With the ongoing financial crisis still affecting the Spanish economy, several autonomous communities are trying to combat the lack of funds by raising several taxes. It appears that Andalusian community has raised several taxes including those on property purchases.
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House price statistics released by the government last week revealed that the average price of property in Spain is now down to 2005 levels. Their figures are based on price per square meter, which currently stands at approximately 1,700 euros.
It appears that foreign investment in Spanish property is once again on the rise. This new wave of investment in probably due to the recent reductions that have been seen in the property market since the end of 2010. Investment in property in Spain surged by 32.8% in the first half of 2011 over the same period in 2010, to 2,445 million euros, according to the Bank of Spain.
As I have previously written, the Junta de Andalucía has been working on a decree which would enable many of the current illegal properties in Andalucía to finally be legalised.
The decree on the illegal properties was meant to have been ready within six months of its announcement back in March but is still not ready and the provincial delegate for Public Works and Housing has stated that will not be ready until November, more than likely December.
Last Friday the Spanish government announced a temporary reductions in the value added tax (IVA), lowering it from eight percent to four percent for any purchase of a new property. The government’s aim is to rekindle Spanish property sales and help reduce Spain’s stock of unsold new homes, which amount to approximately 687.000 properties in Spain, and just over 20.000 in the province of Malaga.
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After the recent article on the decrease of new properties on the market in 2010, I thought it would be worthwhile to review the statistics for the province of Malaga and the Costa del Sol.
By the end of 2010, there were 687,523 new properties looking for buyers on the market, only a slight decrease on a year earlier. Based on current trends, fewer new properties coming on the property market combined with healthier sales last year, it is estimated that it could take between 3 and 5 years to absorb this accumulated stock.
By the end of 2010 the stock of new housing stood at 687,523 properties, a drop of only 0.08% compared to the surplus of 2009, according to the according the the Spanish government . This is the first drop in the level of new build on the market since 2005.
ACCUMULATION OF UNSOLD NEW PROPERTIES
The average price of new housing (non-subsidized) fell 4.7% in the first half of 2011 year on year and 2.3% since December 2010, according to a report by “Sociedad de Tasación”. On average, the price of new properties in the provincial capitals of Spain stand at 2419 euros per square meter in June, with the average 90m2 house valuing at 217,710 euros.
To the rest of the world it became known as the subprime mortgage, but in Spain it is remembered as the “welcome mortgage.” It was specially designed for immigrants in 2005, at the height of the property boom, by Spanish mortgage brokers such as CreditServices. With nothing more than a three-month work record in Spain, these companies offered new arrivals to Spain mortgage loans that covered 120 percent of the value of a property. All the costs, fees and commissions would be covered by the loan, and the buyer would become a Spanish homeowner without having put down so much as a cent. The loans were organized through US companies, none of which had any physical presence in Spain, preferring to use fronts such as CreditServices instead.
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The situation is so severe that the government recently appointed a special overseas property advisor to help deal with it and to better understand the problems of those involved.
As a result, contentious issues such as illegal properties which do not have correct permits, cases where off-plan developments have not been built as specified and the length of time and cost involved in resolving property disputes were recently raised by the British ambassador to Spain with the Andalucian regional government and the Minister for Public Works and Housing.
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Investors bought off-the-plan apartments in a proposed development called Estepona Beach and Country Club, 30km west of Marbella.
In some cases, the prospective owners – many of whom were from Northern Ireland – put down an £85,000 deposit for their Spanish properties.
However, the land still belonged to its original owner and the complex was never built.
An investigation is now ongoing into Ocean View Properties, based in Birmingham, which was the British representative for Sun Golf Desarrollos Immobiliarios SL in Spain.
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There’s one factor more than any other that UK house price bulls use to back up their views. Supply and demand.
There are plenty of variations on the theme. But the general argument goes like this: “We live on a small island, our population is growing, and there just aren’t enough houses to go around.”
And the rebound seen in the market last year simply seems to confirm this view. There aren’t enough houses – so you can’t go wrong with bricks and mortar.
The bulls have got it right in one sense. House prices are indeed all about supply and demand. But it’s supply and demand for credit, not houses.
If you want the proof, just look at Spain…
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