Price of Sold Homes Up 0.7% Due to Market Volatility

According to the General Council of Notaries statistics for August, with regard to housing prices, they noted a “high volatility” in the market due to the reduced number of transactions and considered that, perhaps for this reason, the price per square metre of homes sold in the eighth month of the year recorded growth of 0.7%, reaching 1,219 euros.

This increase was due to the rising price of family homes sold (32.4%) in a month with very few transactions (3,518 units). However, the price of apartments registered a decline of 10.8% year-on-year, to 1,185 euros per square metre, in line with the trend observed in recent months.

New apartments registered a price of 1,424 euros per square metre (-5%) and second-hand, 1,153 euros per square metre (-9.1%).

Spain is about to come out of recession, so have prices hit their lowest level?

El Mundo reported that the number of house sales registered a decline of 28.1% year-on-year in August and totalled 15,027 transactions. The decline has been driven by the 31.4% drop in the number of purchases of apartments and a drop of 14.8% in transactions for family homes. The number of purchases of new apartments fell by 56% in August, year-on-year, while transactions for second hand fell by 19.5%.

In addition, the number of new mortgages contracted in August registered a drop of 33.5% year-on-year. According to the Notaries, the sharp reduction in the number of mortgage loans is due to the decline in the granting of mortgages for the purchase of a property (-34.9%). Specifically, the number of new mortgages granted for house purchases fell by 35.6% year-on-year, and those granted for other real estate transactions dropped by 28.5%.

Moreover, mortgage loans for construction fell by 31.9%. New mortgage loans for building a home dropped by 36.8% year-on-year, while loans for other types of construction fell by 10.4%.

The average mortgage value for the purchase of a property fell by only 0.9%, to 116,162 euros, and in the case of the purchase of a home, the Notaries noted an increase of 0.4% (to 111,790 euros ). Also, the average mortgage value for loans granted for construction purposes fell by 22.3% year-on-year, to 281,504 euros.

Finally, the percentage of homes purchased with mortgage financing stood at 31.8%, and the average percentage of the home purchase price financed was 76.7%.

 

Article source: Kyero.com

 

Labor reforms fast-tracked

A number of arrests were made

Spain’s new conservative government, led by Mariano Rajoy, have approved desperately needed labor market reforms as part of a drive to revive a failing economy and solve Europe’s worst unemployment rate of nearly 23 percent.

The plans are designed to encourage companies to hire more people by simplifying the hiring and firing procedures and offering tax breaks for employing young people.

However, the fast-track approval of the reforms resulted in violent clashes between riot police and protesters who say they will lose worker benefits.

Spain’s largest union is now calling for mass protests across the country on Feb. 19 in response to the changes.

Ignacio Fernandez Toxo, a spokesman for General Workers and Workers’ Commissions said the reforms “are brutal, they cheapen, facilitate and deregulate firing workers as the government’s only solution to unemployment.”

“We want to raise a clamor in the streets of Spain against the labor-market reforms,” said Sr Toxo, although he stopped short of calling for a general strike.

He added that the reforms “limit the rights of workers but offer no benefits for the people.”

The decree will reduce the cost of an unfair dismissal associated with an open-ended contract to 33 days a year worked, down from 45. More importantly, it will make it easier for employers to justify a fair dismissal with a cost of 20 days. Some economists and business leaders say the high costs associated with dismissal can act as a disincentive to hiring.

Under the new reforms, companies will be able to pull out of collective bargaining agreements and have greater flexibility to adjust an employee’s working hours, tasks and wages depending on how the economy and the company are doing.

Severance packages will also be cut from 45 days of severance pay per year worked to 33 days.

Nearly a third of workers in Spain are on temporary contracts, a huge percentage that makes the country’s jobless rate so volatile. From January 1st, 2013, temporary contracts must become permanent after 24 months. Zapatero’s Socialist government had introduced reforms in 2010 that allowed temporary contracts to run indefinitely.

Taking people off benefits will also provide employers with incentives under the new laws by paying the employer 50% of the unemployment benefit while the employee will continue to claim 25%.

This is sold as a 25% saving for the government. How? Usually when someone gets a job they come off benefits so how is this going to save money? You get a job and continue to receive benefits – surely that’s spending more, not less.

One protester, Cristina Fernandez, waved a placard saying “Every cut mutilates my rights” and said the labor reforms won’t achieve the government’s goals in reducing unemployment.

“To reduce unemployment, you need to create jobs, not simplify firing,” she added.

It seems to me that there is nothing in the reforms for me, and the rest of the workers that keep Spain alive. Only the companies that choose to treat employees like numbers seem to be gaining anything here. They can dump you cheaper and easier than before.  This will do nothing to reduce the unemployment level in Spain. If anything, it will increase the numbers as it’s almost certain that many people who were in secure positions before will now become victims of the new “easier-to-justify-and-cheaper-dismissal” laws.

Spanish mortgage market update – Jan 2012

The New Year has seen little change in the banking environment with just more of the same in the first couple of weeks.

Sol Bank (Sabadell Group) increased margins in January by 0.25% and has told bank employees there is no great desire to lend this year and that there are to be no negotiations on terms and conditions in a take it or leave it attitude.

Lloyds International ES have removed their 5 year interest only product dropping the facility to two years but with very high margins.

The Bankia group have opened the doors technically to non residents after closing them completely but the internal scoring system so heavily penalizes non resident applications that it remains more or less impossible to gain any loan.

La Caixa pulled all mortgages except for purchases at the end of 2011 removing themselves from any level of equity release or self build loans.

A further push on mortgages for bank owned stock has been implemented across the board. This has been highlighted by a survey where one company went to 46 banks requiring a loan for an independent property and in all instances was told no but they could have a loan for one of the banks stock if they wanted to buy one.

Mortgages being provided for Bank owned stock remain far more flexible with very attractive rates but the sale prices being offered remain high in comparison to where the price should be so there is still a big quid pro quo to consider.

International Mortgage Solutions
www.international-mortgages.org

Holiday makers want more than just a break

Spanish culture attracts tourists

Many people buy a property in Spain with the intention of renting it out to holiday makers and while this market is staying afloat it is changing and property owners need to adapt.

This is the opinion of the founder of Campaya Holiday Rentals, Claus Pedersen. He claims that many properties in Spain are set up for tourists who want a standard two-week holiday on the coast, but he added that travellers’ priorities are changing.

He commented that catering for the rental market “may not be enough to make your property stand out and attract the more niche-minded tourist”.

Campaya noted that cultural tourism is on the increase with many travellers more keen than ever to learn about the area in which they are staying and to have a more authentic or traditional experience.

The organisation has advised anyone considering purchasing a property to let in Spain to try and cater for more than just one demographic.

With so many properties for rent on the coast it is important to remember that if you’re property isn’t exactly right, the holiday maker will have a huge choice of other properties that may be. If you want your rental property to be rented then it must be attractive for the holiday maker – not just in terms of size but location, facilities and of course price.

2011 Round up

Merry Christmas everyone!

So it’s here again! Another Christmas on the Costa del Sol.

Although this is my seventh Christmas in Spain I never can get to grips with it. It’s been warm and sunny throughout December and it’s hard to get into the Christmas spirit when it’s not snowing and cold.

There are illuminations hanging in the streets and shop windows are adorned with trees, tinsel and the usual “grotto” displays but with the sun on your back it all feels out of place.

One thing I have got used to is not having to scrape ice off my car windscreen in the morning. Good luck with that my English friends!

2011 Real Estate Market

The real-estate market has suffered terribly during the last few years but has shown some small signs of recovery in 2011, nothing of significance though. It’s been tough for me to write anything positive over recent months, I hope I didn’t bring any of you down!

Some banks have begun lending again, property prices crept up slightly and Spain saw record numbers of tourists.

Spain elected a new leader – Mariano Rajoy – and I look forward to him doing some good work for the country. Let’s be honest, he couldn’t do much worse than Zapatero did! I hope he keeps the tax on new builds at 4% rather than reverting back to 8% and I hope he doesn’t increase property tax, there are rumours that he will, and this would be devastating for an already wobbly market.

Unemployment in Spain rose to record levels this year and urgent action needs to be taken to stop it continuing. A good suggestion I have for Rajoy is to stop charging a “self-employment tax”. In case you’re not aware, if you want to help yourself out of the crisis and take the initiative to start your own business the Spanish government will charge you around 260€ per month, every month, regardless of your earnings. So if you start a business today but don’t earn anything for the first three months you still have to pay the 260€ per month. It’s a stupid tax that discourages new business. There is no justification for it. You still have to pay income tax and social security on any earnings on top of this tax so what is it for exactly?

The banks in Spain are looking forward to a hard year too. They have assets to move, debts to pay and defaulting loans to claim. They have work to do and with government pressure on them to behave 2012 will surely be a year that the banking industry wont forget in a hurry.

My friends in the mortgage world have hinted at some good news coming early in the new year and I look forward to spreading some positivity.

I will also be publishing some interviews in the new year from people within the real-estate market including agents and developers and I’ll try for some councillors too.  If you think you have something to say that is relevant to the market, or you know someone that has, please let me know. I’m always looking for new content and this blog reaches thousands every week (which surprises me!) so send me stuff.

I am on holiday from 6pm today until Jan 3rd so there wont be many posts over the next 10 days. I will try to write some though and if anything important happens I will definitely post. However, not much happens in real-estate over the holiday so don’t hold your breath!

So I wish you all a very Merry Christmas and a happy and prosperous new year! See you in 2012!

Andy

Spanish mortgage market update

Since September 2011 a number of Spanish Banks have implemented new scoring systems which assess client profiles and then produce client specific terms based on the overall risk profile of the client. The scoring systems are developed based on the performance of their back book and often penalise good applications because the client falls into a risk profile of non performers.

This is a change to the way Banks assess and reverts back to the pre boom days where Spanish Banks were renowned for lack of transparency and certainty.

Many Banks now work on this basis and also assess rate linked to products taken. With many life cover is compulsory to gaining an approval and for others life cover is compulsory to gain best rates.

Margins above Euribor have risen over the last two months, in some cases by as much as 50%. This is due to cost of funds and lack of liquidity.

The practice of placing floor rates on a mortgage deed has raised its ugly head again and is rarely explained properly to direct clients when they apply at branch level. Where possible these should be avoided as the rate will never drop below floor rate even if Euribors fall.

Debt to income ratios based on net incomes as shown on tax returns and debt payments as shown on credit files have tightened as 2011 has progressed, and in some cases Banks will only take into account 80% of net income but 100% of debt payments.

A great credit rating in the UK is meaningless to the Spanish Banks – they look at credit files merely to ascertain monthly outgoings and to check whether there any missed or late payments.

Financial assessment is made based on what shows on personal tax returns after deductions, nothing else is taken into account no matter how wealthy or asset rich you may be.

Clients  with buy-to-lets will find Banks assess the full debt payments but not all the rental income if rental income is not declared on tax return or after costs is nil many will not assess the rent coming in at all.. Those with more than a couple of buy to lets in home country will almost certainly find themselves unable to meet any Banks criteria.

Minimum income levels are another area of change for many Banks as is minimum loan sizes and minimum valuation levels they will accept.

Clients in non-taxpaying jurisdictions or living in countries where credit files are not available may find it difficult to achieve above 50% loan to value.

Self build loans, equity release and re-mortgages are scarce on the ground with few lenders even offering any solutions. Those that do have very strict criteria on what is possible and buying a share of a property for those getting divorced or one owner needing to get out has become near on impossible if you need to borrow money above the Banks maximum percentage of the cost of the share being bought.

Document evidence requirements are very high with anything up to 12 months bank statements and three years tax returns required. Failure to ensure clear and concise packaging of an application and full documentation will result in the application sitting on a Banks table going no-where. What has not improved is the Banks ability to be forthright and honest with a client preferring to ignore an applicant than actually deal with what is required.

An experienced mortgage packager will at least ensure that any application is dealt with swiftly even if the answer is not what was hoped for. Direct branch applications often go into no man’s land for weeks.

Poor explanations by branch staff explaining exactly what terms the client will be signing for and also ensuring clients understand these are embedded in a deed and cannot be changed at a later date without extensive costs incurred have made the market dangerous for the uninitiated. Behaviors have reverted to type with the onus put on the client to ask the right questions rather than information being freely and transparently given.

There is now a two tier mortgage system in Spain. Buy Bank stock and  pay more than you should for property but get high loan to values and rates from 0.25% above Euribor or find a good deal independently and expect to put in more cash with rates over 4%.

Either way use a good broker who takes fees on results so you can be sure you know exactly what you are taking on and what the alternatives are. Expect the process to be different to the UK as it is not the same. Do not pass over non refundable monies until you have an approval and for the safest way forward, and to give yourself maximum negotiating power on price of purchase, get an approval in place before you start looking at property.

This should cost nothing, except a bit of your time, never pay up front as there is no requirement for this, but be willing to pay on results. In this market an experienced and good broker will earn every penny of their fees.

International Mortgage Solutions
www.international-mortgages.org

Marbella looking at British, Nordic and Arab markets

Marbella will be attending several tourism fairs this autumn in an attempt to woo the British, Nordic and Arab markets.

Jose Luis Hernandez, Marbella’s councillor for tourism, explained that the plan was to “continue to strengthen the town’s position in countries which are fundamental for Marbella”.

Marbella’s efforts will begin in Stockholm, followed by Malmoe, Gothenburg and Oslo. In both Norway and Sweden the economy has proved to be stronger than in other European countries. The number of people, from these countries, that have purchased a property in Spain has increased by 129% over the same time last year.

“This is a situation we want to take advantage of to reactivate residential tourism” explained Hernandez, adding that the markets have been chosen due to the relevant position Marbella has in each of them.

Marbella will also present at the World Travel Market in London and in five countries in the Persian Gulf area.

Property prices rise in Spain

This summer has seen record numbers of tourists visiting Spain with over 7 million visitors in August – an increase of 9.4% over the same period of 2010. Many hotels on the Costa del Sol enjoyed 100% occupancy over the summer. Figures show Q3 has been very busy with Spanish property prices rising slightly as a result.

According to statistics from Kyero.com property prices in Spain increased from €263,000 in June to €266,100 in September. This could suggest a shortage of quality properties in some regions or simply an increase in demand.

Conti – overseas mortgage specialists – recorded a 7% increase n Spanish property enquiries in August with many agents noticing an increase in enquiries and viewing trips.

Marc Pritchard, of Spanish developer, Taylor Wimpey España, said “The price rises in certain parts of Spain is an encouraging sign for investors with locations such as the Costa Blanca, Costa Calida, Alicante and Murcia experiencing marked price increases. Alicante, for instance, has experienced improvements in its infrastructure, seeing a second airport terminal open, which is always good news when it comes to attracting more visitors.”

Prices in Alicante have risen steadily over the last year. In December 2010 the average property price was €220,000 rising to €231,000 in September 2011, according to figures from Kyero.com.

Surprisingly, with the average price of property in Malaga at €299,500 (September 2011), which is above the national average, buyers do seem to be renewing interest in the Costa del Sol, traditionally a popular area for ex-pats.

Malaga has even been nominated as a candidate for the 2016 European Capital of Culture, which could boost future tourist numbers as well as property sales.

Valuation gap in Spanish property

Spanish property valuations are causing friction between banks and investors.

The Financial Times revealed financial institutions have, on occasion, refused to sell real estate assets because the price offered by the buyer has been considered too low.

Wences Bunge, head of Credit Suisse’s European real estate group, said “Sellers have not adjusted expectations to the new reality. But I believe we are starting to see that reality.”.

Wences also pointed out that experienced investors are staying away from Spain’s property market and he does not expect this to change in the next 12 months.

According to Jones Day in Madrid economic uncertainty is the main reason why buyers may be postponing their purchase.

Meanwhile, delegates at Reuters Global Wealth Management summit were told that property prices in Spain’s coastal regions had reached rock-bottom and that the number or transactions was starting to show signs of recovery.

$1.3 Billion of property to sell this year

It’s not just money worries in Spain now, excess property seems to be an issue and not just for agencies.

Two of Spain’s largest regions, Catalonia and Andalusia are trying to sell $1.3 billion of property by the end of the year as the country tries to slash its budget deficit and spiralling borrowing costs.

In an interview in Barcelona, Jacint Boixasa, director of assets for Catalonia, said “We put the cream of the crop in the portfolios to ensure the sales are completed,”. “Our target is to sell 550 million euros ($742 million) of real estate by year- end, which is relatively little time.”

Spain is keen to avoid the need for a bailout, the likes of which we saw in Greece, Ireland and Portugal, and is planning to cut the nations deficit from 9.2% in 2010 to 6% of GDP. Spain’s credit rating was put on review in August in response to financial problems in the regions.

The authorities in Catalonia are attempting to sell 37 properties one of which is the Barcelona stock market on one of Spain’s most expensive commercial streets, Paseo de Garcia. The government are being advised on the sales by Aguirre Newman, real-estate consultants in Madrid.

BNP Paribas SA were hired in Andalusia to assist in raising up-to 400 millions Euros from selling 76 properties. These include youth centers in Malaga and the cultural department in Granada. Following a sale the government will then lease the buildings at a cost of around 30 million Euros per year, which seems a bit stupid to me!

Off topic a bit I know but my suggestion to the Spanish government would be to cut 10% off unemployment payments, now, today. If you don’t live in Spain you probably don’t know how much “dole” you can get here. The usual is somewhere around 80% of your previous salary. So if you were paid 1000 euros per month (for at least 3 months) you will receive around 800 Euros per month in benefits. So imagine how much is paid out every month! It’s astounding! Where is the encouragement to get back to work? There isn’t any! Many people, I’m sure, get their money and sit on the beach all day because they have no motivation to look for work.*

Cut the money, save some cash and give people a reason to look for work! 2 birds, 1 stone.