Hard times for off plan Spanish property buyers

It's a problem that will fade away some time soon, but meantime, buyers of off-plan property in Spain may find it hard to get back the deposits they handed over to developers who are now in dire financial straits - or bust.

The Spanish Law that ensures developers take out a bank or insurance guarantee for the deposits they hold while building the apartment or villa is clear enough, as 1,000s of property lawyers in Spain and the UK will attest.

Property not finished within 90 days of contracted date or not finished at all, means the buyer can claim back all staged deposits paid and a generous six percent interest on top. The buyer gets an impressive looking guarantee from the big name bank once the developer has paid the premium he is legally required to do.

It's a nifty piece of consumer protection missing in the UK and countless other countries within and without the EU. Read about Law 57/68 reinforced by Decree 515/89 in this Buyers' Guide.

But as the Spanish property market - littered with ceased sites and deceased developers - continues to sink, British and other foreign buyers are pulling out as they find contracts being breached. Those who have guarantees are having a hard time getting their money back but many are finding that they didn't have a guarantee after all?

The Bank of Spain confirmed it has received a record number of complaints and is investigating the issue and expects to issue a report next month.

Current would-be buyers are advised to buy only key ready or resale homes in Spain and only through a reliable source and using an independent Spanish solicitor like www.spanishlaw.org.uk/ who are based in London - handy for kicking butt, when butt needs to be kicked.

With so many key ready homes around it could be three years before there is a need for any-one to buy off plan property in Spain...

Why Team Good Bye are heading to Spain...

The increasing cost of living, economy at a standstill, plummeting house prices, coupled with growing fears over job losses, rising crime, pensions and retirement, are the reasons more people from Britain than ever are planning to move abroad.

19 gold medals and an airport handshake to Team GB from PM McBrown may tug a bit for a few days, but for many GB residents the only way for up is out...

The increasing tax burden in the UK has also been a factor to the steady increase in the number of Britons emigrating. Spain remains the number one destination and still accounts for the largest percentage of Britons' overseas property ownership. It seems that the current economic and political climate in the UK is only adding to the legion of people seeking a new life abroad and leaving Team GB to impending recession.

With Spanish property prices at their lowest for a decade, the attraction of moving to Spain has never been more tempting. So Team Good Bye can enjoy the sunshine, still lower costs of living, better lifestyle and lots of sporting activities for all ages.

An estimated 75 percent of wouldbe buyers use the internet for their basic “what do we get, where, and for how much” research and leading websites report strong interest from clients who have got money to buy property in spain.

Spain, like most European property markets is in slowdown and it is not a good time to sell, but ideal timing to buy with excellent bargains for people with the readies.

In a dash-for-cash, some property developers, hit by the credit crunch in Spain, are selling brand new apartments up to 30 percent less than they were a year ago and actually making a loss on some developments. It is now possible to buy a brand new top quality 2-bed apartment on the Spanish Costas below EUR 150,000.over-50s

A growing number of Spanish bank repossessions – www.propertyinspain.net have them from £25,000 - in Real Spain and the main Costas are adding new incentives for Britons to make a new life in Spain. The same website is offering 2-bed villas in one of the new breed of active retirement resorts at around EUR 163,000.

So for Team Goodbye, Spain is looking good for a short-term, long-term or full-time break from GB's woeful outlook...

Estate agents lose out to the lettuce sellers

Once there were a lot of them, but now they are closing down their offices on a daily basis all over the Cost del Sol and Costa Blanca, where 80,000 estate agents are thought to have lost their jobs.

For those people who didn’t realise there were so many people selling property in Spain that figure might come as a surprise, but it is just a fraction of the job losses suffered by the guys who have been building the villas and apartments.

Big name agents like Fincas Corral, MC Inmobiliaria, and Don Piso have closed up to 75 percent of their hundreds of branches and the 10 biggest chains in Spain have closed an average of 150 estate agent offices..

No-one will miss them, least of all the Spanish College of Estate Agents, Their president, Santiago Baena, while admitting the closures have been brutal, claims most of them were not proper estate agents anyway. "We always said training was essential but they ask for more training for a man selling lettuce in the market because he has to use a machine."

The construction workers have gone grape picking in France where they, apparently, earn more money (€8.71/£6.95), according to their trade union bosses. Picking lettuce in Almeria doesn’t offer that sort of money, so there is uncertainty for jobless estate agents seeking a new cash crop to harvest.

The mass closure of estate agents' offices may also be a symptom of the way the Spanish real estate industry is changing.

One of Spain’s leading property sales websites is www.propertyinspain.net whose one-stop. select-view-purchase offer once covered all Spain’s second home areas, has also trimmed back on its local affiliate network to concentrate on the best bargain areas. They have retained multi-lingual, well-trained property professionals in key areas to look after their buyers seeking big discounts they first spotted on their website.

Gareth Milton, operations manager of www.propertyshowrooms.com said: "Companies who had always focused on web-based activities without the massive overheads associated with a network of physical branch offices are the ones more likely to weather the storm."

Construction juggernaut heads for Spanish shores...

The latest housing stats from Spain show that country’s construction industry is so big it can’t stop building. Like the proverbial juggernaut oil tanker that takes 10 miles to come to a halt from switching off the engines, property in Spain is at "full ahead", still a long way from a safe harbour… and could end up on the rocks.

Demand may be down, but the supply of new homes seems to just keep on rising, with nearly 2,000 a day coming onto a Spanish property market already saturated by over-production – and that’s an increase on last year, when the market started to fall away.

Jose Luis Malo de Molina, director general of the Bank of Spain, told an amazed audience in Valencia the other day he expected key ready homes this year to be an all-time high for Spanish developers.

The Tanker Syndrome means this year’s completions, which were started in boom peak years 2005 and early 2006, and their construction won’t stop until the last of them are finished at the end of this year.

Safe haven or simply ship-wrecked on the Costa shorelines, there are going to be some more rich pickings for savvy investors able to navigate to the right place at the right time…

Spanish property slowdown produces bargains for all

As media coverage of the UK and Spanish property markets increases in line with the house price decreases, now might be a good time to look at the true status of the real estate sector across Spain.

A year ago planning approvals reached an all-time high for Spain at an annualised 700,000, as developers, although sensing the impending slowdown, had not started to halt applications in the notoriously extended planning pipeline. They have now, declining to around 120,000 for the latest quarter and looking like 350,000 approvals for the current year.

Given the current financial state of the Spanish economy and its engine-room construction sector, no-one is going to start building that many homes nor find buyers to sign-up for them.

Strangely, housing starts are holding up much better than planning approvals. According to the Ministry of Housing, housing starts fell by only 36 percent in the first quarter to 108,275. Over the 12 months to the end of March there were 484,199 housing starts, 26 percent less than the previous 12 months.

While housing starts dropped, the number of new-build properties completed has been rising. Not including social housing, 165,698 new properties were completed in the first quarter of the year, 23 percent more than the same time last year.

Over 12 months 610,349 properties have been finished, an increase of 3.4 percent over the previous 12 months - more than Britain, France and Germany combined.

The Housing Ministry has also revealed that 423,000 new households were created in 2007, of which 80 percent are owner-occupied, and 20 percent renting. 423,000 purchases made from the 610,349 homes completed is a success rate of 70 percent sales – pretty good, especially in recessional times?

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By the end of 2007, there were 24.5 million properties in Spain, an increase of 2.7 percent over 2006.
16.77 million properties, or 68.5 percent of the total stock, are used as primary homes.
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Sales of unsold housing could start to increase as new Spanish Government tax breaks and subsidies, coupled with heavily discounted prices, tempt buy to let investors back into the market and first-time buyers to start looking seriously again.

The current scenario might also look tempting for north European buyers: Widest choice, at the lowest prices, with the greatest tax breaks could be the new Holy Grail for investors and own users – first time buyers as well as vacational use - especially couples planning retirement?

Think about this - there are probably 100,000 key in hand properties in prime locations on the Costas, ready for careful inspection and securing on the back of a negotiated discount price. There are insider experts who can meet tempted buyers at the airports of Barcelona, Alicante, Murcia and Malaga and Gibraltar and reveal their whereabouts…

Tax breaks for Brits in Eur 20B Spain package

As the UK's McBrown crew gets back from the seaside to stop the nation's economy sinking beneath sunami waves, Brits abroad are already benefitting from anti-inflation tax breaks produced by the Spanish government - and Brits planning to move to Spain can grab theirs right away.

It seems there is no mañana where the rescue of the Spanish economy is concerned...

Expatriates in Spain benefit from a raft of new measures which include the abolition of wealth tax and inheritance tax as part of a package of 24 incentives to boost the country’s flagging economy.

While Prime Minister, McBrown schemed in Suffolk, Prime Minister Jose Luis Rodriguez Zapatero left his Costs holiday and announced the €20 billion (£15bn) plan after an emergency meeting with ministers.

One of the key measures is a bid to increase consumer spending with a €400 tax rebate to 16 million workers and retirees. Others include abolishing inheritance tax and opening up the service sector to be more like Britain.

There will also be more money for subsidised housing to boost the construction industry, cuts in bureaucracy to aid small and medium-sized businesses and speedier approval of new public works.

The abolition of wealth tax fulfils one of the Socialist party’s pre-election promises from 2004. Wealth tax will no longer be levied on any property purchased after January 2008, regardless of residency.

The move comes as Spain’s GDP growth slows dramatically, a trend which is set to continue in 2008 and 2009, before a predicted 3% rise in 2010 - according to government figures. Inflation rose 0.3% in July to 5.3%, the fastest annual rate for 15 years. It is well above the eurozone average rate of 4.1%. However, Pedro Solbes, the Spanish economy minister, said that inflation could fall to 4% by the end of the year if oil prices continue to come down.

Prospects for property buyers in Spain? Grab the developer discounts, Spanish bank repossessions, Senor Z's tax breaks, have a great time in the sunshine and check back on Britain after the next election....

Spanish banks funding double discounted homes…

The lush suburbs of Madrid are riddled with housing projects, ranging from first-timer basic to WAG-style and some pundits reckon most of the estimated 25,000 apartments on offer are not going to sell in the current economic climate in Europe…

Problems for the developers then, as many go to the wall, and for the bankers who have stuck their money into the projects. As is often the case in Spain, the blindingly obvious is quickly spotted and in a bid to kick-start the country’s ailing property market, developers and banks are teaming up to offer discounts on new-build properties.

Leading banks such as Santander, BBVA, La Caixa, Caja Madrid, Popular and Banesto, are planning to work with developers to offer mortgage financing on the unsold key ready properties in Spain.

Developers are offering properties at 20 per cent less than even the present depleted market. The exact price will depend upon its Des Res Rating in Madrid, but a 100-square-metre apartment would be less than €320,000. A discount on discounts with a built-in mortgage would tempt even the ultra cautious?

Despite all the doom and gloom there are lots of good bargains available along the Costas at the moment and with the market set to pick up again sometime soon, now could be the best time to invest.

Unlike the UK Government that is “evaluating options to help the property sector”, the Spanish government is also playing its part in helping the housing market by allowing commercial airlines to use military routes, as reported on Homes Worldwide yesterday.

Using these more direct routes will make travelling to Spain easier and quicker and may help to kick-start the property market. An increase in the number of holidaymakers would also help the holiday rental sector.

True Lies in Spain for house prices

Often figures are difficult to figure out, as when the UK Government announces record inflation of 4.4 percent or when a UK bank or building society gives its take on house price rises/falls.

Everybody in the UK, fast running out of spending money, knows 4.4 percent is only a quarter of the true figure and the Property Registry houses price figures are history when they are announced and seldom match the “findings” of others.

True lies they may be, but where lies the truth?

www.Kyero.com the leading property portal in Spain has been critical of the house price movements as released by various government departments, banks and trade bodies. They claim their own monthly figures represent the most accurate readings.

But even Kyero’s stats pale beside those of the frontline troops, the TINSA army on patrol in the inner cities and the glossy urbanisations of the Costas.

Armed with tape measure, digital camera and military-style mapas they sally forth daily to take the property prices pulse of Spain. They have been enlisted by the country’s biggest valuation firm and they work mainly on behalf of the firm's owners, the 40-odd banks who belong to the Confederation of Spanish savings banks (CECA). They are thorough and accurate, measuring each room, drawing layouts of the building, noticing drainage and general condition and working out a cost per square metre base figure for later comparison.

The valuations they produce are based largely on the formula, number of square metres times the TINSA formula price per square metre, computed with the recorded sales prices and attributes of similar homes in the same vicinity

The images they take are warts and all, no waiting for a blue sky with fluffy clouds day with these pros. Then back to the office to produce a 24 page report and valuation on which the bank will make a mortgage offer, or more frequently nowadays, fix a repossession sale price.

Using their own data, TINSA HQ reported house prices across Spain fell 3.9 percent last month, marking the fifth successive month of falls in Europe’s biggest property market and steeper than the year on year figure TINSA posted in June.

Compare that with the official Spanish Housing Ministry quarterly report that insists house prices declined 0.3 percent between April and June, “marking the first fall since 1998”.

Statistics can be what you want them to be and how you present them, but with a “margin of error” this big, sellers are likely to side with the Government version and property buyers with TINSA…or maybe just lick a finger and hold it up to the wind to fix the figure - like UK estate agents used to do, when property boomed…

Is now the time for value property investment in Spain?

Like so many property markets around the world, Spain is struggling to recapture the heyday of years gone by. For a decade it was the only market over which British holiday makers and property investors became excited...

Until, in 2006, the emergence of other residential markets in Europe, combined with the ongoing credit crunch, brought Spanish property to a juddering halt. The growing number of unfinished developments as more developers go to the wall, will see future investors showing extra caution.

This is reminiscent of the market a decade ago when the property sector was dogged by unfinished properties and bad investment advice. It is now being mirrored in some of the so-called emergent markets where the early bargain prices have been replaced by new offers - often in the same price bracket as Spain.

Canny buyers have decided they have had enough of “cheapo” property in countries that, after the initial flush of bargains, are destined to remain niche players. Buying a place nobody wants to rent is a bad investment anywhere in the world, in a place few people want to go to, it’s a disaster.

While Spain may have thousands of unsold properties, and some being bought for a fraction of the original price, it remains the holiday destination of choice for most Europeans seeking sun, sand and a solid, modern infrastructure. Spain offers all that, on top of decades of warm welcomes for tourists and a support industry dedicated to giving every visitor a safe and happy time.

It was thus during Spain’s first property crisis of the Nineties, from which emerged the decade of property boom. History may be about to repeat itself as the ‘panic selling’ scenario is the first stage of a recovery and, currently, could mark the bottom of the market.

Like so many investment markets it is often the time to look again when there is evidence of panic selling as there are clearly savvy buyers gearing up to take advantage during the ongoing recovery. A 30 percent discount is a flying start in the rental market and can represent a worthwhile equity gain when everybody else decides it is time to buy…

Spain will always be a very important market to the UK ex-pat community and while the currency exchange rate is not helping in the short term there is no doubt that some investors are on the prowl for value investments at distressed prices.

Spain has been the strongest market for the longest period of time and one worth keeping a very close eye upon.

Why the Spanish mayors made property millions...

It may not be much consolation to the many ex-pats who have finished up owning illegal property in Spain, but the main cause of their predicament has now been identified…

The finger points in the direction of the country’s town halls and the all-prevailing local mayors, who came to rely on getting essential funds by doing deals with the construction sector.

This is legal under Spain’s local government laws that link much central funding with the necessity to raise each authority’s population and thereby gain extra cash from Madrid.

Easy deals with house-builders brought millions of Euros into the town halls and, as new “residents” were acquired, so too was the resultant extra funding from central government. Some mayors and their planning chiefs who took the cash for themselves have been sent to jail, but other towns and villages remain in limbo while the mess is sorted out.

It needs new legislation to centralise local government funding and remove the need for ambitious town halls to raise their own extra cash. Local planning can be retained, but with more regional approvals required on bigger, high impact schemes.

Meanwhile, as there is no central source of developments with problems, a quick browse of www.eyeonspain.com will show where the buyers are unhappy with building progress, planning consents, lost deposits or other problems. There is a useful alphabetical list of developments, so any that tempt can be checked out quickly.

Most developments are, of course, fully legal and the Spanish lawyers of would-be buyers can produce all the evidence needed to make a buying decision while there are real bargains around.

Tax changes boost property opportunities

Even as Brits hunker down for a long spell of inflation and a winter of discontent, there’s good news and bad news on financials affecting properties in Spain.

Bad news for anyone making money from overseas property investment as the MacBrown Government is planning stealth raiding parties from November. A little known international treaty enables tax debts to be recovered in 19 OECD countries and you can bet the most hard-up tax men will be pushing out their boats first.

As most Brit investment has been made in Spain, that’s probably the easiest starting point for UK tax men, so investors should check their situations in both countries.

Good news from Spain is the Parliamentary approval to scrap the messy wealth tax is expected at the end of the year. This has been a pain for non resident property buyers and even tougher for Spanish residents who were hit on their world-wide assets. For current buyers, the further good news is that the abolition will be back-dated to January 2008.

The wealth tax was a burden that made Spain less attractive to capital rich retirees to Spain and with prices of top-end finca estates in Mallorca and Ibiza falling in line with the rest of the country, now could be the right moment to grab a bargain.

Recognised as ultra discreet by their show business and media clients, Google’s top ranked website for Spanish property, www.PropertyInSpain.Net are lining up an interesting portfolio for release in September. Their affiliates in Ibiza and Mallorca are in discussions with local wealthy owners on a series of off market disposals of large estates offering good returns on traditional olive production, hunting and other country sports, alongside the celebrity rentals potential.

With capital gains tax reduced to 18 percent and Spanish corporate taxes lower than the UK and other European countries, prospects are good for opportunistic buyers. The right tax advice can mitigate Spanish inheritance tax, opening the door to good medium term investment returns based on low acquisition and ownership costs and the promise of useful equity gains once the market recovery gets underway.

If you are planning a move to Spain talk to a financial adviser on investment and tax mitigation laws and procedures in both Spain and the UK.