am sorry if I sound gloomy. I know we all want to be positive and hope that things are on the way back but if you look at the whole economic picture, and the property market does not operate in isolation of the wider economy, then there is still a lot of negative stuff around. If you are economically secure, have cash available and can pick up a real bargain now, then go for it but I suspect for most of us we will have to wait until late 2009/early 2010 before we can be certain about where the market is going and be sure it has regained the stability that Georgia refers to.

Roybud

Roybud

i think your overall summary is spot on, cash is very much king at present and yes there are many bargains both in Spain and in the UK to be snapped up, personally think interest rates UK wise will not rise much in the next 12 months however sadly there will still be lots more repos due to redundancies etc

business wise most will have to do 2-3 times as much work to stand still however will come out of it stronger as a lot of their competitors will have gone to the wall, investment tip is to invest in any insolvencyh companies as boy are they busy at present!

In very many areas the local Spanish had been priced out of the property market because of the boom in prices. In some respects many are now able to get a foot hold with properties that had been beyond them in recent times. Provided they have (or believe they have) a secure income they can take advantage of the bargains now available. Its no bad thing as so many resorts and urbanisations had become Spanish-lite rather than true Spain. There is a Spanish custom to have a family casa in the country or near the beach as well as a regular family homes or apartment and apparently this custom is seeing a revival too. However even with this positive move and purchasers from other european countries other than the British there are so many unsold properties that kick starting any new building must be far down the line. Also many Spanish dont want the huge developments of new properties and golf resorts like our own, so whilst it would indicate the markets picking up its possible that future building will become more restricted.

I agree that things have been tough over the last 12 months, but being a UK based agent, we have found it very quiet, but at last things are starting to move with the UK buyers.

I think prices have reached base and with the low interst rates and property in UK starting to sell again, then I can feel the movement, though only a twitch at present, I do think it will become more substancial rattle in the not to distant future. I think that the UK government needs to put forward some good news on te money front instead of doom and gloom all the time I feel that would help the pound and the markets, then people will feel better and start to buy again.

Something  positive, my business made a profit this year, up 15% on last year.

Dave

I believe the Govt. and Bank of England have purposely talked down the UK economy to keep sterling under-valued. At present there are more winners than losers with the low £

It cannot last too  much longer - even the IMF are talking up the British economy and they are the regular doom-merchants!

Jo

randolph re: "i believe the Govt. and Bank of england have purposely talked down the UK economy ...." 

lol ... if only our UK Government had any control on anything these days!!!! .. let alone their own expenses ... sack all the bad apples and rebuild the Government with the few that are left ....

(sorry slightly off topic i know .. but the thought that the UK Govt know what they are doing made me have to speak up!). 

Hi TP1

I totally agree with your sentements regarding the Govt. They are underhanded, devious, self serving  and two-faced.

No way did I mean to imply they were in control........ It doesn't take much to make the occassional doom-laden speech!

Trawl through the news and there are plenty of stories of 'green shoots'. Either Gordon and co. are ignoring them or disbelieve them.

A couple of weeks ago sterling was edging up  then Mervyn King made a speech saying the UK was going to have a long , slow recovery. Immediately Sterling slid back.

For the last few days it has been on the up again - and has now slipped due to S&P suddenly revising its predictions for the UK economy to negative. Why they have done that goodness knows esecially as the IMF have given a more favourable report.

But it cannot last for much longer - out of the top 7 world economies only sterling is so undervalued in spite of the mess we are in!

Georgia you wrote

"With some of the prices slipping back 5 years we could see a mini revival especially with the legal sysytem finally getting it's act together."

I would be interested to know what evidence you have to suggest that the legal system is getting it's act together.............

Thanks Advisor.

I want to start my european export recently,

spanish market is my first step, so I think this could help me a lot.

-------thanks from savepurs.

The Spanish property market is very similar to our own just now.....lots of over supply for certain types of properties such as apartments , low level of transactions and for some , those properties which are at a bargain price are often  not the ones you want to buy!

Owners who do not have to sell are sitting tight so a lot of really good properties are just not for sale at the current price levels- developers who do not have to sell are just cutting back until times improve

There are some good deals from developers with circa 25% reductions in asking [!] prices compared with original and if you are wanting a nice holiday home with facilities now may perhaps be the time to start looking...Polaris World have some good offers and re sales asking prices from circa 87.500€

The best deals are probaly the distressed sales....a recent example was a 2 bed duplex in Palomares bought for 185.000 € several years ago, the price to sell was 130.000€ to clear mortgage..others similar...but you have to look hard to find the good ones

The prices stated for owner direct sales tend to be set too high and not reflect the market...most agents today will only take on a property if the price is realistic but some owners are still living in the past!

When will it improve?

I think the Uk market looks like improving late 2009 but we have a general election to get out of the way before confidence improves so that means mid to late 2010 before we see a return to a more active market...even though it has not been as cheap to buy for a long time and interest rates should be low for some time

UK buyers are an important part of the second home market in Spain so that means UK buyers will be slack until late 2010 but an exchange rate improvement may quicken this ,as there is certainly a pent up demand for buying in Spain ,just waiting for this to happen

Spain will continue to be very attractive for northern europeans for well known reasons but with it's large over supply I suspect prices will remain level for a couple of years....say Q1 2011 to get back to a more normal market ,and those developments which are currently being mothballed re started

I think the above is a pretty standard view of the situation...if you want to and can afford to buy now then you should be OK medium term.......may not be buying at the bottom but at least close......and if in the right location via the right people then it should turn out a good investment......although to  life style buyers investment returns are not always as important as the enjoyment they will get out of their purchase !

Planning and legal sitaution is now well regulated but as always you need good independant advice.....adopt the same attitude as you would buying in UK

So if you want to buy...no reason not go to Spain and have a look!

We plan on moving to Spain but like many due to the housing market in the UK and the price of the euro we are sadly having to wait. We are hoping its picked up in 2010 so we can move then, along with some friends and their families.

Wise to wait for the £ > € rate to improve and the bets seem to indicate 1.25 this year...may be a while before it gets close to 1.40 +

You have to balance the exchange rate with the potential to make a good buy.....and of course selling in UK at the current market value......and of course life style

The fact is that if you are selective,and the rate goes to 1.25, then 2009 may be OK..I would suggest that if you start looking circa Sept 2009 you may ' just' be getting the balance right

Just my view......no one can call the bottom of one market [ Spain] and the upturn of another [ UK].....but it does look as though on ' supply & demand' [ basic economics] that the UK will ' upturn' before Spain starts to move

In UK there is a shortage of ' stock on the market' for the popular types of houses'....

Maybe a time to start looking.....if you find waht you want.....everyone is flexible in Spain on timimg!  

Many Thanks,

The main problem for us is the UK market, there are tiny signs of this picking up Im seeing more sold signs in our area so Im living in hope that this time next year mine too will have a sold sign.

Don't want to be a doom-monger, and I know there are two sides to every argument, but I just came across this article today, which makes some pretty logical points, albeit rather depressing if you're trying to sell a UK property.

Roberto

not doom and gloom simply fact, bearing in mind that most lenders are now either government owned or are being very careful just in case they need a bail out, they are all singing of the same hymn sheet.

Redundancies in mass still ongoing, GM going in the usa will have an impact over here due ot their mortgage side, LTSB making a further 500 redundancies, all these people have mortgages and will be ok whilst they have their redundancy monies to hand but getting another job in the same industry......unlikely

Me thinks 12 -18 months before anything picks up

I put my house on the market yesterday and was very pleasantly suprised at what the agent suggested i price it at.  I know this is not the same as selling my house but i did do a price comparison on Right move and was again pleasantly suprised by the number of sold properties similar to mine ( in fact there were more sold than available for sale ).

The Estate Agent echoed what i had heard on the news and read on the websites in that he has a shortage of property available for sale.  I actually choose the agent as he has a large number of sold boards around my immediate area.

So fingers crossed the 'For Sale' board should not be around too long.  Then goodbye UK hello Espania

TP

also use www.nethouseprice.co.uk to gain an idea of actual sold prices, the biggest problem is likly to be the mortgage valuation which are coming in extremely low