Property Rental Prices Lowest Since Crisis

The cost of renting a property in Spain has fallen by an average of 239 Euros since the peak of 2007, according to analysis by property portal Fotocasa.

Pre-crisis the average cost of a rental property in Spain with an area of 80m² was 810 Euros, or 10.12 Euros per m². In February 2016 the average price had fallen to 571 Euros, representing a 29.6% fall over the last nine years.

Rental costs lowest since 2007

Beatriz Toribio, responsible for fotocasa studies, said “Renting a home today is almost 30% cheaper than in 2007, but in the last two years we have seen rental prices have begun to recover due to growing interest and increased demand since the crisis erupted. This explains why owners are increasingly reluctant to lower prices and closed 2015 with the highest increase (3.6%) in the history of fotocasa’s real estate index.”

By Community

The autonomous community that registered the largest fall in rental costs was Aragón where rental prices have fallen an average of 349 Euros over the last eight years. Prices in the community peaked in June 2008 at 10.85 p/m², or 868 Euros per month for a property of 80m². The fall is 40.3% with the same example property now costing only 519 Euros per month.

Conversely, Castilla and Leon has seen the slightest fall in prices over recent years. The average reduction in Castilla and Leon is 81 Euros since its peak in May 2008 when an 80m² property would cost 532 Euros to rent. In february this year the cost stood at 451 Euros.

High / Low

During February this year the most expensive part of Spain to rent a property was the Basque Country where the average rent is 813 Euros. Here, prices have fallen by 13.5% since the peak, an equivalent value of 127 Euros.

The cheapest place to rent a property is Extremadura where the average cost to rent an 80m² property is 358 Euros. This area saw its peak in June 2008 when the average price was 443 Euros. February’s costs represent a reduction of 85 Euros, or 19.2%.

By Province

When looking at the rental prices across the country’s provinces, Huelva recorded the largest fall. Prices in the province have fallen considerably since their peak in May 2007. Back then, a rental property would have an average monthly rental cost of 851 Euros. By February this year this cost had fallen a massive 43.9% to only 478 Euros per month for an 80m² property.

The lowest fall by province was recorded in Palencia. Here, property rental costs, while still cheaper than they used to be, have only fallen by an average of 38 Euros over the last nine years. Renting a property in Palencia in February 2016 would have set you back an average of 438 Euros, 7.9% lower than prices in 2007 when the average stood at 475 Euros.

 

Decline in Home Resale Prices Slows For First Time Since Crisis

The average price of a second-hand home stood at 1,762 euros per square metre at the end of the third quarter of the year, maintaining the same value as in the previous three months, and slowing for the first time the continued decline recorded since the beginning of the crisis, according to the latest report prepared by fotocasa.es in conjunction with the IESE business school.

Specifically, this price stabilisation contrasts with the results of the previous quarter (-3.8%), and breaks the chain of 24 consecutive quarters of declines registered in the price of second-hand housing since the crisis erupted in September 2007.

In monthly terms, Diario Sur reported that the price of used homes fell by 9.4% in September compared with the same month of 2012. However, this data presents a moderation of the year-on-year declines of previous months, when they registered decreases of up to 11%.

The report’s house price analysis shows that nine regions registered increases in the price of second-hand housing in the third quarter. Specifically, increases were noted for Valencia (1.3%), the Canary Islands (1.2%), Castilla-La Mancha (1.1%), Cantabria (0.9%), the Balearic Islands (0.6%), Madrid (0.6%), Murcia (0.3%), Aragon (0.3%) and La Rioja (0.3%). In contrast, prices dropped in the other eight regions, with the steepest decline being registered in Extremadura, of 2.5%, and the smallest in Catalonia (-0.2%).

Prices for all types of housing dropped down slightly in the last three months of the year, (by between 0.1% and 0.3%), except for those of the larger properties (of between 150 and 300 square metres) which rose by 0.4%.

Article source: Kyero.com

Swinging back towards Greece

The European Central Bank

In the summertime when the weather is fine euro leaders take their break so after six months during which the unwelcome financial spotlight had shone on Spain, it swung in late August back towards Greece. It was not that investors no longer had any concerns about Spain, more that they find it difficult to panic about more than one thing at a time. With most of Europe – and most European political leaders – on their summer holidays investors recognised that there could be no realistic expectation of anybody doing anything to move the situation forward until September.

Mario Draghi, the president of the European Central Bank, did his best to improve things in late July. At a speech in London he said the ECB would do “whatever it takes” to preserve the euro, “and believe me, it will be enough”. A week later he reiterated his position after the monthly meeting of the ECB governing council. The Bank and the EU bailout funds would, together, apply their theoretically unlimited spending power to support the price of Euroland sovereign bonds, thereby lowering borrowing costs for Spain and Italy.

Investors were quite impressed by the strategy and the euro strengthened in early August. In the space of little more than a week it rose by nearly three cents against the pound and by a cent and a half against the US dollar. But then it all went cold. In the following fortnight the euro made no further ground against the dollar and it fell back by two cents against the pound. In late August the euro was a cent and a half higher against the pound and two and a half cents higher against the dollar than its position a month earlier. Compared with its levels at the beginning of June the euro was unchanged against the dollar and two cents weaker against the pound.

As they have during most of the last couple of years, investors are paying more attention to the political manoeuvrings in the euro area than they are to the minutiae of economic data. As long as the figures announced are within shouting distance of analysts’ forecasts they tend not to make waves. Only a handful of times have off-base ecostats sent currencies adrift.

On one occasion Germany and France reported better than expected figures for economic growth in the second quarter of the year. Investors became excited that Euroland as a whole might avoid a negative reading but it was not to be; euro area gross domestic product shrank by -0.2% in Q2.

At another time, Britain managed to deliver, on successive days, three sets of economic data that exceeded analysts’ forecasts. Inflation, unemployment and retail sales were all more positive than expected for the pound. Sterling went up on the news but was unable to hang onto its gains. Latest news also confirmed that the UK was far from recovering as UK disappointed with the release of data on public finances and factory orders. Unexpectedly public sector net borrowing went up by .6bn so the UK wants its people to spend more!! Not sure where the money is going to come from particularly when you consider UK banks are considering charging you for the “benefits” you get with your UK bank account.

So investors spend their time watching Brussels, Madrid, Frankfurt, Berlin and Athens for hints of what might – or might not – be coming next. In the immediate future they will be keen to find out whether Prime Minister Antonis Samaras can persuade Euroland’s movers and shakers to relax the repayment terms for Greece’s bailout borrowings.

The next scheduled big deal is the ECB governing council meeting in Frankfurt on 6 September. Having been wound up to expect overwhelming force from the ECB in support of Spanish and Italian government bonds, they will be looking for something serious. Experience suggests they will probably not get it, and that Sig Draghi will simply restate his master plan with a warning that national politicians must get on with their budget reforms and banking union. That same experience also suggests a meek response from investors, who have become accustomed to living on a diet of jam tomorrow.

Moneycorp – costadelsol@moneycorp.com or telephone +34 951 319 700

More companies moving away from risky Spain

Once fruitful Spain is now seeing a business exodus

As the crisis continues to pull Spain further into debt more and more companies are taking steps to reduce their exposure to the struggling country.

Financial services group ING Groep NV reported a 22% fall in second-quarter net profit as it took a hit to cut it’s exposure in Spain.

Separately, Swedish security services group Securitas AB said it may take steps to terminate more contracts in Spain following significant cuts to unprofitable contracts in the first quarter, and fears that some Spanish customers may be unable to pay their bills.

There is already much speculation surrounding where the Spanish economy is going and if Spain will require further financial aid from Europe and steps such as these will only intensify concern.

Securitas and ING are not the first to cite Spain as a “risk” or to distance themselves from the country. Last week the International Consolidated Airlines Group, which owns British Airways and Iberia, said it has already started taking steps to prepare for the possibility that Spain could leave the Euro entirely.

ING said they reduced their exposure to Spain in response to the worsening crisis to “reduce the funding mismatch in that country.” Last month the company cut it’s total exposure from 41.1 billion euros to 34.9 billion through selling covered bonds and residential mortgage-backed securities. As a result of this ING said they made a loss of 234 million euros.

Spain “is going through a massive reduction in government spending, which is having an impact on the economy at large,” ING Chief Executive Jan Hommen said in a statement.

What the Eurozone crisis means for the Spanish insurance market

Guest post by Daniella Bradley.

By now, the financial crisis affecting the Eurozone is not a new phenomenon. Thrust into a deep recession following a widespread failure to regulate the banking sector sufficiently, Europe is now feeling the very worst of a fiscal slump. Unemployment levels have hit new highs and people across the continent are being squeezed by colossal government spending cuts and fundamental changes to benefit and pension plans.

Whilst the entire population of Europe has been forced to tighten their belts and keep an eye on their wallets, the financial crisis has hit different countries and populations with varying velocities. Much of the news coverage for the Eurozone crisis has focused in particular on Greece, Spain and Portugal but the effect have been further reaching than the media coverage perhaps suggests.

The focus on these nations’ economies has been predominantly due to the relative instability of these regions. Particularly high levels of national debt and unemployment have not only threatened the stability of the Eurozone as a whole but have led in each case to mass demonstrations on the streets of these nations’ capitals.

The impact of the crisis on country risk within the EU

What has happened in Spain (and a number of other prominent Eurozone economies) over the past few years builds a classic case exemplifying a considerable and sudden change in country risk. With widespread civil unrest, pending changes to the regulation of the nation’s banks and the strength of its currency bearing an indeterminate future, investment is Spain is no simple matter.

While the country risk assessments of the majority of European countries are stabilising, political events in Greece, Portugal and Spain continue to upset country risk. In findings published by Euromoney Country Risk, Spain now sits above only Greece, Portugal and Ireland. Fortunately for the Spanish, their economic and political future is now looking to harbour a greater amount of stability than it does for the Greeks.

Positive steps

In a race to reach a consensus before the forthcoming Greek elections, the Eurozone’s finance ministers have met once again this week to discuss Spain’s economic future. The expected forecast will be for an injection of money into the Spanish economy and an extension on the country’s current target for a reduction of their budget deficit. A change to the regulatory system governing Spain’s banking sector is also expected.

While the troubles of the Euro currency itself extend beyond Spain’s borders, the currency’s strength is involved in a two-way struggle with the Spanish economy – each to some extent affecting the other; hence the efforts to cushion the country’s economy coming largely from outside the nation itself. Needless to say, the fate of Spain’s economy is an interest which reaches far beyond the country itself and finds its root deep into the Eurozone.

The relevance of the crisis to Spain’s insurance market

The role of an insurance market within a country experiencing the trouble seen today in Spain is not one which fits in as one might expect. While many sectors will be seen to contract in an economy which is struggling to find its feet, insurance activity can often flourish.

Insurance is an industry based on risk – something which a great many Spanish business owners are sniffing out by the truckload. As uncertainty permeates the Spanish economy during the Eurozone crisis, this could well prove to be a prosperous time for the Spanish insurance industry.

However, with continued efforts by the Spanish government and other Eurozone countries to stabilise and promote growth within the Spanish economy, the outlook for Spain is looking better than it has done for some time.

Unlike Greece, whose economic future remains uncertain, Spain is beginning to reach concrete deals with key players in Europe’s economy. It would, however, be wrong to suggest that Spain’s recovery would in no way be affected should the elections in Greece fail to satisfy either the criteria set out by other Eurozone countries for a Greek bailout or the demands of various popular movements within the country which have been rapidly gathering momentum.

Contingency plans have, however, been laid out by the insurance industry (http://www.bbc.co.uk/news/business-18226128). Planned around a multi-currency settlement, the insurance industry hopes to hold on to the lifeline of these plans. Despite having resorted to the consideration of such strategies, the outlook in the industry remains positive.

Concerns within the Spanish population remain high, yet their economic future is looking more stable than it has done for some time. This is good news for the insurance industry – a potential disparity between the perceived risk and its reality. Whereas insurers in Spain will have taken a sizeable hit when the crisis first became apparent, the prospect for the industry looks promising once again.

Interpreting risk

The real relevance of the financial crisis to the insurance industry comes back to risk and an assessment of the health of Europe’s economies. Indeed, if Greece leaves the Euro, if the Euro fails or if successive governments around the continent fail to provide comprehensive, fair and realistic spending plans, the insurance industry will take a huge hit along with the rest of Europe. An understanding of the state of the insurance market is therefore impossible without a thorough understanding of the stability of the economies within which insurers are working.

The steps taken by Spain’s government and financial ministers from across the continent are promising. Relatively speaking, the most recent developments in Greece look promising for Spain, too. Those at work in the insurance industry have to recognise signals such as these and implement strategies which can work in countries such as Spain based on them. Staying abreast of the latest insurance market news offered by experts-Lloyds of London is therefore of paramount importance.

Daniella Bradley is a financial journalist.

The Spanish financial crisis and long term loans

Guest post by Amy Harris

Mayhem in the Med

The Spanish financial crisis can be traced back to 2007, but there is no doubt it has worsened in recent months. The usual financially sound country was forced to ask for a bailout from its European neighbours.

Of course, Spain is not the only country to be affected, Greece also needed a bailout after coming close to bankruptcy in 2011. Long term loans had a big role in what resulted in a major financial dilemma for Spain.

The Spanish Housing Market

80 per cent of the Spanish population own their own homes. The governments of the 60s and 70s encouraged Spaniards to buy their own houses even offering them tax relief on their mortgages.

Demand for houses from 2003 onwards was high and over half a million new houses were built in 2005. Banks began to offer 40 year mortgages and recently even 50 year mortgages were available. Spaniards and foreigners alike flocked to buy properties in Spain.

Property Bubble Burst

With the economic downturn of 2008, the property bubble burst and Spain was one of the worst hit countries. The long term mortgages that seemed a good idea just a few years previously suddenly started looking like a risky move. If people defaulted on their mortgage, banks were unlikely to reclaim all their money.

Construction came to a halt and businesses were going into liquidation all across the country. Indeed, Spain had the worst figures for the drop in property sales in the whole of Europe between 2007 and 2008. Sales for this period dropped by over 25 per cent compared to the previous year.

European Impact

Although long term loans were not offered across Europe, the continent soon felt the force of the Spanish financial crisis. Indeed, in 2010, the UK section of the Spanish bank Santander announced loses of 8.5 per cent. This loss was attributed to the bad loans of the bank’s home country. Europe had to sit up and take notice or there was the real possibility that the whole Eurozone could be pulled deeper into the financial wilderness.

The Solution – Europe’s Bailout

As was the case with Greece, the governments of the Eurozone had to bail Spain out with significant loans. In June 2012, it was agreed that Spain would be given a rescue loan of 100 billion Euros, which would be funded by the Eurozone. It was hoped that this substantial amount of money would enable Spain to recover from the crisis and stabilise. A stronger Spanish economy would then sure up a weak Eurozone.

The Spanish financial crisis is by no means over and, the future still remains uncertain. The bailout provided by the Eurozone was only agreed in June so it is impossible to assess its impact so quickly.

What is evident is that Spanish lenders must learn from the past and show much more caution in offering long term mortgages – just as British lenders have learned their lesson from handing out 95 to 100 per cent mortgages.

Whilst the Spanish economy’s future is uncertain, it is hoped that a general Eurozone recovery, together with the large bailout, will allow Spain to once again become the strong stable economy it used to be known for.

Amy Harris is a writer for FinancialTraining.co.uk – which helps British and international students find the right financial courses in London and the UK. Amy is an American expat herself, and enjoys helping people with their careers and financial advice.

Spain and the Euro

Will the Euro survive?

Headlines such as “Catastrophe in Spain”,”the worst since Franco times”, and “pain in Spain” have been the main focus during the last couple of weeks and of course, it in turn generates fear and uncertainty so the euro and its currency has taken a bit of a battering. It is worth however reminding ourselves of what has been happening elsewhere.

In the UK, the inflation report for May did not make particularly good reading as the Bank of England’s main forecasts went against them. They had to revise downwards the economic growth number for 2012 from .8% to 1.2% and retail sales also hit a rough time in April as they fell to its lowest since 2010. On the plus front unemployment fell to 8.2% and inflation also fell so a bit of welcome news for all. We also know that the Bank of England decided inflation was still one of its main issues so at this moment decided against further money printing.

Looking at the eurozone we have seen lots of conflicting data and whilst some has been negative there is always a balance. The Purchasing Managers’ Index (PMI) fell for the 4th consecutive quarter due to weaker business activity and new orders, manufacturing also fell to unfortunately near a 3 year low. The eurozone did however manage to avoid a recession but data suggests that the next quarter will be much more difficult. Germany once again being the lynchpin for the zone as unemployment fell, bond yields all time low and retail sales figures rising for the second month, sounds like the good ole days!!

There are two main areas of concern right now and that is, what will happen at the forthcoming Greek election and what impact that will have on the euro. Will they stay or will they go (must be a song in here somewhere) and of course Spain and the ever deepening saga over its banking strength. The latter highlighted very much by Spain’s 4th largest bank Bankia which need a capital injection to keep it going and whilst the Spanish government stands very much behind it and wants to help, how it is going to find around 19 billion euros is still the main question. Bond yields in Spain have also been perilously high and the rate now seems to be settling around 6.5% a huge price to pay for raising money. Rumours are also out there that Spain will need a bailout of around 100million euros to keep it alive, sounds a lot on money and of course it is but remember it wasn’t that long ago that the British taxpayer had to foot the bill for the Royal Bank of Scotland and that alone cost around 45.5 billion or c60 billion euros. Lets see if Spain will accept the suggestion from the ECB that it should accept a loan package.

Going forward the key issue will be trying to restore confidence in the eurozone and its currency so that investors feel they do not need to switch to dollars. It seems also that the EU has learnt a little from history in accepting all comers into the euro as it has recently advised 8 countries under review that none meet the required standards for entry.

Impact upon exchange rates has been considerable as the euro has lost ground against both sterling and the dollar or put another way, your pound is now worth more euros.

If you want to know more contact Moneycorp by emailing costadelsol@moneycorp.com or telephone them on +34 951 319 700

Can the Euro survive the crisis?

Guest post by Jimmy Kane

There is a crisis of confidence in the Euro

A wide-ranging survey of public opinion found Tuesday that there is a wide dislike of the Euro, but there is little desire to abandon it. The contempt was brought through the debt crisis that has ravaged Europe for the best part of three years.

Pew Research Center, who conducted the survey across eight European Union countries (among them, Spain, Greece, France and Italy), learned that the regions financial woes were the catalyst for full-blown fears about the future of Europe’s economic climate.

Pew said in a statement accompanying its survey, “This crisis of confidence is evident in the economy, in the future, in the benefits of European economic integration, in EU membership, in the euro and in the free market system.”

In spite of these wide-eyed concerns, Pew discovered there was no desire for those countries that use the euro to return to their former currencies, such as the Spanish peseta or the French franc.

Greece, called by many the epicenter of the debt crisis, revealed 71 percent of those polled want to keep the euro around, as against the 23 percent that wish for a return to the Drachma. Most people in Greece, which is now its fifth year and counting of restless, violent recession, believe the euro is doing more good than bad. 46 percent of those surveyed said so, compared to 26 percent who thought the euro was a curse, rather than a blessing.

What makes these finding so important involves Greece’s upcoming polls on June 17, which many see as a referendum on the country’s euro membership.

In contrast, most in France, Italy and Spain think the euro has been more destructive than helpful. In Italy in particular, which has the second highest debt burden in the eurozone after Greece, 44 percent of Italians surveyed think the euro has been a terrible thing, compared to the mere 30 percent convinced it was benevolent. Italy is also filled with the largest anti-euro constituency, with around 40 percent of those polled wishing to resort back to the lira. 52 percent of those surveyed still want to keep the euro around.

Of the five euro countries polled, not a single one had a majority (that is, over 50 percent) that agreed the introduction of the euro has been beneficial.

These surveys were conducted either by telephone in some countries or face-to-face in others between mid-March and mid-April, with at the very least, over 1000 people surveyed in each region. The margin of error varies from country to country, but stays at about 3.3 percent to 4.4 percent.

Jimmy Kane is an avid traveler and Spanish real estate hobbyist. When he’s not traveling or studying the Spanish property market, he maintains the website Time Warner Cable Dallas.

Spain’s crisis will be over by 2013

“light at the end of the tunnel” – Jaime García-Legaz

This year will be “the last of the crisis” in Spain and there is “light at the end of the tunnel”, according to Spanish Secretary of State for Trade, Jaime García-Legaz.

In an interview with Spanish radio network, COPE, García-Legaz also said that if government plans to raise VAT went ahead they would also lower social security contributions to restore the balance.

He was keen to point out that along with the government many of Spain’s biggest companies are also predicting growth in 2013 along with the International Monetary Fund who now forecast that Spain’s crisis will be over by next year.

This doesn’t mean an end to spending cuts or austerity measures though and García-Legaz stressed that cuts “will have to follow” and that Spain must “persevere” with them if it is to meet deficit targets and it’s commitments to Europe.

“If we do not comply, we will lose the confidence of international investors. It is therefore essential to continue with the adjustment of public spending,” he said.

If Spain is to see growth then spending cuts must be implemented, the minister added, saying that at this point Spain must understand that more spending does not bring economic growth. Growth, he said, “will not come from expenditure, but from structural reforms”.

In the event of  a VAT increase the minister said social security contributions would be rolled back as compensation and that this was a measure that the business sector had been discussing for some time.

“This is what is called fiscal devaluation. If we lower the contributions and they are offset by the VAT, the cost of goods will lower. It is a gain in competitiveness for our products and without a doubt that is something that we need”, he said.

Spain will survive the crisis

Spain will not only survive the crisis but will come out of it “strengthened”, according to Luis de Guindos, the Spanish Economy Minister.

“Spain is a country that has made mistakes in the past and accumulated imbalances. It is now in the process of correcting all these problems”, de Guindos said, talking to German newspaper Frankfurter Allgemeine.

He went on to say that “We will put our budgets in order. Our government, elected four months ago, has an absolute majority in parliament and a clear mandate for savings and reforms. With this we will succeed.”

In response to questions regarding the 25 billion euros in budget cuts recently announced he said that financial consolidation is inevitable, “The previous government left us with a deficit of 8.5% instead of the 6% forecast”.

“We must therefore make further efforts even in the midst of a recession, and we must restore confidence, especially in the Spanish economy. That means not only reaching a deficit of 5.3% this year, but 3% in the coming year. We are committed to that goal”, the minister explained.

De Guindos once again stated that “what we are doing is absolutely necessary. Spain currently has a funding problem. If the markets do not see consolidation then state funding could get more expensive. And that could lead to difficulties in the private sector also. Therefore it is essential to control the deficit.”

Although there were mixed reactions to the Spanish budget amongst EU members de Guindos is convinced that “the markets will react positively when they have studied our budgets in detail”.

Furthermore De Guindos recognises that 2012 will be a difficult year for Spain but “it will also be the year in which we will lay the foundations for recovery. The government is aware of this and does not want to raise false expectations for this year’s forecast. It will be hard with less growth and, unfortunately, more unemployment. But we will be laying the foundations for a better 2013.”

While recounting the first 100 days of the PP government de Guindos pointed out that he had approved a law of stability which “applies to all: central government, autonomous regions and municipalities,” and had approved labour market reforms which would “change the system largely responsible for high unemployment.”

“Therein lies the weakness of our economy,” said de Guindos referring to the countries huge unemployment figures which are likely to increase slightly this year before dropping in 2013.

De Guindos announced further steps to improve the struggling country including “reform of public services, especially health and education.”

He also mentioned reforms within the banking sector that “will get rid of the weakest” and will mean “a much healthier financial sector with fewer, but stronger, banks.”