Last week a spokesman for the opposition party, Partido Popular (PP), said that it is to take the case to the Prosecutor in Malaga to clarify how this development went ahead “without adjustments to the 1995 General Urban Plan (‘PGOU’) being given approval.” The PSOE, the party which leads the Mijas Town Hall, has issued a statement saying that they would study the case but that it occurred “outside the current council’s time.”

“We just don’t know what is going on,” says one British resident who didn’t want to be named. “It’s a worrying time for people who own properties here as there are all sorts of rumours going around. Everyone pays their taxes and complies with all the regulations… and it is not the residents’ fault the authorities didn’t get their act together in the first place. Now we’re stuck in a kind of limbo.” Her neighbour, a Swedish tenant says, “The Parties are using where we live, our homes, as a political football. It is not fair.”

According to the PP, those responsible for the situation include the former Mayor, Agustín Moreno, the then Town Planning Councillor, Luis Vasco, and the department’s current leader, Juan Cruz, who they accuse of being an “accomplice.” In addition, the party claims the Junta de Andalucía “turned a blind eye” and “ignored their town planning supervision duties.”

“We invested nearly everything we had buying our place here and we’re really, really worried about what will happen next. It was meant to be peaceful retirement home for us; it was a long-standing dream and we’re not sure of anything any more,” says the British home owner. “It feels like the wind has been taken out of our sails a bit.”

“We’ve not had any problem with the contracting of the utility services, like water or electricity, so I cannot understand why, all of a sudden, this is coming up,” says the Swedish proprietor in Calahonda Royale. “Why are they doing this now? Maybe it is part of large-scale plan as there may be other places nearby in the same situation. If they’re doing this to us here, they should do it to everyone or it seems to be victimisation. But I love living here and want it all sorted.”

Source: Sur in English, March 5th to March 11th 2010 author: George Prior

source: Mijas property

Many of the current property searchers are cash buyers, or only require a small mortgage and are primarily looking at holiday homes mainly with the idea of using them during the holiday months, if they have children, or in low season if they have no children living with them.

As an interesting change many appear to have previously lived or rented long term within Fuengirola and know clearly what they are searching for.

Of course many are still looking for what they see as bargains, so are understandably looking for the best offer possible. But of these property hunters have healthy budgets and unlike last year, vendors are more open to listening to offers.

According to TINSA, a respected property valuation company, prices along the Mediterranean coast (Costa Blanca, Costa Tropical, Costa del Sol, etc…) are from July 2007 to July 2009, down 16.5%. But to clarify, this does not reflect current prices, simply the value that TINSA has given to the average square metre built. Current asking prices by owners are generally down but the figure varies greatly due to location, qualities, etc…

As a rule of thumb many estate agencies are quoting that prices are down anything from 20 to 50% down on asking prices. But again these are meaningless figures as in the past many agencies would quote a high sales price for a property simply to get the listing, or simply let the owner set the asking price. In both cases this simply helped flood the market with overpriced properties.

As it stands now, although prices in Fuengirola have held up reasonably well compared to many other areas, the average price per square metre in Fuengirola now stands at 2,250 euros per built square metre. But please note this is an average figure with higher quality, garage, pool, etc… raising the price.

The reason why Fuengirola has felt the property crisis to a lesser degree than certain other areas is due to the following. First it bypassed a lot of the property invest craze as there were fewer newly built properties and due to the fact that it is a well connected town with both road and rail lines leading out of the town. Although not a large town, with 8 kilometres worth of beaches, being quite flat as opposed to being on a slope as many areas/towns are and half-way between Marbella and Malaga, Fuengirola makes an excellent base for many tourist looking at a home. It is also very popular amongst the Spanish, who although speculated as much as the next person, were more in tune with average prices, etc… than many foreign buyers. The also chose to buy in towns as opposed to urbanisations in less accessible areas.

Regards
Andrew Belles

And although Costa Blanca has been in the limelight due to the case of the Priors, a British couple who had their house bulldozed, Andalucía has its fair share of illegal properties. Thankfully with less drama though. According to a recent article, there appears to be around 40,000 illegal homes in the province of Malaga, a high figure, but less than what most thought. And of these 40,000 around 20,000 are located in the municipality of Marbella.

So what will the Spanish government do? In a normal situation where Mr and Ms X were building a property or buying a property and tried to cut a few corners, they would get a slap on the wrist, followed by a hefty fine. In the worst case scenario the government would come in a pull down the offending structure.

But what you can do to one offender you cannot do to 40,000! Especially when a vast majority bought in good faith, either not knowing that there were any legal issues or it was hidden due to corruption as seen in Marbella. There is then the separate issue of whether the property was build on land, where the builders/developers simply did not apply for the licences to cut costs, or whether it was build on protected lands.

Thankfully, the Malaga provincial Government, “La Diputación”, together with Marbella and Mijas Town Halls, have confirmed that there are now plans to legalise the 40,000 properties built illegally.

The Mayor of Marbella, Ángeles Muñoz, has stated there will be no demolitions, and with the hopeful approval of the PGOU (urban plan), 18,000 properties in the municipality will be brought into the legal fold. A great piece of news for all those who own the properties. It should be noted however that there still seems to be around 1,000 properties whose fate has not yet been decided.

For those in Mijas, the Mayor, Antonio Sánchez, has confirmed that no more fines will be issued while the new PGOU Urban Plan is being revised.

Furthermore the President of the “Diputación”, Salvador Pendón, has stated that the illegally built property could also be saved in the Axarquía region. He stated that in a majority of cases the province the properties should be legalised as they are not built on land that is protected in any way. However, if the properties were built on protected lands, demolitions are still a definite possibility.

Regards
Andrew Belles

The first part of the line will join Las Lagunas, just north of Fuengirola, to La Cala the Mijas. The project time is 42 months for this stretch of the line and is currently being bided on.

This is going to be great for people that own properties in these areas as one of the main disadvantages of many of the properties in these areas is the lack of adequate public transport. Of course there are buses but the travel time does not make feasible for many of the potential homeowners who would have to travel for up to 2 hours to get to Malaga from La Cala or vice versa.

It also means that many properties that are currently aimed at the second home market could finally be marketed at buyers searching for a primary residence who do not have their own transport, thus increasing the chances of a sale. And let’s not forget the holiday rental market!

This improvement in the infrastructure should also have a positive effect on property prices and for those who can pick up good properties in the current crisis could see a handsome return in the next 3 to 5 years.

Regards
Andrew Belles

Related article: Property investment on the Costa del Sol

So why have properties along the Mediterranean coast been hit so hard compared to the towns and cities?

Quite simple really much of the market outside of the towns made up of second homes (holiday homes), which are not a priority when budgets are tight and secondly, because much of Spain’s property boom took place on the coast, so certain areas have a glut of ‘investment’ properties which help depress prices.

But let us also remember that Spain’s Mediterranean coast is 1.660 km long, so it is very hard to generalise. As a comparison Britain measures just over 1.000 km from the south coast of England to the extreme north of the Scottish mainland and according to the Nationwide building society house prices fell by 15.9% in 2008 in Britain.

So according to these general statistics, the Spanish ‘Costas’ are holding up better than Britain! But looking more in depth prices held up better in Scotland than England and London still has the highest average prices in Britain.

So what does this tell us about broad stroke statistics? Good for headlines and nothing more.

Anyway back to the Costa’s

Yes prices have dropped, and if anyone says otherwise they are giving out misleading information. But it has not been a uniform drop. The Costa del Sol has held up better than the Costa Tropical (west of Costa del Sol) and the Costa de la Luz (east of Costa del Sol). The same applies Andalucia, which has weathered the crisis better than Murcia.

Yet why is that? Well when investing in property became a popular “get rich quick” scheme back in 2004 it started mainly on the Costa del Sol, and as prices increase it branched out to other areas. And even on the Costa del Sol it was more localized to the area west of the Malaga airport with the Eastern end only playing catch-up several years later. Anyway people bought in these areas on the advice that it would be the new Costa del Sol or Marbella, solely on the idea of “flipping” the property and not on the final product or on the quality of the area.

It should also be noted that prices have held up a lot better within the towns, such as Fuengirola, Torremolinos, Benalmadena, La Cala, etc… than in Mijas Costa, Riviera, Calahonda, etc… as many of the properties are more primary residence and the surrounding infrastructure is of a higher calibre.

And even though prices might be at their 2005 average what is currently selling is being priced at a 2004 figure as I previously mentioned in The Spanish property Market 2008 and Beyond.

Regards
Andrew Belles

According to these experts only 1 in 4 landlords declare their rents! And the tenants are in on it as they are the ones that are supposed to withhold the tax and pay it to hacienda!
So why do so many landlords fail to declare their earnings from rentals? Well in this persons opinion it is quite simple. Most people will only pay their taxes when they thinks that the taxes are fair or when they know that they cannot get away with not paying them. Yes I realise this might be a bit cynical, but this does not make it any less true.

At this moment in time if you have a property to rent, after costs (but not including your mortgage) you as a Spanish resident have to pay 15% to hacienda. This strikes many people as a lot of money. But if you are a non-resident this rises to 25% which is just excessive!

Let’s give examples:
We have 2 couples who are both renting their properties at 600€ a month

Mr & Ms Resident                      Mr & Ms Non-Resident
Rent: 600€/month                   Rent: 600€/month
Costs: 150€/month*                Costs: 150€/month*
Gross: 450€                                 Gross: 450€
15%: 67.50€                                25%: 112.50€
Net: 382.50€                               Net: 337.50€

*Please note income-generating expenses are not including in the Costs.

Ok so far? So now lets imagine Mr & Ms Resident have rented their property for 11-months and have earned 4207.50€. With luck the property is returned to them in pristine condition, they return the 1 month deposit and start looking for their next tenant. But what happens if there are damages? Well it will get taken out of the deposit and the remainder will be returned. What happens if there damages are serious? Broken dishwasher or damaged sofa for example? That deposit is not going to go far. So that’s going to eat into the perceived profits. What if the market for the type of property you have is getting more competitive and you want to renovate your property? Say you want to put in a new kitchen or central heating or air conditioning? These costs cannot be deducted! So that 4207.50€ could quite easily disappear by installing a new kitchen.

Now what will happen if the landlords also have a mortgage? Let’s be nice and say 300€ has to be paid to the bank monthly. That 4207.50€ suddenly drops to 907€ after costs. If we take the 15% out of the 4207€ and then the mortgage we are left with 276€ profit. Not a particularly impressive figure is it?

Is it any surprise so many people do not declare rentals? What the government should do is simple. First and foremost treat rental properties for what they are, a business. Allow the owners to offset all their costs that can be shown to be business related. Then reduce the % that needs to be paid to hacienda. With these 2 options there should be an increase in the amount of declared property rentals. After a year implement some sort of certificate that must be obtained prior to renting. With a penalty to the owner and tenant if no documentation can be presented on inspection. Of course for there to be inspections, there needs to be inspectors. In the current job climate it should not be difficult to hire a large contingent of staff to go travelling around asking in agencies and phoning for rent signs. If on demand the paperwork/certificate cannot be presented they get fined. That should clear up the situation quite quickly. Of course the certificates should be easy to obtain with minimal hassle for the landlords.

Regards
Andrew Bellés

First a review on 2008

It’s been an interesting year. Not only have we seen the failure and/or closure of some of the largest (or at least best known) ‘international’ estate agents we have also seen several of the largest national agencies such as Don Piso get into trouble. And let us not forget the myriad of small agencies that opened during the boom years and have not been able to survive the market downturn.

At the start of the year we were also starting to see many vendors start to price their properties more realistically. Actually we have seen vendors willing to listen more to the agency in terms of pricing. Whether the agency in question was giving them the right advice is another matter! In our case the more competitive pricing lead to more interest from prospective buyers which lead to more sales. So early 2008 started in a positive light even though there were fewer buyers around.

Of course there were fewer buyers around as many who had bought in the last few years were ‘investors’. Or were at least sold properties as investments. Which, like all types of investments, are risky propositions where a few win and many lose. The investment market was always a false market, in my opinion, as many were convinced to buy not on the merit of the property and area, but on the fact that everyone else was doing it and you would be able to sell it on before completion at X profit. Or if you wanted a home in the sun, why not buy 3, sell 2 before completion and pay for the third! As you can imaging, it worked better in theory than in practice.

But anyway as I was saying, even though there were fewer buyers around, the huge decrease in estate agents on the Costa del Sol meant that we only noticed as slight decrease in the volume of trade. Many buyers were not only looking at second homes but also at primary homes as many had finally made the decision to move to the Costa del sol, whether they were Spaniards or foreigners.
In regards to budgets though there was a slight shift. Many British buyers were starting to be more cautious as the pound lost ground to the euro and many Europeans were wary of the rising euribor (in case of mortgage).

Then came the credit crunch/crisis/end of days!
Suddenly no-one was lending money. Many a large developer, Martinsa-Fadesa and Habitat for example, went into administration. Throngs of builders became unemployed. Many more companies who were either directly or indirectly reliant on the promoters suddenly went bust as well. This has caused unemployment to rise higher. Furthermore, with the banks unwilling to lend, mortgages are suddenly harder to come by. Or better said, with the higher euribor and the uncertain state of the economy, buyers are unable to get the necessary mortgages to buy properties at the existing prices.
British buyers have also been in the situation where the constant weakening of the pound and the UK property crash have made the dream of a holiday home in Spain into just that a dream.

So has there been an upside to this year? For some yes.
First of all the British. A weak pound means that for those Brits who bought several years ago (at a far better exchange rate than today) can now make heavy reductions and still make a nice profit when changing the proceeds back to sterling.

Second, many vendors realising the state of the market are willing to price their properties more competitively and are more open to offers as buyers are few and far between.

Third, with the economic crisis affecting many countries, we have seen a flight of money to the Costa del Sol. Interestingly the main group have been the Irish. In most cases the buyers have stated that they felt now was the time to buy on the Costa del Sol as they could find the property they wanted at the price the wanted. To a lesser degree with have also seen more French, Germans, etc… making enquiries as well.

What can we expect from 2009?

Well who could have predicted what happened in 2008??? What I can say is this. The whole property investment binge that we have seen in the recent past is dead or at least in a coma. Prices in some areas are going to continue to fall until they reach a more realistic level. We have already started to see this in areas like Calahonda where we have recently sold a 2 bedroom holiday apartment some 5 minutes walk from the beach for 120.000 euros. You can find 2 bedroom apartments in Fuengirola now for 160/180.000 euros as well.
Niche properties (frontline/exclusive locations/etc…) are holding their prices better. With the most recent sale being a 2 bedroom 90m2 apartment on the sea-front of Fuengirola (central) selling for 360.000€.
I am also seeing more people investing in their properties to bring the standards up, not to increase the sales price, but to increase the likelihood of a sale.

What could be a danger for some buyers is that now with the lowering of rates in the euro-area, many potential sellers are going to have to pay less each month to the bank. If vendors are not feeling the pinch as much they are likely to hold of selling if possible.

I can’t say by how much or when prices are going to stabilise as even those that make economic forecasts can’t seem to agree. Will it be 10% in 2009 or 25%? Or 35% by 2011? Personally I find such information irrelevant as national statistics are worth about as much as the paper they are written on! Good properties in good locations hold their value.

What you the buyer/seller need to decide is what gives value? What makes this property more valuable than the one next door? It also comes down to your priorities. If the property is solely an investment and you are looking at making a quick buck, then read what I wrote nearer the top. The successful investment is over the longer term. If on the other hand you are looking at a holiday home or living here, you need to look for the right property for you and family and try and get it at the price you want!

What else? Oh yes newly built properties. The good news, at least for the property market, if not for the builders, is that in 2009 the number of housing starts looks set to go the way of the pound (sorry!). Developers forecast just 150,000 housing starts next year, compared to 250,000 this year. And with fewer properties being added to the market each year, the oversupply of properties should start to decrease.

In summary, and after a lot of waffling, I just want to end this on an important note. Whether you are looking to buy or sell, 3 simple words will decide how much it will sell for. Location, location, location.

Regards
Andrew Bellés