Another Nail in the Spanish Property Coffin

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09 Aug 2012 14:37 by Woodbug Star rating. 371 posts Send private message

 

House prices have fallen by 50pc in Ireland, 34.2pc in the US, 10.2pc in the UK (distorted by London), and 24.3pc in Spain. Spain’s situation is currently a mirror image of the demise of Irelands Celtic Tiger economy.
It is logical therefore to think that Spanish house prices have much further to fall, as the collapse in the property boom in Spain was just as bad as Irelands. So why is there such a disparity?
 
Well, as usual Spain goes about things in a different way to the rest of the world which in turn distorts figures to the advantage of those who wish to ‘hide’ the truth.
 
The UK figures come from the Nationwide House Price Index, based on actual sales prices, US figures come from the Case Shiller Index, also based on real sale prices, whilst the Spanish figures are based on an asking price index published by Idealista.com, an web-based organization with property interests.
 
Asking prices and sales prices are not the same, therefore can’t reflect the true situation.
 
If a reliable house price index existed in Spain, based on actual sales prices, we would see a more realistic comparison to Irish property prices. In July this year, asking prices fell 10.6% and it is generally accepted that Spanish house prices have declined by between 40pc and 50pc, whatever asking prices and official figures would want us to believe. Spanish thinking by sellers and their ‘advisors’ is that they will get a better price if they price themselves out of the market!
 
So we have millions of homes on the market at inflated asking prices,  the banks holding e156 billion of construction related debts, in April and May alone this year bad debt relating to property loans rose by e3.1 billion, meaning many more repossessed properties will hit the market.
 
The only way out of this mess is to sell the stranded properties whilst they are still in a saleable condition, so what has the government done to help this rapidly approaching hopeless task? They have raised IVA (VAT) from 4% to 10% effectively increasing the cost of new homes by thousands of euros! If that doesn’t guarantee to keep the sponge investors away from an already ‘dodgy country’ to invest in – nothing will.
The government in their wisdom, have also increased the IVA on property refurbishments to 21%.
 
If there is a way to encourage people to use the B-money route, then this government will direct them to it. Dodging the tax-man is a national pastime here and these measures will give this popular hobby a huge boost which in turn will result in even more tax rises in other areas to compensate.
 
A leading world economist sums up actions of this lost and desperate government as follows:
 
They are still trying to kick cans into the future whilst simultaneously catching the ones they had kicked in the past! Not even Lionel Messi and Victor Valdez have ever demonstrated such skills and dexterity.
 
Woodbug
 




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09 Aug 2012 17:01 by I_Love_Javea Star rating in Gibraltar / Morocco .... 125 posts Send private message

 Prices have fallen by up to 70% in Spain. It is possible to buy properties from apartments to villas for incredibily low prices. All you require is good relations with the banks and be willing to play the Spanish game. When some one walks away from their mortgage if the mortgage was for under 50% of the original cost the banks will let these properties go for 70 -80% of the outstanding debt. Obviuosly these properties are in great demand and the banks are eager to offload as it does not hit there balance sheet too badly. Now the over valued properties that they gave 100% or even 130% mortgages on are a different kettle of fish. The most they are ever going to get is 35 - 40% of the debt back from a potential buyer. This is disastrous for their balance sheets and they would be bankrupt in no time at all. So these properties will not sell for a very long time unless the Government steps in and creates a toxic fund (i.e. it buys all the banks bad loans), good for the bank but bad for the tax payers as they are left carrying the can of shit while the banks go on ripping the tax payers off and awarding themselves huge salaries, pensions and bonuses.

There are real bargains at 70% of 2007 prices you just have to know the right people. It's not what you know it's who you know.



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09 Aug 2012 18:01 by trowell1 Star rating. 150 posts Send private message

Hi

Do you know who they are?

regards





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09 Aug 2012 18:02 by Roly2 Star rating in Almeria. 651 posts Send private message

 You will be cried down by those not wanting to face reality, but I think you are right.  You can get good property for 30% of what it was going for.  Of course, 30% is still a lot for something which was massively over valued at the time at 500000 or so - but plenty of bargains.  And good value property.  The Costas are already rock bottom, and I am not sure they fall further though average price across Spain might go down again.





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09 Aug 2012 18:06 by Roly2 Star rating in Almeria. 651 posts Send private message

 We found that you dont need to know anyone.  Just show an interest and make an offer!!!  Speaking Spanish increases your options.





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10 Aug 2012 10:53 by trowell1 Star rating. 150 posts Send private message

Hi

I'm finding that reps just say "they won't take offers" , more so when the banks are the owners. lets say a property is 50k and is bank owned and to cover myself for possible future depreciation I offer 38k and try and get a deal to boot, how do I go about it, without the rep/agent.

I do want a property in Spain and will buy, but don't want to end up paying over the odds!

regards





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10 Aug 2012 11:18 by Roly2 Star rating in Almeria. 651 posts Send private message

 We used multipe agents and nearly all indicated that owners would take a big hit over the asking price where this was appropriate.   The bank repos we saw were also open to offers, and if you speak Spanish you can deal directly with the bank - we did not follow up on any offers so cant speak for that.  We did have joy with individual builders (not talking about big players building masses of property) who have been left with what was expensive property on their hands and they are now prepared to take a big hit - and will often throw in extras as well.  Some of these properties are lovely - but maybe a bit big for holiday purposes.





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10 Aug 2012 13:03 by claire T Star rating in Torremendo, Orihuela. 689 posts Send private message

EOS Supporter

It is impossible to generalise about the market here at the moment.  There are banks who have some properties on special offer who will not take one cent less, but the same bank may also have stock where they will accept massive discounts.  A private buyer will only know by making an offer and see what they say.  We had bank properties at around 30% of the original asking price but these tend to sell out very quickly.

It is possible to deal with the banks direct and some are easier to deal with than others - some are very difficult to work with!  It is up to the customer to decide if the services of an agent are worthwhile or not but remember that an agent will be able to show a wider range of properties from different banks and construction companies, as well as from private sellers.

Regarding private sellers, we find that only people who have to sell are putting their properties on the market just now, for obvious reasons.  In our agency we try to get sellers to be realistic about their asking price and that means there is often very little room for negotiation.  On the other hand, there are some agents who will put 20% onto the price, so they can then take low offers.  The best way to check if the price is artificially inflated to allow for low offers is to shop around and see what other similar properties are going for.

There are some amazing bargains around and the best way to find them is to get to know your area and do your homework.



_______________________
Claire



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11 Aug 2012 13:22 by Woodbug Star rating. 371 posts Send private message

 

Good information Claire and a balanced view of the situation concerning property prices. Don’t you agree though, that it would benefit the vendor and buyer if there was an honest and transparent system of establishing a ‘selling price’ as most other countries do instead of relying on an organization who collates ‘asking prices’? Asking and selling prices are worlds apart and simply distort property values so the yardstick used here is an absolute waste of time and of little help for an investor or buyer.
In this market, the value of a property is dictated by what a buyer will pay for it, not what a seller wants for it.
 
Turning to the bank repos, distressed or discounted properties (or whatever description they come wrapped in) – can anyone tell me why there is very rarely, any detached villas or country properties on their lists? I accept there are hundreds of smaller properties on the costal Brit urbanizations on offer, but my question is: Don’t the banks ever repossess any country houses or stand alone villas? If they do then what happens to them?
 
Would there be any truth in the rumour that they are bought for a knock-down sum by ‘those in the know’ (no names - no pack drill here chaps) and then put on the market via certain estate agents, by the new owners at high ‘asking prices’?
 
If a buyer is daft enough to pay an asking price of say 200k and the valuation turns out to be 100k with their lenders only prepared to offer (if he or she is lucky) 70% loan to value, would that not be a total waste of time for all including the estate agents who booked the property knowing that the price was vastly inflated?
 
Recently, two colleagues came to Spain and stayed with me for a couple of days, then went to Costa del Sol to ‘get a handle’ on the property scene. Both are very experienced investors and developers who were on the prowl for deals they could turn. After 2 days they threw the towel in and spent the rest of the week in Marbella clubbing.
 
Besides the many  expletives other descriptive words  used to describe their efforts were;  chaos, rip-off, liars,  amateurs  – these are the guys we need here to soak up some of the thousands of orphan properties and give the stagnant property industry a kick up the a**e.
 
Until sanity, transparency and honesty prevail to say nothing of greed, along with a change or at least a clear national directive of property and construction laws, along with a clamp-down on graft - nothing is going to alter the parlous position we are in.
 
The government needs to understand urgently that there are only two lifelines to the sinking ship, one is property/construction and the other is tourism. Both need to be invigorated immediately whilst it is still possible, but slapping taxes on everything, prevaricating over permitted shop opening hours and sleeping all afternoon is not going to solve the desperate situation. Times have changed – the world has moved on and now Spain must do the same or its game over.
 
Woodbug        (So sad to see his beloved Spain so seriously wounded and can’t do anything to help her)
 




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11 Aug 2012 14:15 by I_Love_Javea Star rating in Gibraltar / Morocco .... 125 posts Send private message

 Woodbug - you have hit the nail on the head. No names no packdrill, but here is how it works in property markets the world over: (This relates to Spain). Investors use whatever means necessary to get inside the system, they are only interested in good properties in very good areas, so this does not apply to properties in Marina Baja on Costa Blanca, Almeria or Northern Costa del Sol, like all areas in the world there are very few good areas for long term investment. People, do not get your nickers in a twist but this is fact these areas where only developed by local goverments and speculators to take easy money of foreigners. If you bought in the last 13 years you will not get your money back with a reasonable return in your lifetime, get over it and get on with your life. "Private Capital" is picking up properties in some areas of the Northern Costa Blanca and Southern Costa del Sol through there connections at prices you would not believe. They are able to do this as they pay well for the priveledge for the correct information at the right time. The information keeps coming as they are willing to buy absolutely every good bargain as long as the price is right and it meets there criteria. This is why you lot never get the real low prices on villa, fincas building plots etc. All you get is the crap that the "Real Money" does not want. It does not matter how cheap you, your friend or mother Theresa bought their property for yesterday, if it was not in the best location in the very few saught after areas, built to a proper standards (97% of spanish building is substandard), then they have still payed to much! Why does the real money buy these properties? I hear you ask. Simples, they are just such good value that most are already sold on before the ink is dry for hugh profit with no risk what-so-ever within a month or so, the ones that do not sell are rented out short term and are returning upto 40% per annum. 

MOST WILL NOT LIKE TO HEAR THIS, BUT THE WORLD IS NOT A FAIR PLACE,  those of you looking for that special bargain, just be happy for what you can find, you will never get anywhere near the best possible price. Just be happy in the fact that you have done your best and do not think about the few who are still making great easy money in the world property markets. 



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11 Aug 2012 14:55 by normansands Star rating in Kent. 1281 posts Send private message

Dear All,

I wonder what happened to the lady member who used to auction properties, if memory serves her last post indicated frustration at sellers not wanting to be realistic on prices.

Also what have valuations become? the valuation companies used to just measure up and value as an insurers rebuild, what do they do now?

Regards

Norman



_______________________
N. Sands



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11 Aug 2012 15:44 by Roly2 Star rating in Almeria. 651 posts Send private message

 There are villas for sale but nearly all inland.   Have a look on Kyero.  Also your average  built for northern Europeans villa even if with 3 beds and 2 baths is generally only about 120 sq mt - so a tad small.  

People are very naive when it comes to any investing.  What you have to always realise is that by the time an investment is made 'known' to us lesser mortals - the heady days have already gone.  Same with the .com boom and emerging markets etc etc etc.  Crumbs from the rich mans table - and like I love Javea says - get over it.   It is what capitalism is and aways will be.  If you do well out of property that is good, but in reality, for most, property should be to live in - or use for a holiday for those who can actually afford it.  

IF you have the spare cash - and I really mean spare cash - it is always good to aquire property, and as long it is in a good place (forget about the build because the plot can be valuable) you will not go wrong in the very long term i.e. you are investing for your children and not yourself.





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11 Aug 2012 18:25 by ads Star rating. 4012 posts Send private message

97% of spanish building is substandard..........goodness there's a statistic that would concern many prospective purchasers (not speculators however).





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11 Aug 2012 19:46 by Roly2 Star rating in Almeria. 651 posts Send private message

 ....and almost certainly not true.     





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11 Aug 2012 19:52 by I_Love_Javea Star rating in Gibraltar / Morocco .... 125 posts Send private message

Obviuosly the ones with real monetary clout are only interested in the top 0.25% of housing stock world wide. We are not intersted in the "average joe's" apartment or 3 bed villa. Houses in Belgravia, Wentworth, St.Georges Hill etc. have all returned excellent growth in the recession. The same goes for good areas in any country. The top 1% have never been richer, live with it, they are always looking for investments in the right place and they certainly are not visiting agents and banks on the Costas, they do not have to. There are specialists here who do all the work for them.



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Shiny happy people - where?




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11 Aug 2012 19:52 by I_Love_Javea Star rating in Gibraltar / Morocco .... 125 posts Send private message

Obviuosly the ones with real monetary clout are only interested in the top 0.25% of housing stock world wide. We are not intersted in the "average joe's" apartment or 3 bed villa. Houses in Belgravia, Wentworth, St.Georges Hill etc. have all returned excellent growth in the recession. The same goes for good areas in any country. The top 1% have never been richer, live with it, they are always looking for investments in the right place and they certainly are not visiting agents and banks on the Costas, they do not have to. There are specialists here who do all the work for them.



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Shiny happy people - where?




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11 Aug 2012 21:30 by ads Star rating. 4012 posts Send private message

And are the top 1% going to soak up the excess of property..... I think not, so where does this leave the Spanish property glut?

I'm with Woodbug on this one "Until sanity, transparency and honesty prevail to say nothing of greed, along with a change or at least a clear national directive of property and construction laws, along with a clamp-down on graft - nothing is going to alter the parlous position we are in."





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11 Aug 2012 21:58 by I_Love_Javea Star rating in Gibraltar / Morocco .... 125 posts Send private message

 Where did I say that the 1% where going to soak up anything, all that is happening is that they are playing the system they control at the expense of everyone else. Look around you, the world is in crisis but the rich are still getting richer at the plebs expense. This is how it has always been and only a rebellion by the plebicite will have a chance of changing it. Get use to being tossed an occasional scrap from the top table to keep you happy.

Sanity, transparency and honesty, you are pulling my leg. The Western world is a dispicable ponsi scheme run on madness, hidden agendas and total dishonesty. We are told the banks are too big to fail and they must be bailed out with our, our childrens and our childrens money. All the stuff you read in the papers about the banks ubderhand deals are just the tip of the iceberg. The top 1% are going nowhere the rest of you are going into slavery.

The spanish property glut is with us for the forseeable future and beyond. Most of the worthless coastal areas where developed by greedy speculators, developed because the land was cheap. Local and regional authorities whose administrators (both elected and civil servants) on all levels where both directors of the banks (mainly cajas) and the development companies or on their payroll  took a slice of all your hard earned cash. 

When I came to Spain 26 years ago, the mark-up on speculative property was between 25 - 37%, this was a great return. Before I retired 4 ago, the return was 150 - 210%. The economics is simple most all paid well over the odds for your properties, now we have excess supply and virtually no demand - go figure!



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Shiny happy people - where?




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11 Aug 2012 22:18 by TamaraEssex Star rating in Colmenar, Malaga. 508 posts Send private message

TamaraEssex´s avatar

 Last month I went into the insurance broker in my village, to insure the house I'd just bought.  Of course his first question was "How much is it worth?"   I told him that nobody could answer that question at the moment - it could be worth anything from a quarter of what I paid for it, up to quadruple.  All I could tell him is what I paid.

But it's not just bricks and mortar, with a simple rebuild value - it's a home.  Priceless.



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 Blog about settling into a village house in the Axarquía. http://www.eyeonspain.com/blogs/tamara.aspx




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11 Aug 2012 22:41 by maddiemack Star rating in Grantham, Lincolnshi.... 194 posts Send private message

You are well-informed, I _Love_Javea.  I suspect you read the same sites/ books and watch the same News Programmes as we do! Having learnt how the world REALLY works, together with the fact that very few people on earth are interested in finding out or trying to change things, what do we do?  I spent a long time feeling very depressed before I accepted there was little I could do and I may as well get on and enjoy the life I have.  What did you decide?  The same?  Is life as one of the 99% easier to bare in Spain than it is in the UK? I'm guessing that you have your family here with you, judging by what you've posted on another thread.  And that's what it's all about for most of us...

 


This message was last edited by maddiemack on 11/08/2012.

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