No Money? No Problem!

Published on 8/14/2007 in Buying Process

Many people are bemoaning the current state of the Spanish property market but like every market experiencing a period of adjustment a whole range of opportunities arise. Clearly prices are now at a more manageable level and entry into what was otherwise the domain of the rich and famous is now even more attainable.

With developers discounting their properties to compete in the current market conditions, many shrewd investors are taking advantage of the situation in Southern Spain, utilising finance packages which will cover 100% of the purchase price and, in some cases, even cover all the purchase costs and taxes. This is made all the more interesting when you consider that just 6 months ago you needed a minimum deposit of 30% of the purchase price plus an additional 12 – 14% to cover purchase costs such as VAT, stamp duty, lawyers fees etc..

So what does this all mean to the average person in the street looking to buy an overseas property?

Now everybody has the opportunity to invest in one of the more established markets of Europe with little or no capital. Compare this to Bulgaria where although property per square metre is much cheaper you still need a hefty deposit averaging between 30 – 50% of the purchase price, plus the additional purchase costs usually in the region of 23 – 25% (sometimes less, though the 20% VAT is often hidden in the purchase price). There is always a reason for price variances from region to region, the UK is a very good example of this, and the fact is that Spain is often more expensive than other alternative “emerging markets” can clearly be attributed to the advanced infrastructure, enviable climate, coveted lifestyle, spectacular scenery and chic cosmopolitan resorts.

In recent years, however, the region has experienced unprecedented levels of investment, both in the public and private sectors. Major schemes presently underway, or on the drawing board include the expansion of Malaga’s international airport and seaport, the extension of the coastal railway from Malaga and Fuengirola to Marbella and San Pedro, a state of the art marina at La Cala de Mijas, the scaling up of various other yachting harbours, the arrival of the high speed AVE train from Madrid and of course, Disney drawing up plans for a possible park on the Costa del Sol which could transform the area’s tourist industry.

With flights to Malaga airport from the UK alone averaging over 60 arrivals per day, an average of 320 days of sunshine and the highest concentration of golf courses in mainland Europe it is also no wonder that the rentals market is also very buoyant.

To recap, the opportunity now exists to buy a fully financed property in, what is still the number one destination of choice for overseas homebuyers in the UK, with little or no deposit and attract some of the highest weekly, monthly or long term rentals in Mediterranean Europe.

Professional investors buy when share prices are low; not when the market is at an all time high.

Written by: Lee Mockler

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Shay McDowell said:
Wednesday, January 8, 2014 @ 9:39 PM

Shay McDowell · Real Estate Investor... San Diego, CA. Americas' Finest City* ... at Soon to be self employed
I am SO LUCKY...That God has Been Good to US!
Antonio...I am in Hope that We ( you and I can become Billionares !! ) All for the recovery of Economy and Good it Does to the Nature of Man.

2014 to be a Promising Year to All ( Love, ) Espana~ !!
And , Its Tourism, Food , Customs, Costumes, And Flamenco ... On to India, China, And EU where we can even Buy ( with coaxing ... ) Castles , and Retail Properties to continue in the same Investment pattern which will promote Tourism and a ( clever ) Reminder : :
THAT ; Second ... is NOT BAD in Business ... Allowing Governance to enbue its Children with Reverance and Respect from Regents ( decree*, ) and keeping a cycle and frequency of WORK ( ethic ) in The LAND where it Belongs. . . This is a Good Time to be BORN... Green Earth and Technology are at an
apex of Development ... now if we can TURN the minds of Man and Promote the Ovaries of Woman we will be in GOOD SHAPE ... ( Px / Rx )

No IS a ( Good thing ! ) : : Noel.
Reply · Like

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Jayuin Kim said:
Sunday, November 11, 2012 @ 5:15 AM

I am searching profitable property including land in spain.

As korean businessman, I have imported construction materials from europe.

E-mail :

1) beach & downtown area
2)convenient transportation
3)profitable property
4)rental fee guarantee
5)many facilitation

frank D said:
Thursday, December 9, 2010 @ 1:39 PM

best analysis i have heard in a long time... right on the button. well done sir.

allan said:
Thursday, September 23, 2010 @ 3:37 PM

100% mortgages spain are a repeat of the sub prime scam which took off in florida around 10 years ago, agents for spain spew lazy buzz words like "bank reposessions" and "guarantee" but simply care not a jot!! - we still go by the office title "the punter"

Step 1 - even if you do find 30% from your own pocket these properties are still overvalued by 20% on both the current market price and the real developers total investment cost.
the developers profit is still 20% on the (total outlay) ie. what the banks lent him in the first place to purchase the land and pay the builder, fees etc. (ie they are selling a 2 bed duplex for 100k + and the investment outlay cost is only 80k!!!! how do i know? - well im a quantity surveyor and in my past life i worked as a director in a major construction investment company who made these property deals happen all over europe. in the inner circle i would hook them all into it, banks, private individuals, planning authoroties, solicitors the lot - had enough of the greedy animals and escaped before they killed me with champagne!

get on the plane walk around and look at similar properties, new and almost new, same M2 area and bigger, i was on the murcia coast last week, they are 20% cheaper than quoted in thes deals and you can easily push down a seller at least another 10% without trying too hard. they may be lived in (once) so what! get them to throw in the furniture for free! be aware the market is full of them (a glut) and they are not not not selling so why pay 20% more than an already inflated sensetive artificial market price?

Step 2 - developers and investment institutions, 100% finance is unregulated sub prime lending and they can double interest rate demands overnight as the sub prime mafia did in florida 10 years ago sparking a total property value collapse. they start you at 2.7% just to sign you. then they start to squeeze you until you hurt bad. their finance company is off shore so the spanish government wash their hands of it - previous writer is correct you cannot pay back early and will be tied into 20 to 30 years of an interest bill. valuations and solicitors fees are overinflated to get a dodgy one who will sign.

spain is not the problem here. spain is very nice. these costas developers still have a grip on the place though thankfully their small operator offices are dissapearing overnight. its the big institutions that are strangling spain. i am not talking the individual gangsters who cashed in on spains property boom and disappeared off shore with the dosh, beware more the big boys - the investment funds, pension funds, solicitors, barristers, doctors, life assurance companies, and indeed the rainy day high street building socities trying to punt financial products in their shop windows.

shareholders in said institutions and banks are jumping like bees in a hive which has been whacked hard with a very big stick!
they must be able to pay for the new range rover and private education school fees now!! - and they are not happy.

all that is happening here with these deals is that one greedy animal gets paid off and then you get the privilege of of another unregulated greedy animal who will eventually come knocking on your door for a bit more. sales agents use the word "bank" with the photos, makes it all sound above board but these mortgages are very murky. the spanish government turn a blind eye as they are afraid of their cosy jobs - due to the massive unemployment monster in the construction industry. by the way - look out for more of these murky deals emerging, market forces dictate that the fat man at the top of the pile must have his greed satisfied. all you need is a country where the government will let you away with it!!!!!!!

yes many are trying to cut our loss, get what we can and get out, which means that market price is still very unstable. owners who cannot sell or rent are still handing back their keys daily, which makes price even more unstable. mayors now refusing to maintain roads, foul sewers, flood defences, clean beaches etc - the recipe for price volatillity is still there. i heard the rumor - one dream complex in murcia is closing its pool in october - for good! - what does that tell you about price stabillity?

bad for some who have lost the dream and sadly lost money, but stay well clear of these 100% finance deals or you will join them. these deals represent a false artificial market price.

there is a glut in spain. the greedy big animals want to squeeze more and will not let go - and more importantly - will not let the market self correct. these animals should be forced to close down, instead of engaging in tactics to try and correct their share price. they got enough fat out of spain over the last 10 years.

if you bought and moved there enjoy the sun even if your property is worth nothing as it may never sell in your lifetime. if you are servicing 190k interest only on a 7th floor backstreet flat that you cannot rent - here is a tip - get the key and tie it round a large brick and walk in the direction of your sales office. let the fat cat take the hit for their greed. life is too short for buckets of stress

also press your alarm bell when you hear the del boy term "rock bottom price" this is an agressive, threatening sales term used by someone who is desperate and stupid enough to think they are the sales smart ass!

aruna said:
Thursday, October 18, 2007 @ 8:48 AM

Articles of this type gives the southern Spanish property market a bad rep. First his statement:

"This is made all the more interesting when you consider that just 6 months ago you needed a minimum deposit of 30% of the purchase price plus an additional 12 – 14% to cover purchase costs such as VAT, stamp duty, lawyers fees etc.."

If you read one of the comments above, you will see that, in fact, this is exactly the other ay around as far as reputed banks are concerned. Most Spanish and international banks, like Barclays and Ing have increased the margin to 30% from the 20% they earlier offered - they will now only cover upto 70% of the purchase value rather than the 80% coverage offered a few months ago.

What the writer did not mention is that these 100% finance packages are being offered by the developers or the investors themselves at exorbitantly high interest rates, generally at least 2.5 points higher than any comparative bank rate. Also the repayment options are fixed at 30 years and over with high penalties for early repayments. The end result - on a month to month comparison of real money going out of your pocket for cheap 130,000 euro flat, about 250 to 300 euro difference when benchmarked to averaged bank lending rates.

I live in Costa Calida and every day see the Alquila (for rent) signs going up around me and not coming down. Polarisworld, the largest property developer around here has intensified LOCAL advertising, indicating they are finding it harder to attract their bread and butter foreign - UK - buyers. The market is tottering and the advice should be proceed with care, not to go in for the developer get rich quick schemes.

colettepaul said:
Saturday, September 22, 2007 @ 12:08 AM

Could prove to be very misleading comments. Interest rates have gone up over the past 23 months. Highest rates now since 2001. Competition for rental income is high and will only increase. All major banks recently stopped 70% mortgages in favor of 80%. That should tell you their concerns. Sad facts are you can borrow 100% but this will over stretch too many people. Be aware!

ashish said:
Saturday, August 18, 2007 @ 3:09 PM

The agent claims to have a discount from the developer - hence the 100% mortgage after valuation (although valuation fees seem excessive and not refundable). I have a sneaky feeling that the properties are overvalued, hence the 100% mortgage deal. I have chosen a property - OK to choose my own lawyer and contact the Banks recommended to see details of the deal. I am genuinely interested in a decent 'turn key' package and not one without furniture and lights. See what happens.

ashish said:
Wednesday, August 15, 2007 @ 1:21 PM

I have contacted this agent - apparently completed properties with 100% mortgages already available through the banks. He said he would send me an email with details of prices etc. etc. Waiting for this and once available will write back. Call me cynical, but I assume that the prices and charges probably unfair.

Rational said:
Tuesday, August 14, 2007 @ 2:32 PM

Where's this guy coming from?
What valuer worth his salt is going to value seriousñy above the sale price, particularly in a depressed market.
A situation which would result in embarrasing questions from the lender when the borrower falls into arrears and repossession is contemplated.

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