Spain hit by property crash fears

[reddevil]

A recent BBC article - just one of the many down-beat predictions recently.


Fears of a Spanish property crash have increased, prompting a sell-off in real estate shares and fanning concerns that thousands of Britons will lose money.
The sell-off was triggered by worries of rising bad debts and speculation that one large company had been buying its own properties to keep prices high.

Spain is one of the main destinations for Britons looking to move abroad or buy a holiday home as an investment.

Analysts warned that a crash could spread to the wider Spanish economy

Spain's economy has been growing strongly in recent years - the government recently raised its forecast for this year to 3.5% - driven mainly by expansion in the construction industry.

Coupled to this has been strong demand for housing helped by the low interest rates that have also underpinned consumer spending and allowed households to take on increasingly large amounts of debt.

However, in recent months cracks have started to appear and mortgage demand has slowed as homeownership levels topped 85%.


The country is over-housed, households are over-indebted and the construction industry continues to churn out houses
Lombard Street Research

On top of that, households now have some of the highest debt levels in the eurozone, much of which is based on variable lending rates leaving consumers open to sudden increases in borrowing costs.

The worry is that should the suspected property bubble burst, and some analysts estimate that house prices are overvalued by 30%, then many other industries such as banking and retail would also suffer.

Spain's government and construction industry figures tried to calm fears on Wednesday, stating that the fundamentals of the property market remained solid.

Economy Minister Pedro Solbes said that the country was not in a "worrying situation".

He argued that the outlook for household earnings, and as a result their debt repayments, was steady because there "are good prospects for employment".

The chairman of Astroc, the Spanish property firm at the heart of the recent market wobbles, has also said that the fears are unfounded.


There had been reports that Enrique Banuelos, the chairman and majority shareholder of Astroc, had bought properties from the company and rumours that a large shareholder had sold out.

However, Mr Banuelos said that there was no "determining reason" for the sell off that has wiped more than 60% off the value of the company in the past six days.


Analysts warned that while the current fears of a crash may be over amplified, the Spanish property boom that had provided strong returns for the past eight years was probably over.

"The country is over-housed, households are over-indebted and the construction industry continues to churn out houses," said Lombard Street analysts in a note to clients.

According to Lombard Street, the biggest problem facing the market was over-supply of housing. Industry estimates show that more than 800,000 new homes were built in Spain last year, four times the number in the UK.

"That is not good news for UK investors in Spain," said Diana Choyleva of Lombard Street.

"We have had over-investment on a gigantic scale and it has already started a slowdown in house price growth," she explained.

"We will definitely see house price growth stop and falls in nominal prices are likely in Spain over the next 12 to 18 months."

[Mouse]

Another interesting article Red Devil - thanks.

The country is over-housed, households are over-indebted and the construction industry continues to churn out houses

for me that statement says it all. I don't know about the rest of spain but here, for years, we've been asking...who's buying all these apartments?
They're over-priced and soaring well out of the reach of ordinary folk. For example, a studio apartment here (thats around 30sqmtrs) is now €150+
A friend who works in a bank dealing with mortgages tells me she has had to take out a 35 yr mortgage to afford a 2 bed flat.

Meanwhile...the polititians and architects get rich, along with their families who all seem to be 'developers' and the a beautiful island is slowly being concreted over.
At times I dispair...and it makes me very sad.

Whilst I would suffer along with others in a property crash...I feel its the only thing that would stop them in their tracks and bring a sense of normality back.

Sad Mouse
x

[Guest3]

I don't know about the rest of spain but here, for years, we've been asking...who's buying all these apartments?

We've said exactly the same thing on the CdS! Since moving here in 2001 we've seen a dramatic change to the scenery!
All the 'green' areas in Torreblanca (or anywhere along the coast in fact) have been built on with huge ugly developments.

As you drive along the coast road cranes seem to be standard in any scenery photo shot down here!

[Mouse]

Its awful isn't it BP that all those green spaces have gone.

the really sad part is that I don't think the Spanish appreciate that people don't want concrete everywhere when they go on holiday.
They should have learned from the 70's

Mouse
x

[Partridge]

Whilst I would suffer along with others in a property crash...I feel its the only thing that would stop them in their tracks and bring a sense of normality back.

Couldn't agree more Mouse. Luckily where we are they are only allowed to build low rise and on about 30% of the land but the prices have been climbing stupidly. Having said that, the CDS is supposed to be having a hard time but where we are properties have fallen around 20,000 euros from the end of last year. I think downturns in the market always affect holiday homes first, which is why I'm keeping a close eye on things over in Spain, those ripples may spread closer to home.

[Mouse]

I think downturns in the market always affect holiday homes first, which is why I'm keeping a close eye on things over in Spain, those ripples may spread closer to home.

wise words Party!

And its good news that in your area of Spain at least they seem to be restricting development. Here you have to own 15,000 sqmtrs of land before you can build a house on it IF its in the country.
So - on the surface that seems good. But what is happening is that the urban areas (where you only need 500sqmtrs) are becoming like a building site. Our village for instance has changed so much just in 2 yrs due to the architect (who is close to being jailed) giving approval for the most ridiculous schemes.
2 years ago when you approached the village the main thing you saw was the lovely old church. Now its a horrendous block of flats...that, guess what...are so expensive they've only sold one!

i was looking on a website yesterday at property in Alora (quite a popular place I hear) anyway there were quite a few houses up for sale with announcements that the price had been dropped.
2 yrs ago it was 'booming' according to a woman I was corresponding with at the time.

Perhaps the developers are getting to the top of the peak in some areas?

Managed construction will help us all in the long run.

Mouse
x

[Big Sis..]

http://property.timesonline.co.uk/tol/l ... 712024.ece

[Guest3]

There is an oversupply of apartments in popular coastal areas so the owners of these properties will suffer.�

We could see it coming!
I just feel sorry for the people that have bought an apartment down here with the 'sales feed' that renting will pay their mortgage!

[Partridge]

I just feel sorry for the people that have bought an apartment down here with the 'sales feed' that renting will pay their mortgage!
_________________

Thank goodness I knew that in 2003 before buying, still damned annoying though

[davey2187]

Lets be honest, has anybody noticed the difference apart from reading about it. We have bought 2 properties, 1 off plan and 1 key ready, we are doing really well on booking. Even now properties are being priced well for mortgage purposes. If in a position to mortgage just the price of purchase and you can afford that mortgage there should be no real problem. Those that perhaps take most of the mortgage valuation in a mortgage loan perhaps should take greater stock of the situation. Sadly we are all in different situations and have to adapt suitably

[Partridge]

Lets be honest, has anybody noticed the difference apart from reading about it

Yes, in our area properties are selling for around 15 to 20,000 euros less than last year on re sale and this is the Costa de la Luz which is supposed to be the 'hot' new area of Spain.

I think what Crystal and I were getting at is that properties are sold with promises of huge capital growth and a healthy rental return. In other words, it is always irrelevant if you want it and can afford it BUT if you are after investment, then chances are by the time you add up all costs of buying, selling, interest, running costs and then offset that against your rental income and sales price (especially if it has recently gone down), then chances are there would be no 'real' profit, investment wise.

Horses for courses

[davey2187]

Hi yes I agree, if for only investment then perhaps think hard about it

[Big Sis..]

Hi All

Two articles that you might find interesting

http://business.timesonline.co.uk/tol/b ... 595909.ece


http://business.timesonline.co.uk/tol/b ... 719183.ece

[Donna P]

Thanks for that Big Sis. Food for thought indeed.
I bought my apartment instead of paying into a pension plan so I aim to keep it for the next 20 years. Hopefully things will be sorted out by then in the housing market.........?

Donna x

[Alan Knighting]

Many parts of the Spanish Costa’s have suffered from over-development for years. Stories of “gloom and doom� have come and gone but the over-development goes on unabated. One would have thought it all must stop at some time but when? I guess the answer is when sufficient Brits are persuaded that "investment opportunities� in places like Croatia and Albania are more trendie and therefore more attractive to them.

Those who bought a property as a permanent home or as a long-term personal holiday home will have little interest in the fluctuations of the property market unless they currently want to sell.

Those who bought a property as a pure investment, who treat a property as nothing more than a trading commodity from which to take a profit and currently want to sell might well be concerned.

Fluffy