According to reports, Spanish Prime Minister, Mariano Rajoy, has told European officials that the debt reduction target of 4.4% will be impossible to meet and has asked to raise the target to 5%.

Officials said Spain is likely log a deficit of 8% for 2011, two points above its target of 6%. In 2010 the figure soared to 9.3 percent.

Government sources say Spain’s savings and reforms will strengthen the economy, which is still suffering from the bursting of the real estate bubble in 2008. Some say the country will enter a new recession in this quarter after only recently recovering from the recession of 2010.

Today experts are expecting the European Commission (EC) to announce revisions to the eurozone growth forecasts following the implementation of spending cuts, tax increases and job losses across the member states.

Finance minister Luis de Guindos said that Spain’s request to lift its debt targets would not appear unusual because there is likely to be a “general reconsideration of targets across the whole of the EU”.

Cameron and Rajoy outside Number 10

Spanish Prime Minister Mariano Rajoy has made his first official visit to England since winning the election in November and was told that Britain will not negotiate with Spain on the question of sovereignty over Gibraltar without the approval of it’s residents.

Speaking at a joint press conference with Cameron, Rajoy said “We have spoken about Gibraltar and the foreign ministers will continue talking in the future. We have different positions, but we will keep talking.”

However, Mr Cameron was less ambiguous in his comments stating that the British position on the subject “has not changed”. Cameron is in favour of letting the Gibraltarians decide who governs them and will not enter into talks with Spain without approval from the islanders.

In 2002 the rocks residents overwhelmingly rejected a proposal which would have seen Britain and Spain sharing sovereignty over the island.

Zapateros socialist government had put the sovereignty talks to one side preferring to pursue efforts to benefit people on both sides of the Spain-Gibraltar border. The tripartite agreement included the UK, Spain and Gibraltar but Madrid have now rejected it in favour of quadripartite talks.

Other issues discussed by the leaders included Spain’s drastic labour reforms and budget cuts, implemented under recommendation from the EU, which brought 1.5 million people on to the streets on Sunday to protest.

Economy Minister, Luis de Guindos

Economy Minister, Luis de Guindos has called for a “code of practice” to be drawn up for banks to help struggling home owners to stay in their home and reduce their debt.

Speaking in parliament today, Sr. de Guindos called for an end to the “human tragedy” caused when a family is evicted, effectively making them homeless.

“This situation is a human tragedy,” de Guindos said. “The government is very sensitive to the situation created by the large number of evictions which are affecting a large number of citizens.”

“What the government is going to try to do is protect a segment of the population, which because of the economic crisis and as a consequence of the errors of the past, may find itself in a very difficult situation,” de Guindos added.

The minister called for steps to be taken to allow defaulting home owners to write off their mortgage by handing the property back to the bank, sparing them from accumulating further debt.

The code will not be there as a get-out-of-jail-free card for everyone with debt problems. It will be there to provide help for families that fall under a definition of economic exclusion, which has yet to be defined. Those that will benefit are likely to be families in the lowest income bracket, or with no income, and with no additional assets.

Official figures show that nearly 43,000 evictions were carried out in the first nine months of 2011, just under 5,000 fewer than the total for the previous year, which was 47,800.

Over recent months campaign group PAH has staged a series of protests on the doorsteps of home owners awaiting eviction. In a statement the group said a code of conduct was not enough to protect families or provide assistance for those already evicted.

“We do not need recommendations but legislation that guarantees that citizen’s fundamental rights will be protected,” the statement said. It also went on to say that appealing to the good will of the banks with a “voluntary” code would not work because these are companies whose only reason to exist is to get maximum profit from it’s customers.

Luis de Guindos is a former Lehman Brothers executive, appointed by Mariano Rajoy, so I have to wonder how on earth he managed to get a job as a government minister in a country still suffering from the damage Lehman Brothers caused.

At year end the mortgage balance stood at 1,009,656 million euros, the report shows.

In absolute terms, the net decline in mortgage lending was 67.271 million. In December alone it shrank by over 8 million euros, representing a decrease of 0.5% over the previous month. The data confirms the contraction suffered in Spain for the last four years. This is in contrast with growth exceeding 20% experienced during the peak of the housing boom.

By December, 543,766,000 euros in mortgages had been approved by savings banks, 6.54% less than a year earlier. For banks, the balance stood at 374,491,000, a 5.69% decrease from December 2010. Meanwhile, credit unions granted 67.058 million in loans, 4.87% less than the same period last year, while credit institutions account for 13.807 million euros, 36.02% more than in 2010.

With regard to new borrowing there has been a collapse in loans for private and corporate borrowers. According to the Bank of Spain the form of credit that suffered the most was families borrowing for property purchases. During 2011 banks granted 37.525 million euros in mortgages, a figure that is 46% lower than the year before when they loaned nearly 70,000 million.

The association suggests that the downward trend is likely to continue over the coming months, at least during the first half of this year.

In December the AHE predicted that the “turbulent” economic environment in Spain, and internationally, provides an “uncertain future”. However, a broad improvement in credit in the real-estate business is expected by the AHE.

The credit crunch became more severe in 2011, and when the crisis deepened it resulted in difficulties in obtaining finance. It is these circumstances that have reduced the overall balance of the mortgage portfolio which has reduced by 5.7%.

With the crisis continuing the market looks uncertain. On one hand falling house prices and interest rates are likely to increase the number of mortgages, while on the other hand economic pressure and rising unemployment could reduce borrowing.

Mariano Rajoy’s recently elected government has already approved financial reforms in an attempt to “clean up” the banks balance sheets and reduce their exposure to bad loans.

The Priors dream home was demolished

Over the last twenty years many thousands of people have bought into the Spanish dream by buying their dream home in the sun. For many, however, the dream was more like a nightmare and for some it continues.

A British couple living in Albox, Almeria, bought their three bedroom home with a first occupation licence and also the much coveted building licence, issued by the town hall, yet they now face the prospect of watching their home demolished.

The couple had previously overturned a demolition order because they had not been informed of the legal proceedings but now a judge has reviewed the case and said that the licence should indeed be revoked meaning the property could now be demolished.

“The court has again decided that the building licence is null, which under Spanish law implies demolition”, said the couple’s lawyer Gerardo Vásquez.

“The house has a first occupation licence issued by the town hall, is registered at the land registry and has electricity and water. So, in theory at least, it has the requisite paperwork, unlike hundreds or thousands of others in the area.” he added.

The Junta de Andalucia announced a new decree recently to regularise properties built without a licence but this property faces demolition despite being far more legitimate than many others that will benefit from the decree.

The situation is bizarre and not what was expected under the new decree. Sr. Vásquez said “That people who obtained a building licence and have all the requisite paperwork are likely to be worse off than the very many other people who built without such a licence makes a mockery of the whole planning system.”

Obviously the couple are devastated by the news and they plan to appeal the judgement.

British couple Len and Helen Prior watched as their dream home was demolished in 2008. They became the first to see their home demolished under the socialist governments plan to stop the “concreting of the costas”.

Spain sold itself across the world as a place to “live the dream”, and it still does. It’s a shame they don’t mention all the corruption and illegal activity within the local governments which they now blame on the consumer absolving themselves of all responsibility.

Last week, despite having two months to apply for the subsidy it seemed that most of Marbella decided to turn up at the town hall on the same day.

Queues snaked around the office as people waited to apply for a discount on this years IBI bill.

“I’ve no idea when the deadline is but this morning I heard the town hall was going to subsidise the IBI bill and I came straight here”, said one property owner.

Under the new urban development plan (PGOU) a house valued under 100,000 will be eligible for a discount of 10%. A property valued over 300,000 would receive a smaller reduction of 1.5%. The only requirement for home owners to receive the subsidy is that they must be registered on the local population register (padrñon) which the town hall hopes will encourage more people to register. This will mean the town will be entitled to more funding from central government.

Municipal workers were surprised to see so many people arriving in the town hall. “People have found out by word of mouth and that is why the majority don’t know they have two months to apply”, said one member of staff.

Residents have until March 31st to apply for the subsidy and can apply at offices in Marbella or San Pedro, which are open in the morning and the afternoon.

Whilst the Banks have been provided some respite by access to European Central Bank funding at reasonable pricing most are taking advantage of this and then putting the money back on deposit with the Central Bank so using the cheaper funding to help the balance sheet rather than money to lend to ease the credit crunch. This means it has had no affect on pricing with banks continuing to raise margins above Euribor.

Sabadell group have now adjusted margins three times in as many months and last week moved again from 2.20% to 2.40% above 12 month Euiribor for 70% lending. They remain however at the competitive end of the range with most others now only offering 3% plus above 12 month Euribor.

For best rates possible, which is 1.8% above, clients need to drop loan to values to 50%.

International Mortgage Solutions
www.international-mortgages.org

Whilst the decree itself will take some time to implement and will not favour everyone, when everything is finally ratified, or unfortunately for some demolished, it may allow for more Banks to consider giving mortgages for properties that sit on Rustic land, an area that very few banks will participate in presently.

Whilst it will always remain more difficult to mortgage a country property the new decree will remove some of the uncertainty that currently exists and does not allow for banks to consider them as security.

International Mortgage Solutions
www.international-mortgages.org

The 17th Moscow International Property Show

The World of Overseas property will return to Moscow for the 17th Moscow International Property Show on 6 & 7 April 2012.

Firmly established as the leading event in Russia for the overseas property market, the Moscow International Property Show will again attract more than 7,000 targeted visitors to meet with 200+ International Property Participants.

Conveniently held in the centrally located T-Modul Exhibition centre, the Moscow International Property Show is the premier event for the booming overseas property market in Russia.

Created in 2003 as the first specialised event for international property, the Moscow International Property Show is firmly established as the premier event in Russia for overseas property. Held in April and November, this professional exhibition addresses the exact requirements of International participants and Russian visitors, providing a highly concentrated 2-day show in the centre of Moscow.

International Developers and Agents soon recognized the significance of the Moscow International Property Shows and have become regular participants enjoying the professional organisation, friendly service of the aiGroup staff and the exceptional number of targeted visitors.

Whilst primarily a consumer show the Moscow International Property Show also attracts a growing number of Russian real estate agents presenting the International participants with an eclectic cross section of Russian buyers.

Details

Address: Moscow, Tishinskaya sq., 1, building 1, map.

When: 6 April: 12:00 – 19:00 and 7 April: 11:00 – 19:00

Tel: +7 (495) 926-96-95

Email: expo@aigroup.ru

Second Place Expo

Second Place Expo – The only Belgian second home exhibition.

The 12th edition of the Second Place Expo will be held from March 16-18, at Flanders Expo Ghent, Belgium.

This years event is expected to bring over 250 exhibitors showing over 250,000 properties from 25 countries, on over 100 stands.

“The fair is aimed at a very specific audience: the “mediors” (between juniors and seniors). It is usually two-income families (40 +) with higher than average net income and children have left home. It used to be that age group that was more likely to save, but now they want to enjoy. There is also a difference in the type of buyer: those who buy for pure holiday pleasure, others hope to find a spot where they finally go to emigrate and the third group sees the purchase as a pure investment. Just like last year the more traditional destinations such as France, Spain, Italy and Turkey did very well.” [from official website]

The entry price per ticket per person is €10,00, entry for children under 12 is free. If registered through the official website, you will receive a 50% discount (max. 2 persons), the ticket price is €5,00 after registration. Click here to register.

For more information visit the website or contact the exhibition manager, Henkjan Prins, with the following details:

Flanders Expo, Maaltekouter 1, 9051 Ghent (B)

Tel: +32(0)9 241 99 97

Fax: +32(0)9 270 32 56

Email: info@fairsconsult.be

Banks are holding onto their cash

As Spain continues to be gripped by economic downturn, rising unemployment and possible recession bank lending slowed at a record pace.

In December lending fell by 3.3% compared to the previous year, the largest single drop since Bank of Spain records began 50 years ago. Bad loans represent 7.61% of the total, up from 7.52% in November as borrowing considered “doubtful” rose to a staggering 136 billion euros. Five years ago, before the crisis struck this figure was around 11 billion.

Banks remain cautious about lending with the prospect of a second recession slowing the demand for mortgages. Economists estimate the Spanish economy could shrink up to 1.5% in 2012, while unemployment, currently at 23%, is also likely to increase throughout the year and into 2013.

After the crisis took hold of Spain in 2008 many bankrupt developers and defaulting clients forced the banks to add many properties and building plots to their books. It is these bad assets that are weighing heavily on the banks performance figures.

Speaking on state radio yesterday, Economy Minister Luis de Guindos said that the government is currently engaged with the banks to try to reduce the number of evictions being enforced against people who are unable to keep up repayments. Many of the people affected bought their homes before the crash when prices were higher and borrowing was easy. Some blame the banks for irresponsible lending. Others blame the borrowers for borrowing beyond their means.

Protest and help groups have been set up all over Spain to try and prevent more people being evicted from their homes by the banks. In Madrid this week one defaulting borrower was granted a further eight days in which to pay after crowds gathered around his property to prevent the bank repossessing his family home.

Last week, Banco Santander announced that they had set aside €1.8 billion to cover losses on repossessed homes and they now plan to add a further €2.3 billion to this reserve.

Banco Bilbao Vizcaya Argentaria (BBVA) say they will set aside €1.4 billion, which will be added to money it had already reserved before the government regulations were announced.

BBVA made it clear that its good results in 2011 meant it would be able to “entirely absorb” losses in 2012 using this money.

Caixabank also stated it is looking for an extra €2.4 billion to set aside to cover its real estate assets and losses.

Manuel Gonzalez Cid, financial director at BBVA, told Reuters that “These are the strongest banks in the Spanish financial sector so it’s not surprising they can manage the [requirements] through generic provisions or by bringing forward other capital buffers.”

As well as downgrading Spain’s sovereign debt rating this week Moody’s also downgraded Catalunya Banc and Bankia’s debt and deposit ratings over concerns that they are unlikely to meet the requirements for covering real estate losses as laid out by the government.

A shrinking economy

For the first time in two years the Spanish economy shrank in the fourth quarter of 2011, according to figures from the National Statistics Institute.

The GDP shrank by 0.3 percent in the fourth quarter of 2011, compared to the previous quarter, roughly in line with expectations and unchanged from previous estimates.

Many economists fear this is the the start of a prolonged slump as Madrid implements austerity measures to deflate a huge budget deficit. Others suggest the country is about to fall into recession once again.

This was the first contraction since the fourth quarter of 2009.

Year-on-year the economy grew by 0.3 percent in the fourth quarter which is in line with forecasts and compares to 0.8 percent in the third quarter.

RBS economist Nick Matthews is hopeful that some countries in the euro-zone will avoid another recession but thinks Spain may find it difficult to avoid.

“Given the need for fiscal consolidation in the country and the pressure that puts on domestic demand, it’s going to be very difficult for Spain to avoid recession,” he said.

Since Spain entered the euro-zone 12 years ago they have been steadily growing but much of the growth was due to the housing explosion fuelled by cheap loans and since the market crashed in 2007 the country has struggled to maintain momentum.

Exports were the only sector to show growth in Q4 although this is slowing because many of the countries trading partners are seeing their own economies stagnate.

Overall the economy grew by 0.7 percent in 2011 compared to a fall of 0.1 percent in 2010.

Paying more?

The National Statistics Institute (INE) have released figures showing you are likely to be paying more rent now compared to  the same time last year.

According to the figures the average rental cost in Spain increased by 0.8% in January, compared to the same month in 2011.

This increase is 1.2 points under the overall CPI, which was at 2% at the start of this year.

Only two regions saw rental costs come down – Navarra and Murcia – both falling by 0.4%. Andalucía saw an increase of 1.1%, slightly lower than Catalonia and Asturias who both saw an increase of 1.3%. The largest increase was seen in the Basque Country where rents increased by 1.6%.

Regarding costs for house maintenance prices rose 1.6% year-on-year, four percent less than the overall CPI, and remained stable in December 2011, El Mundo reported.

The decree, passed in January, will come into force at the end of February and town halls will then be able to immediately implement changes with the process taking around three months.

At a conference in Malaga this week Gloria Vega, Secretary General  of Territorial and Spatial Planning, explained the process to town hall officials “with the objective of applying the same criteria across the whole of Andalucía”.

Many thousands of illegal properties in Almeria and the Axarquia will benefit from the decree. However, it is thought that only around ten percent of similar properties in Andalucía will benefit.

It is suggested that most properties will be “recognised” by town halls following the changes which will entitle them to connect to services such as water and electricity while around ten percent of properties will not be recognised and will be subject to demolition.

Another downgrade for Spain

Ratings agency Moody’s have once again downgraded Spain’s government bond rating, this time from A1 down to A3, whilst placing France, Austria and the UK, on negative outlook. The UK is facing the prospect of losing it’s precious Aaa rating.

One of the main reasons cited for the downgrade is the “uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.”

Moody’s say that weak prospects can complicate the implementation of austerity measures and structural reform that are needed to promote competitiveness.

Further reasons for the downgrade include Spain’s poor fiscal outlook which is being exacerbated by a large deficit in 2011, mainly due to budget overspend by Spain’s regional governments. Moody’s is sceptical that Mariano Rajoy’s new conservative government will be able to meet the targeted reduction in the budget deficit, leading to further increases in the public debt ratio.

The Spanish economy is close to falling into another recession and the pressure will be further increased by the need for even stronger action to meet the deficit target. A renewed recession will also negatively affect the profitability of Spanish banks at a time when they are being asked to clean up their balance sheets.

Spain saw it’s  GDP contract by 0.3% quarter-on-quarter in Q4 of 2011. Moody’s now expects Spain’s GDP to further contract by 1%-1.5% in 2012. This is in contrast to forecasts from just a few months ago when low but positive growth of around 1% was predicted.

Moody’s say they are maintaining a negative outlook on Spain’s sovereign rating. This reflects the potential for a further decline in economic and financing conditions as a result of the continuing euro-zone debt crisis. The report also says that Spain’s outlook “could be stabilised at the current level if the wider euro area situation were to be resolved conclusively.”

Full report from Moody’s: Moody’s adjusts ratings of 9 European sovereigns to capture downside risks

Faced with mounting losses, Spanish banks have reduced new lending, which the National Statistics Institute in Madrid said fell 35.8 percent from a year earlier in November, the 19th straight decline. The bad loans to immigrants are also complicating a push for Spanish banks to recognize greater losses on real estate they accumulated during the crash and driving buyers from the 182 billion euro ($240 billion) Spanish residential mortgage-backed securities market.

“Deals with a significant portion of foreign residents, whether immigrants or vacationers, are double no deals for me,” said Alexander Fagenzer of Union Investment GmbH in Frankfurt, which oversees 120 billion euros. “Incentives for those borrowers to keep paying are significantly lower than for Spanish residents,” and that’s “key in a country facing high levels of unemployment and declining housing prices.”

Source: Business Week

Spain's beaches attract investors

Despite the continuing crisis and much negative press buying a property in Spain is still considered to be a wise move by some experts.

A Place In The Sun editor, Liz Rowlinson, said there has been a noticeable shift back to countries like Spain and other established markets as they are seen as a safer investment than other emerging markets.

Ms Rowlinson went on to say that Spain is currently one of the best places to buy as prices have fallen “so much that it’s now within people’s budgets”.

“[Spain] still offers all the things that make it our favourite holiday destination”, she explained citing amenities such as golf courses and beaches, as well as the climate as the main reasons Spanish property remains popular.

Also in the last few days Robin Haynes of Currency Index noted that British buyers considering purchasing real estate in Spain could now take advantage of the strength of the pound against the euro. He explained that investors could get up to eight per cent more for their cash when buying euros, compared with July 2011.

Reforms are "unconstitutional"

Following the announcement of new labor reforms last Friday unions have said they consider parts of the reforms to be “unconstitutional”.

Union leaders met with the Minister for Employment, Fátima Báñez, on Monday where both Ignacio Fernández Toxo (pictured right), Secretary General of the CCOO, and Cándido Méndez (pictured left), Secretary General of the UGT, heavily criticised the reforms, describing them as “unjust, inefficient, lacking solidarity and degrading”.

The changes to employers options for dismissal are not a way to help workers but to facilitate sacking them which, the unions say, could be unconstitutional. “This is a reform which is going to destroy a lot of employment in the short term,” Sr Toxo argued with agreement from Méndez.

Méndez went on to say that “From a working point of view, this is an erroneous route, an unjust and very dangerous way to overcome the crisis situation in our country. It’s useless for resolving the problem of unemployment”. He also alleged that the motive for the reforms was financial and not to create jobs.

Although the union stopped short of calling for a general strike a calendar of stoppages has been prepared and new action “will depend on the concerns of the workers.”

The first action will take place in Madrid on Sunday, at noon, between the Plaza de Neptuno and the Puerta del Sol.

Finance Minister, Cristóbal Montoro, agreed that the labour reforms will not create jobs without credit becoming more widely available. However, the CEOE employers organisation are a little more optimistic saying “The workers and the businessmen have won, Spain has won”.

According to Arturo Fernández, CEOE Deputy Chairman, the new legislation puts Spain “close to the most advanced European countries”.

Responding to the unions comments Mariano Rajoy’s government has said that it is willing to take part in further discussion with the unions to “improve” the legislation.

Despite a good start to the year when sales figures showed a slight increase the year finished with 17.7% fewer sales than the previous year.

The total sales figure stood at 361,831, with 49% for sales of new properties and 51% for resale properties. This is a decline of 19.7% (177,236 transactions) for new dwellings and a decline of 15.7% (184,595 transactions) for resales.

In 2011, the total number of property transfers recorded in the land registries per 100,000 inhabitants was highest in the Autonomous Communities of Castilla y León (7,428), and La Rioja (6,839).

In Andalucia there werea total of  255,554 property transfers which represents 3,881 per 100,000 inhabitants. Overall 60% of the countries merchantings of dwellings were in the regions of Andalucía, Comunidad de Madrid, Comunitat Valenciana and Cataluña.

Of the total transfers in Andalucia 72,412 were for the transfer of dwellings, much higher than Madrid which followed with 49,194 transfers. Valencia was next with 48,198 transfers, and Cataluña with 47,118.

Nationally there were an average of 960 transfers of dwellings per 100,000 inhabitants.

You can see the full report here: Statistics on Transfer of Property Rights Year 2011 and December 2011.