Spanish enjoy Mañana Moment in financial storm

As America and Britain struggle to solve their banking greed-induced financial woes, Spain’s Government, having dropped a EUR 3 billion life-raft to the property sector, is taking a quiet “mañana” moment - because the country’s banks have zero exposure to US subprime debt…

The Bank of Spain has long banned risky stuff for the banks under its control and their reserves and bad debt provision would have to plunge by 50 percent before they felt any stress. If the current level of loan defaults increases and the world banking paralysis continues, then Spain, like the rest of the western world could be in deep trouble. However, at the moment the country is better placed than Britain or America.

Spain needs foreign cash to service a current account gap of EUR 100 billion, on the same levels as the US and Britain. Much of that is tied up in the one-time property boom that has seen many developers crash, leaving surplus stock to be sold off on the cheap. Spanish banks too, are drip-dripping repossessions into the market as can be seen daily on the www.PropertyInSpain.Net website.

There are bargains to be had in most second home areas of Spain and prices have generally dropped below the benchmark EUR 2,000 a square metre level that means a typical 2-bed, 2-bath apartment with communal pool can be picked up for around EUR 124,000 – well within the £100,000 sterling buying band.

The other big earner for Spain is its world-class tourism industry, which generates huge revenues and maintains millions of jobs. Tourist arrivals this summer have held up well, despite higher flights costs, lower disposable income and the strength of the Euro as northern European and Spanish families insist on their annual breaks on the playa. As many families prefer rental apartments or villas to hotels, the property rental market is also holding up.

So it could be the Spanish Government can continue to take a relaxed mañana moment as less well managed economies continue to battle it out.  

Money madness and 100% mortgages in Spain

That Was the Week That Was in America, Britain and Europe as banks and institutions imploded, changing from “Rock solid” to “Rocked solid” overnight and generations of tax payers being committed to picking up the tab for the greed, avarice and stupidity of the out-of-control finance sector.

It unfolded like a John Cleese inspired sketch on the famous Sixties satirical review of the same name. Farce descended into a blame game among banks, regulators and politicians with names beginning with “B”, who have run up the biggest-ever deficits in their national exchequers.

Can’t bank on bankers any more, can’t trust Governments to look after us, or their own political party’s coffers, in the case of Britain’s Labour. TWTWTW ended with magical flash and a bang to mark the arrival of a wizard carrying a £1 million cheque to boost the finances of the Labour Party.

No sign of that level of magic for the ordinary property owners in the US and UK, although Spanish housebuilders in Spain did get EUR 3 billion to help them finish off thousands of villas and apartments under construction along the Costas.

It’s all been enough to get folks thinking about the golden beaches, cool mountains, sangria & tapas of Spain, where, because the banks have been banned by joining in the financial excesses, life is a little more certain. Banks have little exposure to junk mortgages and their reserves remain respectable.

Spanish tourism and construction produced a buoyant economy was once Europe's envy and the country has managed to avoid the worst of the financial turmoil. However, following the collapse of the construction boom that drove a decade of economic growth, Spain is lumped with stagnant growth, 10.7 percent unemployment and inflation at nearly 5 percent.

Oh, and there are also thousands of completed villas and apartments overlooking hot beaches, cool mountains or the swimming pool shared with the neighbours. Developers and local builders are rattling the door keys and promising free cookers, fridges, flatscreen TVs and a houseful of furniture.

Likewise Spanish banks have got many keys - of properties they have repossessed and are also working hard to help the hard-press owners of Must Sell property sell in advance of possible repossession.

Just as big name banks were sold off on the cheap with Governmental encouragement and taxpayers future contributions, it makes sense to grab a property bargain in Spain that helps take us away from the UK’s crazy money machinations - frequently or permanently…

A good source for these bargains is www.PropertyInSpain.net and they have some with that rarest of the rare, the 100 percent mortgage and others requiring only £15,000 deposit. There’s the proof that the Wizard’s magic can work in Spain as well – after all, don’t we all wish we could become Spanish property owners on the cheap?

Can property buyers bank on Spanish galleon?

With all front pages of the national press covered in “international banking crisis” stories and wall to wall coverage on the TV news, would-be property buyers thinking of a house move in the UK or even a place in the sun to get away from it all, may be as puzzled as the rest of us?

“Unsinkable” Lehman  Brothers sank at Titanic speed because of their own greediness – the boss’s pay topped 22 million – and forays in derivatives uncharted waters without a life raft. Other banks doing business with them could go down with similar Titanic timing, while others can pick up the juiciest remains. Regulators in the US and UK seemingly failed to stop what was going on and merely moved the deck-chairs around…

Not in Spain though, where it appears their banking galleons are in smoother waters . This is because the central Bank of Spain cracks down on uncharted and risky speculative investment, so Spanish banks have minimal exposure – in fact “practically non-existent” - to Lehman Brothers. Spain's banking system also has some of the world's strictest reserve requirements.

While Spanish banks remain in a fairly healthy state, the worsening global financial market conditions will have an impact on Spain's economy and smaller Spanish banks could be forced to seek fresh capital if the crisis drags on and bankruptcies continue to soar in the property markets.

Bank of Spain Director General of Research Studies, Jose Luis Malo de Molina said: "The direct impact of the Lehman bankruptcy for Spanish banks will be minimal, given their exposure is practically non-existent. The Spanish banking system is facing the international crisis from a healthy position, with good levels of solvency and profitability,"

 "However, it is necessary to recognise this episode signals an intensification of the serious international financial crisis, that also has consequences for the Spanish economy," Malo de Molina added. Spain was the only one of the euro zone's four biggest economies not to contract in the second quarter after the government drew on its budget surplus to launch a 38 billion euro economic stimulus package.

The Bank’s proactive statement contrasts with the wall of silence from the British Government – busy scrambling for the political lifeboats - and from the Bank of England that reported high inflation, but failed to change course again.

Buy a property in Britain? Only if you really need to and can get a half decent mortgage. Buy a property in Spain?  Plenty of bargains, good mortgages, a better managed economy, oh, and the sun shines for 300 days a year along the Costas.

Property deals flowing in Spain and UK

As the property markets of the UK and Spain bungee jump in unison, new efforts are being made to revitalise the market, something that is essential to both countries…

The new average price for a UK home has plunged to a new low, but seemingly not low enough to spark interest from first-time or second rung buyers nor stop leading housebuilders report profits slumps, lay-offs and site shutdowns.

It’s the same in Spain, where the property sector is three times the size of Britain’s, with a growing list of developer failures, even among well established builders who avoided the flotations and over borrowings. 

If buyer confidence is low, then it’s time to bring out the big marketing guns. When Barratt last found itself in the same position, in the early Nineties, the firm brought out its helicopter “gunship” to buzz its slow-moving developments for television adverts offering a bagful of sales incentives, including shared equity.

History repeats itself, as today Barratt announced an array of incentives including subsidised stamp duty on all homes up to £500,000 and mortgage payments of to £1,000 a month. T

here’s also a promise to pay 15% of any loss resulting from the sale of the property within the first three years. Assuming more mortgages from the running scared banks become available, Barratt might be able to claw back some of the £300M lost profits they also reported.

Costa Blanca is the current hotspot for deals, with builders offering bigger discounts, better specs including all white goods, all furniture, free hotels and meals and 80 percent mortgages. Stamp duty is so low in Spain, it’s not worth subsidising and mortgage interest is lower than the UK.

It was also revealed today that the UK’s homes have been shrinking in size to the point where, on average, they are the smallest in Europe, at a rabbit-hutch dimension of just 76 square metres (818 sq feet). Spain at 20 square metres bigger produces the second biggest homes of all the Med countries – behind Greece.

More property, for less money with lower mortgage and cost of living, suggests Spain might still have the edge for savvy buyers seeking sunshine bargains, blissful beaches and relaxed lifestyle away from rabbit hutch hopping in Britain?

Another tax chore for Spanish property owners

There's an extra chore for over-taxed Brits owning homes in Spain if they want to avoid a run-in with the Spanish tax man. 

British and other non Spanish owners need to prove their non-resident status by producing a new identification document for tax purposes. Failure to produce the document, the "Residencia" or "hacienda" as country Spanish still call it, could lead to mortgage and other payments being stopped.

Britons who use their Spanish bank account to pay the mortgage for their home in Spain have been required by Spanish banks to produce a Residencia certificate since March 2007. CAM Bank has certainly been sending them out, even to Brit customers without a mortgage, but some banks gave homeowners short notice or did not contact them at all.

The Residencia certificate is part of an EU initiative to clamp down on tax evaders. Spanish residents are taxed at source but non-residents can avoid paying tax there only by proving non-resident status. Anyone who does not provide the paperwork risks having their bank account frozen and mortgage payments stopped.

Non-resident status means spending fewer than 180 days per year in Spain and be able to produce the certificate after registerinjg in person at their local Spanish police station or Oficina de Extranjeros and then have the document stamped by a town hall official. If you go specially, try adding the costs of "EU compliance" to your UK expenses and/or your costs of ownership in Spain.

For an EU initiative, some might find it strange that it's not applied in reverse and that other country's are not also using the usual "money laundering, tax evading" excuse for keeping tabs on folks. Free passage throughout Europe, but there are barriers going up for any spare cash its citizens might manage to hang onto - wherever they happen to be living at the time?    

Anyone needing further information can contact the Spanish Ministry of the Interior's immigration directorate helpline on 0034 913 639 071. The document costs between €10 and €13, although going through a lawyer could be more expensive...

When to buy that "must-sell" property in Spain?

As the early fall-out from the world credit crunch settles over sunny Spain, there's a whole new breed of savvy buyers eying up the resultant property bargains - and liking what they see.

Couples like John and Janet Wilson are telling everybody about the apartment in Costa Blanca they snapped up with a 25 percent discount (saving £37,000) that was proven when their Spanish bank advanced a 70 percent mortgage. The 2-bed home came with fitted kitchen, wide balcony, three communal pools, tennis courts and a gym - and that famous Spanish lifestyle...

The Wilsons are saying: "We're so pleased with our bargain. A saving of more than 25 per cent isn't exactly small change - it made a world of difference to us and as we are not planningt to sell, what happens to general property values doesn't matter at this stage."

They bought from a "must-sell" builder in the current dash for cash that can mean the difference between the firm staying afloat or going under. They have a 10-year build guarantee and a near completed development with all facilities up and running. Minimal buyers' risk.

But would they have got a bigger bargain if they had waited longer into the credit crunch? Possibly, but that could another year down the line. There may be better bargains in a year or so when the liguidators of the Spanish developers who have gone bust start their fire sales of assets that include finished or near finished homes. 

There could be tens of thousands in the Costas, but the liguidators will be seeking "trade" buyers rather than having to deal with individuals seeking a holiday home. By the time they hit the general market there will be added costs and profit margins pushing up the price to the end user.

So savvy Brit buyers are making their moves now and taking their time to assess the bargains on offer. Google ranks specialist website, www.propertyinspain.net as the top source for Spanish bank repossessions and they receive inquiries for these on a daily basis from British and north European buyers. 

"We have buyers who have put down hefty deposits on repossessions at up to 50 percent below current valuation and are happy to wait until the slow process of physical return of the villas to the bank concerned. The interest they are getting on their deposits is very good and more than double the 2.4 percent equity growth they would be getting had the sale already gone through," explained spokesman, Kevin Barnett.

The website has a Fact Sheet on Spanish repossession procedures and a selection of bargains in prime Costas and Real Spain areas.

Calmer waters for the Spanish property market

When the man in charge of storm-tossed Great Britain's financial lifeboat admits he didn't see the financial tsunami heading in and is pictured in the media with his personnal buoyancy aid undone and his engine kill cord unattached, what hope of rescue for the UK property market?

That Capt Darling appears to have not a clue on how to turn the boat around and chart a course to calmer waters, suggests it might soon be case of "women and children first" as the ship of state hits flotation difficulties.

To many people, the overseas property scene and Britain's property scene are both one and the same - once good news stories that have now turned bad since the credit crunch hit, leading to nothing but trouble, losses and broken dreams.

However, property owners are in trouble only if they must sell and if the mortgage payments become unaffordable. Otherwise the current dip in values can be retrieved in future years because property prices always go back up and beyond their peak.

So now might be a good time to buy a property in Spain for those with spare cash as they will get more property for their investment and benefit when growing confidence begins to move prices upward again. A discount of 20-30 percent is a great equity gain and coupled with a much lower mortgage and lower still repayments is giving some out there good reasons to buy.

Nicholas Marr of property website www.homesgofast.com says investors who have enough money to avoid the credit crunch can pick up bargains in Spain. He explained: "Those buyers who are in the fortunate position not to require high loan to value finance are now reaping the rewards; they have the power.

"Buyers are still there and that they are picking and choosing the best products. The truth about the market is more subtle than just boom or bust, he added.

For those looking to invest, it seems the key is not to put things on hold until the storms die away and the sun shines again, but to seek the best deals that are now clearly out there...leaving Capt Darling to chart a rescue course for the UK property market...

The rain in Spain falls mainly on Britain

As Britain soaks through summer and the property market mires, the weather in Spain is hot and sunny and the bars and beaches bustle with relaxed holidaymakers...

Many of the tourists hail from Britain, as Spain remains the most popular holiday destination for the 25th year in succession. The same can be said of the Spanish property market. More Brit ex-pats own property and want to own than there are from any other country.

As today marks the start of the Spanish property buying season, many of the Brits will be tempted away from the Costa beaches to investigate some of the bargain apartments and villas in the resort were they are staying.

They will find key ready and resale bargains everywhere in the new hunting grounds of dash for cash developers and distressed sellers facing higher mortgages or off-plan property contracts they cannot afford due to the credit crunch.

Developers and private vendors who are keen to sell property in Costa Del Sol and Costa Blanca will be more realistic about pricing, maybe even accepting an offer at price levels not seen for three of four years in these high demand areas.

One of the affiliates of www.propertyinspain.net is Paul Rossiter, Managing Director of Costa del Sol based specialist land and self-build agency, Carrington Estates. He says: “I think the bottom end of the market, the ’stack them high, sell them cheap’ identikit market has had a big wobble, but conversely, the top end villa market has remained steadfast. Even when Spanish property stocks took a pounding in April, with shares in freefall overnight, there was still no knock-on effect to this sector of the market.”

Mark Stucklin, of the website www.spanishpropertyinsight.com has a final piece of advice for those heading to Spain or those leaving the playa to look for property: “If you do your research, and take your time, you can find great value property in Spain today. But remember that good value is not the same as cheapness, and be prepared to pay a fair price for good quality.”