Costa del Sol Property Blog

Carlton Group Inc.’s clients have earmarked 7.5 billion euros ($10 billion) to buy real estate in Spain and Portugal over the next 12 to 18 months as risks diminish and prices adjust to what buyers expect to pay.

“A combination of reforms in Spain, stabilization of sovereign debt yields and reduction of risk perception for Europe as a whole has made investment in Iberia far more attractive,” Javier Beltran, head of Spain and Portugal for the U.S.-based real estate investment bank, said in an interview. More..

The European Commission has approved the Spanish government’s plans to restructure four troubled banks.

Bankia, Banco de Valencia, NCG and Catalunya Banc were nationalised after experiencing heavy losses on loans to homebuyers and property developers. More..

The Aifos real estate group has outstanding debts of 500 million euros in amounts owed to 5,000 creditors, of which approximately 1,000 are property buyers whose homes never materialised. Now a deal has been proposed that would allow them to recover at least part of their investment. More..

During the second quarter of 2012 the foreign market accounted for 9502 Spanish property purchases, which represents a 12 percent increase compared to the same period in 2011, and is the highest figure in the last 4 years when it stood at 11,130 property purchases.

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I have just found an interesting news blurb by Mark Stucklin on a study by Jones Lang Lasalle. Based on this study it appears that the Spanish property market is more transparent that quite a few of its fellow European countries including: Belgium, Norway Italy, Portugal and Italy are all less transparent that Spain.
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After posting the article on S&P and their property forecast I had someone contacting me panicking that these articles would be detrimental to Costa del Sol real estate. Although I can see why a negative article, would be viewed… well negatively, there are also reasons why it should be written about.
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Prices of Spanish properties could decrease a further 25 percent over the next 4 years according to Standard & Poor.
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The Minister of Development, Ana Pastor, asserted today that the Government has no intention of removing tax incentives for homeownership. “They are in effect because this government wanted it” and we do not see us change our minds, she added.

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The governments most recent financial reform is forcing banks to dig themselves out of a hole that they helped to make in the first place.

Mortgage default and repossessions mean that now financial institutions are the owners of around half of the 6,792 unsold new properties on the Costa del Sol (according to a recent repost by Aguirre Newman). Now following Spain’s most recent financial sector reform this stock of real estate assets and loans granted to developers are costing the banks more and more in the form of provisions. As a result they are doubling their efforts to sell, which in many cases implies first finishing off the construction work where indebted developers left off.
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According to the latest statistics supplied by the INE (Spain National Statistics Institute) Spanish house prices fell 11.2 percent in 2011 with new build suffering an 8.5 percent fall and resale’s a 13.7 percent fall.

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Home sales in June were the lowest since the property crash began, show the latest figures from the Statistics Institute (INE).

There were 24,699 home sales in June (excluding social housing), down 26pc on the same time last year, below even June 2009, when the crash was thought to be at its nadir. The graph above makes it clear that, after a deceptively promising start, 2011 (in red) is turning out to be the worst year yet.

Compared to June 2007, sales were down 60pc – a teeth-jarring fall by any measure.

Year-to-date, transactions are down 11pc compared to last year, 3pc compared to 2009, and 55pc compared to 2007, as illustrated by this table.

On an annualised basis, sales have fallen in 10 of the last 12 months.

Assuming that prices have fallen by an average of 30pc since 2007, then in value terms (Euros) the market has shrunk by 70pc since then. That means 70pc less money around for everyone who lived off the housing market, town halls in particular.

All this helps explain why many town halls are now in the jaws of a financial crisis: They ramped up their spending and overheads during the boom, assuming it would last for ever, but now the money has dried up and they can’t afford to pay their bills. A 70pc fall in revenues from real estate helps explain why.

Why are transactions still falling? Partly because the credit crunch is still in full swing – in Spain at least – and partly because the abolition of mortgage tax relief at the end of last year brought forward sales that might otherwise have taken place in the first half of this year. So the figures might make the market look worse than it actually is. To find out we will have to wait and see if there is a recovery in the second half of the year.

The following table summarises the key transaction data month-by-month for the last 5 years.

Article by Mark Stucklin

The sale of Spanish properties decreased by 18.3% in May compared to the same month last year, with monthly sales standing at 30 797 sales (including VPOs). Most of this drop was due to the sharp decline in new build sales in the Month of May which saw a decline of 22.7%.

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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.

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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

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