Office market in Spain will remain stagnant until 2013

Posted on March 31st, 2012 in Real Estate in Spain by author

Commercial real estate experts Savills believe the office market in Madrid won’t show an improvement until 2013, although the beginning of 2012 has been encouraging.

Savills believe that investment in Spain’s commercial real estate sector will be hampered by a lack of demand for office space and a distinct shortage of trust in Spain’s economy picking up any time soon.

Gema de la Fuente of Savills’ Research noted that growth in Spain was likely to remain “muted until 2013”, adding that, as overseas investors were concentrating on  retail, the domestic market would be more likely to control the office market in 2012.

Among the few highlights in Spain’s commercial property market was the sale of Torre Picasso in Madrid. With 43 storeys Torre Picasso ranks as one of Madrid’s tallest skyscrapers, using most of the space as offices. The office development changed hands for €400 million / £338 million at the beginning of this year and Savills confirmed that this particular deal accounted for 10% of the total volume of transactions brought to completion by the end of 2011.

The buyers are Pontegadea Inmobiliaria SL, an investment company founded by Zara’s Amancio Ortega. The intention to sell was announced at the very end of last year, when construction company Fomento de Construcciones y Contratas made the deal public.


Getting a foothold on the Spanish property ladder with distressed properties

Posted on March 31st, 2012 in Real Estate in Spain by author

Not every investor has access to large funds to start their property portfolio. Distressed properties in Spain present would-be investors with an ideal opportunity to get in on the buy-to-let or holiday-let market.

Jon Ainge, director of International Property Success, pointed out that, while banks have introduced far stricter lending criteria, which have made funding a property problematic for some investors, they are willing to advance mortgages on Spain’s distressed properties. Recently introduced legislation forces Spanish banks to shed the glut of properties on their books in order to reduce their exposure to under-performing assets.

Jon Ainge explained: “If banks currently finance a development they are keen to deleverage themselves of the current risk they hold – this is where you will find that most loans are not being issued in countries such as Spain.”

The recently published Global Distressed Property Monitor by the Royal Institution of Chartered Surveyors revealed that increased demand for distressed properties had occurred in the last three months of 2011, far more than in the previous quarter.

Industry experts forecast roughly the same number of distressed Spanish properties would enter the housing market in the first quarter of 2012 than there had been listed in the previous quarter.


A Retirement nest egg with Spanish property?

Posted on March 31st, 2012 in Real Estate in Spain by author

With the latest budget having been announced in the UK many people are looking at different options to boost their retirement funds – how about making Spanish property part of the retirement fund?

Jon Ainge, the director of International Property Success, believes that using Spanish property with capital growth and holiday rental income potential to boost retirement portfolios is not a bad idea.

“I believe the returns from overseas property, particularly in locations like the Caribbean, the Algarve and Spanish coast can help fund retirement and should be part of a pension portfolio,” Jon Ainge explained.

The idea of buying real estate in Spain has of late interested far more British people than before. Liz Rowlinson, the editor of A Place in the Sun magazine, observed that falling house prices have made Spanish homes more affordable, while at the same the traditional factors of great amenities, warm sunny climate and beachside holidays are still as appealing as ever.


Spanish property prices continue the downward spiral

Posted on March 14th, 2012 in Real Estate in Spain by author

January’s house prices saw the worst depreciation since 2008 and, while this news was greeted cheerfully by potential foreign buyers, the Spanish press has expressed fears over a deepening of the crisis.

Spain’s new government, headed by the People’s Party, appreciated the “good” news, as lower prices mean greater affordability. Government officials are currently putting pressure on banks to cut prices for residential properties by launching higher capital requirements and making far greater provisions for bad debts and “undesirable” properties on their books, namely those properties that are unlikely to be sold., a Spanish online property expert, commented on January’s sales results as being “the worst month since the Spanish housing crisis started four years ago” and underpinned their statement with statistics that revealed a 9.4% decrease in a year-on-year comparison with 2011.

Traditionally, December and January are the worst months for selling property anyway, which means the average month on month decrease of 1.9% has to be seen in context. The average price per sq. meter is static at €2,000, meaning a typical 2-bedroomed holiday apartment still sells for just €130,000.

This is potentially good news, as low prices at desirable locations such as the costas have already caught the attention of international investors. Large numbers of self-catering tourists coming to Spain for their holidays have the potential to increase yields on rental income and Spain’s revenue from tourism was at a record high in 2011.

It is estimated that at least 36% of all bank-owned housing stock is in seaside locations. Such developments received generous funding during the housing boom years, when developers speculated on rising prices. Now such key-ready housing stock bargains are luring potential buyers from the Benelux countries, the UK, Germany and Scandinavia to Spain once more., a specialist in bank-owned housing stock, described the whole debacle best by saying “crisis, what crisis? Price reductions are good news for both international and Spanish buyers.”

Is Spain’s government right after all? Affordability can be measured in two ways: who can afford to buy in Spain at what price? Domestic buyers have far less money to spend on properties located at the costas than international investors, but this has prompted Spanish buyers to look for property bargains in cities and towns, leaving the seaside housing stock largely to foreign buyers.

The Bank of Spain has told off the country’s banking sector, suspecting that prime properties are being held back until better market conditions are starting to surface. Housing stock that nobody else wanted has instead been offered at rock bottom prices to bank employees, their families and friends, even to long standing customers. Despite such tactics, some 600,000 housing units remain unsold to-date, representing a year’s worth of housing stock during 2007 peak times.

Spain’s banks will come under increasing pressure to release quality properties in prime locations at the costas onto the market to achieve more sales. They will also be called upon by the government and the Bank of Spain to come up with better incentives, so that international buyers can take advantage of lower prices and improved finance options.


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Spain’s leading developers urge government to introduce mortgage interest tax relief on holiday homes

Posted on March 2nd, 2012 in Real Estate in Spain by author

An introduction of mortgage interest tax relief on holiday homes could stimulate demand and cut the oversupply of unsold holiday homes at the costas, says the G-14 association of Spain’s leading property developers.

They are urging the government to adopt new measures to deal with the crisis in the holiday homes market. The Spanish government has reintroduced mortgage interest tax relief on main homes, even though experts warn that homeowners occupying their properties will be better off, while tenants renting a home will suffer, a measure that makes it far more difficult to get the rental market moving into the right direction again.

Quoted in the Spanish press recently, Antonio Carroza of rental company Alquiler Seguro said this request is nothing short of “irresponsible”, since public money would be used to effectively subsidise large-scale developers to finally shift second homes that should never have been constructed in the first place. Such mortgage interest tax relief should only be extended to resident Spaniards, not foreign investors who purchase holiday homes in Spain.

The G-14 association also urged the Spanish government to cut ITP sales tax on resale properties, a move that would help private vendors.


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Sales volume for Spanish property transactions rises by 27%

Posted on March 2nd, 2012 in Real Estate in Spain by author

The new Spanish government, led by the People’s Party, made a number of decisions on how to kick start the property market that have led to a scramble among foreign investors to snap up property bargains in the New Year.

At the end of 2011 international property investors came back to the land of sunshine and Sangria to boost the annual sales volume to €3.6 billion, representing a 27% increase in a year-on-year comparison. What started as a trickle of potential buyers at the beginning of January soon transformed into a positive flood in parts of Spain, where lenders and cash-strapped developers tried to lure buyers to their doors with hugely discounted properties and excellent finance deals.

Spain’s government cut property purchase tax by half, now standing at just 4%. The devaluing of the Euro against Sterling helped also to reduce asking prices by up to 50% and produced mortgage deals with up to 107% loan-to-value offers. International buyers were quick to spot various surveys listing property super sales.

A considerable number of buyers clearly felt that prices couldn’t go down any further, reserving their chosen properties either by internet or making appointments to view them post haste.

A bank-owned property development based in Costa Almeria saw the bank’s reservation system for viewings virtually collapse under the onslaught of potential buyers wishing to make appointments for their chosen properties. Online property portal had nicknamed the development “best key-ready buy”, which no doubt added to the bargain hunters’ frenzy.

Within the space of a week there were multiple buyers lined up for viewings on waiting lists spanning several days, while the banking staff wrestled with a mountain of mortgage application paperwork and tried to allocate reservations to the correct property and potential buyer.

Their system allowed the bank to skip from one failed applicant to the next one in line on their waiting list, using the bank’s lending criteria as the basis for weeding out the unsuitable applicants.

One plucky South African buyer can hardly believe his luck, after having selected via Google and Skype street view and having patiently waited for several days, he eventually got the third penthouse, he’d chosen for just €62,000. The property is a brand new 2-bedroomed pool and sea view penthouse, includes all appliances and has a choice of no fewer than 4 swimming pools.

The most sought after properties in this super sale were the newly built, key-ready penthouses that have rooftop solariums together with either sea views and/or stunning views over four communal swimming pool areas. The €62,000 price tag is for 2 bedrooms, fully-fitted kitchen with appliances, air conditioning and secure parking. Buyers only need a €6,000 deposit to secure the deal.

The properties were discounted by 50% by the bank who owns the penthouses. The properties come complete with guaranteed 90% mortgage deals.


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Great choice of Spanish bargains for investors

Posted on March 2nd, 2012 in Real Estate in Spain by author

One real estate experts believes there are great opportunities in Spain for investors, since the various financial issues affecting some European member states and their banks are opening up the chance of acquiring property at heavily discounted prices.

The Head of European Office Research at Aberdeen Asset Management, Mr John Danes, commented in an interview with Property Investor Europe on the selective approach investors are forced to take while the Eurozone is in such financial turmoil.

There may be a great choice for investors wishing to buy assets, but much of the European office sector is still overpriced and Mr Dane advised investors should consider the industrial and retail markets instead.

Mr Dane’s concerns follow upon the IPS’ revelations that Spain is currently one of the most distressed real estate markets in the world, where property can be bought for some 60% under its market value and where lenders offer 100% finance deals into the bargain.

His firm recommended potential investors to remove the asset-related risk that office investments pose.


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Real estate market declined further in third quarter

Posted on March 2nd, 2012 in Real Estate in Spain by author

According to data published by the Spanish Government (Fomento), sales of Spanish property declined in a year-on-year comparison by 6.3% to just 75,462 sales in the third quarter this year.

While this may seem depressing news at first glance, it is nothing compared to the fall seen in the first 2 quarters of 2011, when a 30.4% fall was seen in the first quarter and an eye-watering 40.8% decline was recorded in the second quarter of the year. Some members of the Spanish press have chosen to put a rosy glow on this latest result, El Pais being one of them.

The sales result of the third quarter was undoubtedly influenced by the government’s announcement of new measures to boost the real estate sector, such as the reduction of VAT on purchases of new properties, down from 8% to 4%. It hardly bears thinking about, what would have happened, if there hadn’t been such incentives!

Although it is important to take the quarterly figures published by the Department of Housing in the Ministry of Public Works into account, the monthly data released by the National Statistics Institute (INE) are far more reliable as a true reflection of the property market situation across the country. Their figures, which exclude social housing, show no improvement of the real estate sector whatsoever for the third quarter.

The Property Register, another valuable source of accurate data, reported a 32% decline in property prices for the third quarter this year.

Bearing in mind that lending to new mortgage applicants has come to a virtual standstill, it is highly unlikely that the Spanish property sector will see any significant improvements in the final quarter of 2011.

While overall the figures suggest that things are still grim across Spain, there is reputedly evidence that shows some areas are more recession proof than others and luxury, high-end properties in some of the most sought after regions have fared far better than the average property has.


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People’s Party is being urged to introduce property reforms

Posted on March 2nd, 2012 in Real Estate in Spain by author

After a landslide victory, Spain’s brand new government formed by the People’s Party (PP) has a tall order to fulfil the expectations of an electorate that kicked out the last government, which it held responsible for the financial woes of the country.

When the People’s Party was last in power, they put their weight behind the real estate sector, because it generated huge revenue and jobs for the country. Voters are hoping the “Property Party”, as the new government has been nicknamed, will do so again this time round.

It’s not just overseas buyers who are asking for urgent reforms in the property sector – Spanish families have been suffering from the same ill-judged banking follies as their overseas counterparts. With record numbers of households going into mortgage arrears and hundreds of thousands of repossessions having already taken place and with hundreds of thousands more to come, the People’s Party has its work cut out to satisfy the electorate at home and investors abroad, who have traditionally been  the driving force behind Spanish property boom years.

Banks stand accused of not being more lenient with debtors, while they themselves were largely responsible for producing the crisis in the first place. Easy to come by credit for mortgages people couldn’t really afford, spurious construction guarantees that weren’t worth the paper they were written on and reckless spending have all been blamed for the crash of the property market, and in its wake numerous scandals involving corrupt regional officials of the previous government and unscrupulous developers working hand in glove to cheat buyers came to light.

Now people are looking to the new People’s Party government to firstly take a close look at the last resort measures introduced by the outgoing government, while at the same time coming up with new ideas to reinstate and enhance confidence in the Spanish real estate sector with both home-grown and international buyers. Millions of jobs in the construction industry were lost when the market crashed – millions of jobs need to be created afresh and a huge amount of incoming investment funds are needed to get the Spanish economy back on track and refill the empty tax coffers again.

The outgoing Socialist Government hurriedly cut VAT/IVA on property purchases by 50% from 8% to just 4% for a 5 month period lasting from August to December 2011. They also introduced an Online Registry Service for potential buyers, who wished to verify the legality of the property they were trying to purchase.

The Socialist Government also dispatched their perhaps less than effective Minister for Housing on a “Property Roadshow” across Europe, where he was supposed to reassure investors and members of the press that all was well with Spanish property market – but failed largely to do so.

Far from providing reassurance on “Land Grab” scandals and satisfactorily answering questions concerning compensation claims, the Spanish government’s “Property Roadshow” teams did little, if nothing at all, to lay fears and scepticism by potential buyers, affected home owners and the media to rest.

Ben Walker, sales manager at one of the country’s leading real estate portals promoting distressed property bargains offered by banks and desperate developers, remains unconvinced any of the previous government’s measures has had the desired effect. “None of which seemed to work as it was perceived as too little, too late in Spain and in countries like Sweden, Russian and Britain,” he said.

Ben should know – he works for, a portal that offers some 19,000 bank-owned properties, which were selected for promotion to international investors and families seeking bargains for a lifestyle change. “The previous government’s confidence building efforts may have had the opposite effect. The new government has 1 month to the start of the New Year buying season to come up with enough incentives and safeguards to get more buyers tempted by the genuine bargains and mortgage deals on offer,” he added.

The new Online Registry Service was tested by members of the media, only to reveal fatal flaws in translations as well as incorrect and even out-of-date details. Outstanding court cases on fraudulent property transactions, land grabs and spurious bank guarantees were not even listed and at the end of the day prospective buyers still didn’t know, whether or not the properties they wished to buy were legal and safe to be bought.

Although the tax cuts, which typically would have saved some €8,000 on a €200,000 purchase, were meant to be available for 5 months until the end of 2011, banks were too disorganised and took 60 days and more to approve mortgages, which is rather counter-productive, given that potential purchasers require sufficient time to take legal advice, plan their viewing trips and have legal documents translated.

Ben Walker expressed his worries: “If they don’t get a grip on the market, they may find economic recovery splutters out and the Eurocrats take over the reins as in Greece, Ireland and Italy.”


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Overnight occupancy rates rose by 3.2% this October

Posted on March 2nd, 2012 in Real Estate in Spain by author

Spanish hotel industry counted some 24.7 million overnight stays this October, a healthy 3.2% increase compared year-on-year. While the overnight occupancy rate by residents fell by 9.3%, the rate of overnight stays from non-residents rose by 11.1%, indicating that efforts to improve Spanish tourism industry are beginning to work.

Latest figures published by the National Statistics Institute show that the average stay also went up by 3.5% compared with October last year, when on average guests stayed for about 3 nights in hotels.

According to the figures, 52% of all available hotel beds were occupied in October 2011, representing an increase of 2.2% from the previous year. Indeed, during the first 10 months of 2011, the rate of overnight stays went up by 6.9% compared year-on-year.

The weekend occupancy rate went up by 3.5%, bringing it to an overall 56.3% result.

The changing fortunes of European economies are reflected in the number of visitors that come to Spain. While the German economy is flourishing once more, the number of German guests staying in Spanish hotels went up by 14%; meanwhile, the British market increased by a mere 5.3%. In combination the two countries were responsible for 9 million guests occupying Spanish hotels this October.

Overnight guests from France, Italy and the Netherlands accounted for year-on-year increases of 15.4%, 10.9% and 21.7% respectively.

The Most Popular Destinations in Spain

Like in previous years the Balearic Islands are still firm favourites among non-resident guests. Here overnight stays from overseas visitors increased by 13.2% in October. The Canary Islands are in second place with an increase of 14.0% and Cataluña is in third place with a rise of 5.9%.

Guests who are normally resident in Spain favour Andalusia, Cataluña and the Valencia region, but occupancy rates have gone down compared to the same period last year, namely by -14.5%, -8.9% and by -10.4% respectively, while the Canary Islands had the highest occupancy rates measured in bed places, namely 70.7% of beds were filled with overnight guests in October 2011. In second place Madrid counted an occupancy rate of 58.7% and the Balearics recorded 57.1% occupancy in October 2011.

The islands and costas are still firm favourites with tourists and this was reflected in the occupancy rates and overnight stays. Barcelona recorded the highest occupancy rate by bed places with 72.9% generally and the highest weekend occupancy rate by bed places with 78.7%. Mallorca had 3.8 million overnight bookings in October 2011.

Madrid and Benidorm also recorded high overnight occupancy rates. Arona on Tenerife had the highest occupancy rate by bed places with a staggering 81.5% being filled and Benidorm ranked as the highest weekend occupancy rate holder with 86.8% of bed places being filled.


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