Tag Archives: Spanish property market

Only 28% of families have a mortgage on their Spanish property

If you live in Spain and you are paying a mortgage, you may believe that everybody else is doing the same. Think again. The Spanish National Institute of Statistics has published figures showing that more than half of Spanish households (namely 50.7%) own their property, which is free from any mortgages.

Only 28.5% of families do have a mortgage on their main residence, down from 31.9% in 2008. This decrease may be due to demographic change but also to the financial crisis which has restricted bank lending to families.

However, in 2001 only 22.8% of families lived in a mortgaged house. The increase between 2001 and 2008 was a reflection of the credit boom.

In any case, these data confirm that Spain remains one of the European countries with the highest percentage of households who choose to buy, instead of renting, a home: 79.2 %, compared to the EU average of 60%.

Therefore, only 14.5% of households pay rent on their mainb residence , of which 2.5% pay lower “social” rents.

Although the preference for buying property is widespread throughout the country, there are certain differences by regions. The two archipelagos and Catalonia are the territories with higher percentages of rented properties. In the Balearic Islands , “only” 65.9% of households own the house they live in – still higher than the European average.

 

Barcelona’s 16th International Construction Fair opened with optimism for Spain’s economic recovery

The XVII Barcelona Meeting Point (BMP), an international construction fair held at the end of October in the Catalan capital, opened with widespread optimism for Spain’s economic recovery with eyes firmly set on the arrival of foreign capital, especially from China and Russia.

At the opening of the fair, the Secretary of State for Transport and Housing, Rafael Catala, said that in the second quarter, Catalonia had reported a 12% increase in real estate transactions, with a significant increase in foreign investment. “We begin to glimpse a new economic scenario” – he said, adding that he hoped that future editions of the fair would confirm this trend, making true the wish recently expressed by Prime Minister, Mariano Rajoy, that real estate and construction would “re- occupy an important place” in the Spanish economy .

The Secretary of State, who defended the government’s measures to stimulate the sector and facilitate access to housing, stressed the importance of activities associated with the rehabilitation of homes and improvements in energy efficiency, given that Spain has 6 , 5 million buildings that are over 50 years old.

BMP’s chairman, Enrique Lacalle, himself predicted that this year will be a good one for the “great influx of international funds , which timidly started to come last year and this year are coming in massive quantities” .

Nearly half a million homes could be incorporated into the Spanish rental market by 2016

Nearly half a million homes, mainly of new construction, could be incorporated into the rental market between now and 2016. This is the “prudent” calculation made by Arrenta, a large Spanish company especialised in rentals.

These 500,000 newly available homes would represent an increase of two points in the rental rate in Spain, which would increase from today’s 17% to 19% – still far from the average of 38% found in Europe’s richest countries.

The high number of empty homes left by the economic crisis in Spain is one of the biggest problems for its economy. Renting these out would be a great formula to start incorporating these vacant properties into the market.

This half a million homes could be further increased by a trend that has already begun in some coastal areas, of property investors buying newly built properties at very competitive prices in order to rent them out and thus obtain attractive returns on their investment.

 

The latest figures for property prices continue to show a descent, but…

The latest index prepared by Tinsa, Spains’s largest valuation company, estimates that in September 2013 the average property price continued getting cheaper at a rate of 9.2%. Thus, since reaching their peak values​​, houses in Spain have suffered an adjustment of 39.1% overall. However, as we have stated in previous posts, the reality is very varied if data are analysed per region and/or per market segment, and Mallorca and Ibiza’s high-end properties continue to behave significantly better than average, proving to be somewhat immune to the general Spanish market.

Most expensive house in Spain is in Mallorca

House prices in Spain have been falling since the housing bubble exploded a few years ago. However, the luxury property market does not seem to have been affected by this fall. “El Cielo” (“Heaven” in Spanish) is the most expensive property currently for sale in Spain, with a price tag of  57.5 million euros, and it has not only not lowered its price, despite having now been on the market for seven years, but it has actually recently risen it by 15%.

nuevo precio para la vivienda más cara de españa

This villa is located in Mallorca, on a hill-top location in the bay of Alcudia, with views that dominate the whole bay and the surrounding countriside and mountains. It has 3,500 square meters, eight bedrooms, and its own helipad and yacht docking.

So if you have that kind of money lying around and fancy owning a Bond-villain type of Mediterranean villa… this house may be perfect for you! Contact us for more details.

You can view more photos of this property at the foot of the article published in Idealista.com:

http://www.idealista.com/news/archivo/2013/03/20/0594233-la-casa-mas-cara-de-espana-sube-de-precio-fotos

Some facts you should know before buying property in Spain.

Borja Mateo (www.borjamateo.com) is a real estate expert and author who believes many people misunderstand the property market, which leads them to make the wrong investment decisions. He recently published an article in the Diario de Mallorca answering some basic questions about the current state of the market. Here we summarise his most interesting points.

The current state of the market can be gathered from the following facts: Prices of real estate have fallen around 48% since their peak. There are between 6.1 and 8.5 million properties which are either empty, under construction or in the rental market. The annual demand for new housing is of 130-170 thousand units, so the existing housing stock will be enough for many years. Current prices still do not reflect this over-supply reality.

“The area in which I am interested is different” This is a common mistake. The drop in real estate prices affects all areas to a greater or lesser extent. Reduced access to credit and the high supply of properties are relevant factors currently affecting all areas. It is true that some areas are less affected than others, but it will be dangerous to believe that a particular area is completely immune to drops in prices.

“Banks are going to start lending soon and prices will skyrocket”. Reality is quite different: banks are not going to go back to previous lending levels anytime soon. The Basel III reform, which has greatly affected the credit market, means in practice that much less credit will be available for families in the near future.

“Lowering the price any further would be like giving the property away”. False. No property owner thought prices would drop like they have, but it happened. Prices that seem bargains today, in a few years may be considered expensive. It is a fallacy that prices will not go any lower. Only when the number of property transactions has recovered strongly we will be able to say that prices have bottomed out: for this to happen, we think prices have to come down even more.

“Nobody is going to sell a property at a lower price than the one they paid for it”. These days, buyers and tenants have the upper hand. The over-supply of rental properties is pushing prices down. Lower rents mean lower property valuations, as their potential rental yield is factored in. This underlying conditions are not going to change for a while.

“The property is being sold at cost price”. The fact that the price of land has dropped by 80-100% from its peak, means building is now much cheaper than during the housing bubble. Therefore, it is perfectly feasible that the current market price of a property is now well below what it cost to build.

“Nobody is going to want to sell at a price lower than their mortgage”. Many people would happily sell just to cover the amount of their mortgage -just ask those who have been evicted. Today’s prices are 20% lower than last year’s, and more expensive than they will be in twelve months’ time.

“In my area, no one needs to sell, so prices will not fall”. An unemployment rate that may reach 28% in 2013 affects everyone. Prospective buyers demand discounts. As general supply increases and demand decreases the decreasing-prices dynamic intensifies.

“The bank is financing it, so it has to be a good investment”. Mortgages are great business for banks: buyers are offering a large asset (the property) as guarantee, plus their own personal guarantee (all their present and future assets), plus often those of a guarantor.

“After a cycle of drops in house prices, there must come one of rising prices.” In the current situation, with an existing house stock that exceeds 63 times the annual demand for housing, this cycle could perfectly last for 20 years since 2006.

“Why rent when you can buy. Renting is throwing money away”. In the same way that rent is an expense, so is the payment of interest -and much more so when it comes to acquiring an asset whose market value is falling. If we compare Mr A who buys a property with transaction expenses of 7%, a decrease in prices of 10% over the next 12 months, and a mortgage at 1.5%; with Mr B, who rents an equivalent property paying a rent priced at 3% of the property’s value, we can see how only during the first year, Mr A has lost 14.3% of the purchase price while Mr B loses only 3%.

So, as a general comment, the best thing now would be to wait as much as one can before buying or renting (or to sell as soon as possible) as prices will fall further in the foreseeable future. 

 

 

Sixth year of falls in the number of Mortgages in Spain

The number of mortgages formed in Spain has fallen for the sixth year and 2012 by a massive 32.7%, according to the national institute of statistics.

Unfortunately, this is a very clear indication that the Spanish property market is still in a desperate situation and is likely to continue to be for the foreseeable future.  This is 32 month of consecutive falls.

 

 

BNP Paribas Real Estate thinks that 2013 will be a “particularly favorable” year to successful investing in the Spanish property market

There is always some room for optimism. At BNP Paribas Real Estate they beleive that 2013 will be a “particularly favorable” year to successful investing in the Spanish property market. Although “current levels of uncertainty have distracted attention from some international investors”, BNP said that Spain has “ten strengths” that make  investing in Spanish real estate a very attractive option, according to their ‘Guide to Investing in Spain’, a handbook aimed primarily at international investors which offers a list of reasons to opt for the Spanish property market. Among these, the price of real estate, from residential and commercial to hotels and plots, is particularely relevant, as it is at its lowest levels in recent years. At BNP Paribas Real Estate they beleive that this fact represents “a unique opportunity” to successful investments with returns in three to five years, as the economic recovery pushes up prices.

The report also argues that after years of low returns, the main markets of Madrid, Barcelona and Valencia are offering stable income. Furthermore, the guide assures foreign investors that Spain has a legal framework that favors them, as Spanish law has moved towards market liberalization, and reforms have been undertaken in the labor market and the financial system that are atracting investors’ confidence and increasing competitiveness.

 

Property sales in Spain rose 3.6% in 2012

Property sales in Spain rose 3.6% in 2012 over the previous year, to a total of 361,631 operations, according to the Ministry of Fomento.

Only in the fourth quarter, 132,609 homes were sold in Spain, representing an increase of 76.1% over the previous quarter and 23.5% over the fourth quarter of 2011.

The increase in VAT as of January 1st 2013, which in the case of property transactions rose from 4% to 10%, probably acted as a stimulus for the property market.