A Good Time To Buy Property in Spain

Apparently now is a great time to buy Spanish property and property Costa del Sol as the banks once again play games with their balance sheets. When the financial crises struck the Spanish property market, the banks avoided making massive write-downs by converting the loan assets into hard assets - the homes the loans were on.

This was a great idea at the time but now the 59.7 billion euros worth of homes on the Spanish banks' books have become as big-a-burden as the troubled loans they were swapped for, and the banks are now offering crazy mortgage deals including no-money-down, ridiculously low teaser rates and long deferral periods of up to 3 years.
This has been triggered by the Spanish central bank forcing banks to increase their loan loss provisions against their property assets within a few months, because of a fear that Spanish banks haven't properly set up reserves against the risk of their vast property holdings.

Given that increasing loan loss provisions would force Spanish banks to recognize losses in their income statements, many are now eager to sell off their houses.
The banks are once again delaying the inevitable, because loans like this are almost certain to have a high default rate, but the banks know that this won't have to be dealt with for a few years.

Thoughts on the banks doing this aside, it could present a good opportunity for buyers. Looking at the UK property market now, the recovery is being severely hampered by the fact that only those with a deposit of 10% or more can secure a mortgage. It certainly doesn't look like this will be a problem shared by Spain.
This may also go some ways against the repossession problem, because the properties going hand in hand with these favourable mortgages are obviously being sold at a reasonable market value, rather than rock-bottom pricing seen with repossessed properties in Spain.

Spanish Property Market Update

The latest real estate figures on prices and transactions are giving hope that the Spanish property market is improving but foreign property investors are still not returning to the country in great numbers.

Prices are still falling, but less with every passing month, according to the monthly house price index published by Tinsa, one of Spain’s leading appraisal companies.

However the Tinsa figures show prices have fallen the least over 12 months in coastal areas and the Islands, areas traditionally popular with foreign buyers looking for fly to let holiday properties and retirement homes.

Average Spanish property prices fell by 4.4 percent over the 12 months to the end of May.

“If the Tinsa figures are to be believed, the rate of decline in Spanish property prices has been slowing since June 2009, when it peaked at 10.1 percent,” said Marc Stucklin of Spanish Property Insight.

“If the trend towards smaller declines keeps up, average property prices will be stable, or even growing slightly before the end of the year.”

But Stucklin points out the Tinsa figures are based on their own valuations, not actual transaction prices.

“Most of these valuations have been paid for by banks and for several reasons they might not give a true picture of property prices,” he added. “Nevertheless, they are interesting in what they reveal about trends, not to mention the valuations used by banks for mortgage lending purposes.”

Prices are down 4.1 percent on the coast and 2.4 percent in The Canaries and The Balearics.

On a peak to present basis prices are down 16.5 percent nationally, 21.4 percent on the Mediterranean coast, and 12.8 percent in the Canaries and the Balearics.

However foreign buyers are not flocking back. The latest figures from the Ministry of Housing show non-residents bought just 513 holiday homes in Spain during the first three months of the year.

According to the Ministry transactions were up in the first quarter by just 1.5 percent and on a cumulative 12-month basis sales were down 85 percent.

Sales increased over 12 months in places like Catalonia, up 13,6 percent, The Balearics, up 7,9 percent, Asturias up 4,6 percent, Madrid up 4,5 percent, Valencia up 4 percent and the Canaries up 1.4 percent.

Prices fell by 22 percent in Murcia, were down 14.4 percent in Extremadura, down 10.3 percent in Castilla La Mancha, saw a fall of 9.5 percent in Andalucía, some 7.8 percent in Navarre, 2.8 percent in Cantabria and down 0.6 percent in Galicia.

Stucklin also points out foreigners who are buying tend to be economic migrants from places like Morocco and Ecuador buying primary homes in or around Spain’s big cities.

“They won’t help mop up the glut of holiday homes on the coast,” he warned.

“There are tens, if not hundreds of thousands of holiday homes for sale on the coast that will need to attract foreign buyers in large numbers if the holiday home glut is to be dealt with anytime soon.”

Last week a new report from Spain’s Property Registrars suggested transactions are bottoming out, though it is still too early to declare a recovery under way.

The number of property deeds of sale recorded in the property registry rose by 7 percent in the first quarter of 2010 compared to the same period last year.

This is the first time in several years that annualised sales have risen in a quarter.

The report cautions against declaring a recovery under way. They point out that temporary factors such as the imminent increase in VAT on home sales, and elimination of tax relief on mortgage payments, could be bringing forward sales and boosting the figures temporarily.

More Spanish Property Idiots

As we always say don’t believe everything you read in the press especially the bit I picked out below and he obviously isn’t referring to luxury property in Spain------------------------------------------------------------------------



The cost of a home in Spain may fall even further as it has not yet hit its lowest point.
In the view of property writer Marc Da-Silva, there is still a long way that prices in the country can fall before they hit their lowest point.
The total that prices still have left to fall could mean large reductions on some of the values being seen at present.
"If you look at various statistics there are real genuine signs that property prices need to fall further - 15 to 20 per cent on average," he said.
He stated that people who are purchasing in the country need to be sure that they are buying at the right price or they could be purchasing negative equity.
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This guy should have been out with us in Marbella this week where its getting harder and harder to find good quality discounted property especially luxury property in Spain

More Proof That the Spanish Property Recession is Over

Spanish property prices are still falling, but less with every passing month, especially the property for sale in Costa del Sol according to the monthly house price index published by Tinsa, one of Spain’s leading appraisal companies.

Average Spanish property prices fell by 4.4% over 12 months to the end of May, show the latest figures from Tinsa. That said, prices actually fell a fraction compared to last month, even if they rose compared to the same month last year.

According to TINSA, the rate of decline in Spanish property prices has been slowing since June 2009, when it peaked at -10.1%.

If the trend towards smaller declines keeps up, average property prices will be stable, or even growing slightly before the end of the year.

Coast and Islands doing best

Not Suprisingly, prices have fallen the least over 12 months in coastal areas and the Islands, areas traditionally popular with foreign buyers looking for holiday and retirement homes. Prices are down just 4.1% on the coast, and 2.4% in The Canaries and The Balearics. The Reason its not a major suprise is it is international buyers taking great advantage of the situation in place they want to buy.

Small Banks in Spain facing Funding Problems

Spain's smaller banks are suffering due to the huge amount of property for sale in Spain that is not selling and the bad lending made is beginning to come home to roost

Smaller Spanish banks are losing access to the European repo market due to concerns Spain could be heading for a debt crisis along the lines of EU partner Greece, a top financial source in Spain said on Wednesday.
The repo market is wary of smaller Spanish lenders because of their real estate losses and because they can only offer Spanish government bonds as collateral.

The sharp rise in Spain's 10-year government bond yield since mid-May, to a peak of 4.66 percent from below 4.00 percent -- has brought it above the previous high of 4.50 percent hit just before the European Union agreed on a trillion-dollar financial safety net for eurzone countries in early May.

"The smaller Spanish banks cannot finance their positions in (Spanish) government bonds through the repo market outside Spain. This shows just how little appetite their is for Spanish government risk outside Spain," the financial source said.

"And the problem is these small lenders do not have access to the interbank market so basically they are tapping the ECB to cover short-term funding needs," the source said.

A source cited by Cinco Dias newspaper said however the bigger Spanish banks, particularly Santander and BBVA , are not having any major funding problems.

"Only the biggest Spanish banks are managing to get funding, but backed by bonds from other countries such as Germany. With our national bonds they are not managing to get anything," an executive at a Spanish savings bank was quoted as saying.

Santander and BBVA are well capitalised but also have a robust liquidity position. BBVA said in April it already had 80 percent of its funding needs covered for 2010.

"And the listed banks can always raise capital for emergency funding but the unlisted savings banks do not have this possibility," a leading Spanish bank analyst said.

Spain's 45 largely unlisted savings banks -- which account for 50 percent of the financial system -- are suffering the impact of a sharp downturn in the property sector after a decade-long boom and are immersed in a government-driven consolidation process aimed at restoring the weaker banks to good health.

Currently about 35 of the small lenders are involved in mergers with the clock ticking on government funding via the Fund for Orderly Bank Restructuring which expires at the end of June.

There have been signs for some weeks that Spanish banks were having to pay a premium to borrow in their domestic repo market as the broad repricing of euro zone sovereign credit risk raised lenders' concerns over the liquidity of the banking sector.

Other banks based in the stressed fringe euro zone countries -- Portugal, Italy, Ireland and Greece -- are also struggling to find any offers for term funding in the wholesale interbank market, said ICAP analyst Chris Clark. (see [ID:nLDE6581DX])

A credit analyst source told Reuters the issue for Spanish banks was not one of liquidity, as the banks have the ECB to rely on, but that it shows that in the current risk-averse climate smaller banks are being ostracised.

"The markets are almost shut for Spain," the international banking source said.

Market access could improve if Spain's Socialist government announces further austerity measures, the source said.

At the end of May, Spain's credit rating was cut by Fitch to AA+ from AAA, adding to fears the country was heading for a debt crisis from which it will need to be bailed out.

On Monday, the Treasury announced it would aim to raise between 3 and 4 billion euros on Thursday through the auction of a new benchmark, three-year bond.

Amid concerns that the auction might not be well enough bid, analysts have said they do not expect the auction to fail partly because Spanish banks such as Santander and BBVA would buy the bond if necessary because they have access to funding.

Paul Kenyon Wins 2m In Spanish Property Case

A WELWYN man has successfully won a £2m High Court action, along with World Cup hero Sir Geoff Hurst, against fraudsters involved in a luxury Spanish property scam.

"We are relieved at the judgment at the end of a terrible ordeal for my family. "

Paul Kenyon, Sir Geoff and four other people sued businessman Mark Cordner, of Park Lane, Knebworth.

The claimants had alleged, due to Mr Cordner’s deceit, they had paid full price for apartments in Marbella, in 2003 and 2004, to which their rights were now worthless.

Judge, Mr Justice Keith, on Thursday ruled the investors were entitled to damages having been deceived into parting with six-figure sums on the basis of “a tissue of lies” told to them by Mr Cordner and his associate Michael Hone.

Mr Kenyon, who was tricked into handing over £251,748 to buy a luxury apartment, later discovered his cash was used to purchase Mr Cordner’s own large detached house in the Times Territory village.

He told the Welwyn Hatfield Times: “People need to be aware of what this man has done.

“We were 99 per cent sure that we were going to win this case.”

Mr Kenyon continued: “We are relieved at the judgment at the end of a terrible ordeal for my family.

“I am annoyed that someone I thought to be a close friend could take our money and carry on for years as if nothing had happened.

“We only discovered that Mark Cordner had used our money to buy his own property from documents we obtained with a court order.”

Mr Kenyon added he was now hoping to recover as much of the money as possible.

Chris Corney of solicitors DMH Stallard was working for the six claimants.

He said: “This case shows the perils of buying property off-plan in Spain without checking the legal background first. “Sadly many more British property buyers have fallen victim to similar scams.

“In some rare cases it is possible to trace fraudsters’ assets in the UK and we are hopeful these claimants will make a significant recovery.”

The amount of damages the group – which includes David Barkley, Terence Hopley, Martin Roberts and Verna Roberts – are entitled to will be assessed at a later date.

Soccer star Sir Geoff, who was conned out of £600,000, was not in court to hear the judgement.

Standard & Poor predict More Spanish Property Gloom

The Spanish property market crash has not yet hit bottom. The Standard & Poor’s rating agency believes that the country is still “a long way to go,” and that prices could still fall another 12%.

The authors believe that “the massive stock of supply” of housing (around a million homes, according to some estimates) should have caused a greater fall in prices. In any case, since the creation of new homes has fallen to about 300,000 a year, “will take several years to absorb the excess.”

Housing prices in Spain could collapse 12 per cent according to a report published by Standard and Poor’s on Tuesday.

According to official figures contained in the report, the annual rate in house prices in Spain fell by 6.1 percent in the fourth quarter of last year with the Costa del Sol property market outperforming this sector

S & P also includes data provided by Tinsa, one of the largest assessment agencies property in Spain, which estimates that property prices fell by 5.3 percent in the last 12 months to March 2010 compared to June, 6 per cent in December 2009.

Accordingly, the price of housing in Spain, where economic fundamentals are “bad”, have not decreased more than 16 percent, far less than what happened in the UK or Ireland