Pure investors from the UK have disappeared from a holiday home market now dominated by cash-rich lifestyle buyers, according to new research from Savills. The report from Savills International Research and holiday lettings company HomeAway.co.uk, revealed how far the overseas property market in the UK had fallen over the last year. Just 2% of the 430,000 foreign-home owners in the UK bought their property in 2009, compared to 70% who bought between 2003 and 2008. “By spring 2009 Savills International noted that interest in international holiday homes had returned, albeit at far lower levels than previous years,” said the report. “The market has now reverted back to traditional, end-user buyers (as opposed to investors), and mostly in traditional, established hotspots.” The high number of distressed sales that have contributed to oversupply and falling prices has helped keep pure investors out of the market, it added. “In contrast to previous years, investors solely seeking to capitalise on upward price movement are no longer active in the market place.” Savills’ head of international, Charles Weston-Baker, told OPP that mid-market buyers had also started to return to the market. “We have started to see more grassroots sales coming through,” he said. “The very top of the market has largely been unaffected, but now end-users who are looking for lower-priced but quality property are buying to enjoy the product. “We’ve also noticed how important sport has become to buyers, especially for baby boomers and those retiring. There’s a new enthusiasm for experiential holidays and buyers need a reason to be somewhere, such as golf or horseriding. We seem to have jumped 20 years in aging, where people are slowing down at 80 rather than 60.” The report predicts another quiet year for the UK holiday home market, with most sales taking place to high-income lifestyle buyers in traditional locations, with little activity in the speculative or off-plan markets. In 2009, although property in France, Portugal and Spanish property remained the most popular destinations for Savills’ buyers, the proportion of people buying in western Europe overall decreased, as the popularity of central and southeastern Europe (particularly Cyprus, Greece and Turkey) and the Caribbean grew. However, the sample base for 2009’s results was much smaller than in previous years. The proportion of people buying in major cities and in villages grew substantially at the expense of smaller towns and isolated rural locations. The popularity of purpose-built resorts also increased. “This reflects not only the growth in preference for such developments but also the rise in quality and quantity of such communities,” said the report. Interest in buying property to renovate or improve also fell, mirroring the rise in resorts where ready-to-go homes maximise letting potential. Savills’ market has become skewed towards mid-to-top end buyers, and properties worth more than £200,000 now form the majority of purchases, with a particular fall in popularity of homes worth less than £100,000. Story from OPP (registration)

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Spain Sees Return of International Lifestyle Buyer

Spanish Banks are slowly relaxing their lending criteria with one or two offering more attractive deals and higher LTV’s. However, banks are still being cautious when it comes to assessing a client’s affordability. Most banks use a debt / income ratio of either 35% or 40%, although we work with one bank that uses 50%. This really helps those clients who struggle to get mortgages elsewhere due to having a higher ratio of regular outgoings on mortgages, loans, credit cards etc. to net disposable income (the “debt / income ratio”). The eurozone base rate has remained at 1% for some time now, meaning that borrowing in Spain is still cheap. With the recovery in Germany faltering and ongoing problems in the so-called PIIGS group of countries (Portugal, Italy, Ireland, Greece and Spain), it is very unlikely that there will be a sudden hike in rates. With regards to the exchange rate, this is more or less the same as last month. Dual-currency mortgages are available, which allows clients to pay the mortgage in pounds sterling and avoid any currency fluctuations. If you are buying a property for your main residence, we can offer 80% of the bank valuation. This means that if the valuation is higher than the purchase price, it is possible to borrow up to 100% of the purchase price, which is something that has been impossible during the recession. The interest rate is as low as Euribor (annual) + 0,66% (the lowest we have come across to date), with 0,5% bank opening commission and 0% redemption penalty for partial redemption. Another attractive option is that you can have up to 2 years’ interest-only. This bank also offers remortgage products. Terms are available up to age 75 with a maximum 45-year duration. The only disadvantages with this product appear to be the compulsory insurances and that the client’s income needs to be paid into an account with the bank. More information from Mortgage Direct

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Spanish Mortgage News

The Ministry of Development has just released some statistics that help illustrate the severity of Spain’s construction boom and bust. What is worse, there is no quick solution as much of the trouble is stored up in a new homes glut that will take years for the market to digest. The new figures show that 387,000 new homes were finished last year, despite a property market crash already into its second year. Compare this to the 220,600 new home sales recorded by the National Institute of Statistics for 2009, and you get an over-supply of around 166,500 new homes that joined the glut of new homes languishing on the market in search of a buyer. As a result there might now be something like 1.1 to 1.2 million new homes on the market, the equivalent of the entire housing stock in Madrid. BBVA, one of Spain’s largest banks, put the figure last year at 1.1 million, to which we need to add the new 166,442 finished and not sold in 2009. The developers’ association and the Ministry of Housing are more optimistic in their estimates of between 700,000 – 750,000 new homes on the market, but even at that level it will take years for the market to absorb. How much is too many new homes? It all depends on how many new households start each year, as new household formation drives demand for new homes. Last year, there were around 225,500 new households formed in Spain, down from 300,000 plus p.a. in the boom years. New household formation surged as immigrants flooded into the country and changing demographics and life-style choice (for example and increasing divorce rate) pushed up the demand for housing. But even at the boom level of 300,000 new households a year, it is now clear that Spain was building way too much Spanish property . In 2006, for example, there were 865,500 planning approvals, (though not all of them went on to become housing starts). And in 2007 there were a record 641,500 housing completions. Now even if you assume that demand for second homes was a generous 200,000 per year, Spain was still building something like 200,000 or more excess homes per year. Now they are idling on the market, tying up capital, and dragging down the Spanish economy’s productive potential. At least supply has finally adjusted to demand, though the astonishing collapse in new residential construction is creating economic havoc (a collapse in new building is just as bad for the economy as too much building). Residential planning approvals last year were down to 110,000, the lowest level since the present data series began, and lower even than the 1970’s, when the population was much smaller. A couple of examples will illustrate how severe the shock has been. In Malaga city (550,000 residents), planning approvals have fallen from 7,500 in 2003 to 800 last year. And in Madrid, the Spanish capital, they have fallen from 35,000 in 2003 to 3,375 last year. That’s a drop of almost 90%. Therein lies the key clue to Spain’s serious economic problems. Story from Mark Stucklin

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Spanish Property Boom & Bust

Upward revision to fourth quarter economic data does sterling no favours. Germany and France consider a bailout for Greece but there are no details yet. A two-day honeymoon took sterling from €1.1350 to almost €1.1450 before it set off south. Thursday and Friday were a one-way street that took it down to €1.11 in time for London’s opening this morning. Robert Stheeman, the chap responsible for issuing UK government bonds, managed an upbeat tone when he addressed a conference in London. He said that ‘politicians of all colours are taking the [public sector debt] situation very seriously indeed. Investors derive a lot of comfort that there is agreement across the spectrum that the deficit needs to be brought under control.’ Mr Stheeman also suggested that a hung parliament might be ‘less disruptive’ than assumed. Unfortunately the market did not share his optimism and sterling spend most of the week on the slide. The rot started, as it so often does these days, with cautious words from Bank of England Governor Mervyn King to parliament’s Treasury Committee. He did not go out of his way to talk sterling lower but, by refusing to rule out the possibility of further quantitative easing, made it sound as though the Bank’s printing press is ticking over and ready for more action. The governor’s comments coincided with news that mortgage approvals had dropped sharply in January with the end of the stamp duty holiday. Sterling spent the rest of the week rolling from one punch after another as investors lightened their holdings. A sharp fall in business investment at the end of last year saw investment down by 24.1% for the full year. Consumer confidence improved by three points but at -14 it still had a minus sign in front of it. Nationwide reported a -1.0% monthly fall in house prices after nine months of improvement. Britain’s overall economic performance in the fourth quarter of 2009 was revised to show growth of +0.3% instead of the +0.1% previously reported but third quarter shrinkage was also revised, from -0.2% to -0.3%. Government spending in the fourth quarter was much higher than expected. Investors did not just ignore one part of the euro zone economic story, they ignored the lot. Industrial new orders grew in December by +0.8%, less than a third of the pace seen in November but the cumulative effect of several months of improvement took the annual increase to +9.5%. Confidence figures from Brussels had little to say; consumer and economic confidence were very slightly softer while industrial confidence edged higher. Euroland inflation was roughly in line with expectations. Prices fell by -0.8% in January but were still +1.0% higher than a year ago. Greece was again the main story for the euro. Even though no solid plans emerged last week, stories at the weekend suggested the emergence of a workable solution that would see the better-heeled euro zone members buying Greek government bonds. EU Economic Affairs Commissioner Olli Rehn is in Athens today, apparently to negotiate a deal whereby Greece would get the support it needs in return for taking painful decisions to reduce its budget deficit. Although Germany’s Chancellor Merkel still publicly maintains that Greece’s salvation lies in Athens, not Berlin, she and other European leaders are not looking for a Pyrrhic victory that would scupper the single currency. The six weeks that sterling spent between €1.13 and €1.16 have been consigned to history With opinion polls closing the gap between Labour and Conservative to almost nothing investors fear that even after the general election Britain’s government will be paralysed by indecision, unable or unwilling to tackle the budget gap. Buyers of the euro should hedge at least 50% of what they will need. If the money will be required in the near future they should consider covering the whole amount. Get the best foreign exchange rates with no bank fees or commission charges using your Moneycorp Privilege Card

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Another week of Punishment for Sterling

Buyers in Spain could be able to secure 100% mortgages for the first time during the downturn thanks to a new developer-bank partnership. Customers buying from UK-based developer Almanzora Group will be able to apply for 100% loan-to-value finance through the Bank of Andalusia on properties with discounts of up to 55% off peak price. The developer has been selling around three properties per week since the start of the year and hopes the new mortgage offer will provide an extra boost to the Spanish property market. The large discounts make the properties more affordable and so the bank can feel more confident about buyers’ ability to repay the loan, said Almanzora’s sales and marketing manager Simon Coaker. “In some cases, the mortgage available is larger than the amount actually payable by the purchaser,” he said. “This is because, following last year’s price reductions, current prices of a number of properties are actually lower than the bank valuations.” Although the number of mortgages issued in Spain rose year-on-year for the first time in two years in November 2009, such high loan-to-value rates have become almost unheard of in Spain due to increased conservatism among lenders. However, banks are more likely to lend to customers buying repossessed properties or from developers backed by bank funding. “There are some 85% loan-to-value loans available for bank-owned properties but generally there is still little movement in the market,” said Clare Nessling, operations director for international mortgage broker Conti. Coaker told OPP that Almanzora was in partnership with the Bank of Andalusia to fund certain elements of its projects, but that the bank also wanted to take advantage of the sales opportunity. “The banks have seen us doing well and are interested in dealing with our clients,” he said. “Some of our own mortgages are with the Bank of Andalusia but they have competed against other banks for our customers’ business.” Addressing the long-term sustainability of such large price reductions, he said: “We wanted to create real interest in the property so have allied a mortgage product to selective discounts that will incentivise the market. But we think the 55% discounted stock will sell very quickly and we anticipate raising prices hopefully by mid-year.” Story from OPP (registration required)

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100% Mortgages to Boost Spanish Property Market

Recent periods of heavy selling in the Spanish stock market, in the wake of fears that worries over Greece will spread to other European nations, is reportedly being investigated by the country’s intelligence service. The unit of the National Intelligence Center that deals with economic intelligence has spent the last few weeks discussing the matter with Spanish companies and the stock exchange as well as other experts, according to a report in El Pais’s English edition on Monday. An official could not be reached for comment. The newspaper said the investigation is looking at whether there was any collusion in attacks by investors and the hostility shown by some sectors of the U.K. and Spanish press. Over two weeks ago, Spain’s IBEX-35 saw its biggest one-day loss since 2008, in the wake of worries over Greece and fears Spain might have similar economic worries. See related story on Spain The government has been battling a tidal wave of bad news and sentiment from inside and out. Prime Minister Jose Luis Rodriguez Zapatero has hinted on a number of recent occasions that criticism by the U.S. and British media is part of an effort to undermine the euro. El Pais said in private he has been taken aback by just how aggressive some parts of the foreign press have been with Spain. Paul Krugman, the Nobel prize winning economist columnist with the New York Times, is practically persona non grata for his comments on Feb. 4 after a blog posting that said Spain was the euro zone’s biggest trouble spot. Salgado responded by saying that analysts and media from outside the euro zone did not understand how the bloc worked. Krugman was at it again on Monday, writing in his column for the New York Times, that Spain’s core economic problem is that prices and costs have gotten out of line with those in the rest of Europe and there isn’t much that the government can do to make it better, as its economy is locked into the euro. “This is McCarthy-style witch hunting,” said analysts at UBS in a note to investors on Monday, in response to the report in El Pais. “Spain was a victim of joining an inappropriate monetary union and a Ponzi scheme housing market.” Story from Market Watch

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Spanish Intelligence Investigating Market Slurs

The overseas homes market may have already entered recovery in some parts of Spain as one developer has started putting its prices up. Key Mare in Almeria has seen sales rise by 30% in the last three months and now has more international customers than Spanish ones. The company raised prices across its seven resorts in the area by €3000 per property at the start of January. “Almeria is one of the up-and-coming areas of Spain so it’s not as overbuilt as other parts of the coast,” said the company’s head of international sales, Stefan Kdist. “The Spanish have always known this area but now more British and Scandinavian buyers are finding out about it.” Until now, the company has been following the line of many Spanish developers and offering discounts of up to 25%. Developers and banks have been under pressure to lower prices further to help shift the large amount of unsold Spanish property accumulated during the boom. This tactic has worked to some degree, with companies such as Taylor Woodrow seeing sales improve in the last three months by offering discounts of up to 40%. Kdist said Key Mare’s sales increase represented an improvement in confidence but he also hoped the price rise would encourage buyers to feel better about the market. “We wanted to give a signal to people that things are getting better and they should have faith in the situation. Today, people don’t feel there’s such a risk of losing their jobs as they did a year ago. Most economies are recovering and prices and interest rates are low.” With many agents and developers in Spain still suffering the effects of the economic downturn badly, Key Mare’s success emphasises how diverse the market has become. The latest data on the Spanish housing market paints a generally negative picture. Prices continued a steady fall in the fourth quarter of 2009, dropping 6.2% year-on-year, according the country’s housing ministry. The number of transactions also fell 2.6% year-on-year in November, although this was down from a 21% fall in October and transactions rose 5.3% between the two months, according to the National Statistics Institute (INE). But there was some good news in that the number of mortgages rose 1.8% year-on-year in November 2009, the first increase since April 2007, according to the INE. Story from OPP (Registration required)

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Spanish Developer Increases Prices

Risk measurement agency Moody’s said Spanish recession will continue until the second quarter of 2010. These forecasts are contained in a statement, arguing that the weakness of economic activity, coupled with rising unemployment and slower income, will “depress” the residential Spanish property market, which estimates that prices have fallen 9, 5% from their highs in 2008. Risk measurement agency Moody’s said the Spanish recession will continue until the second quarter of 2010. Spain as a country will take the longest to shed the shackles of the economic recession in the euro area. Furthermore, it believes that in this whole year, GDP will grow only 0.2 per cent while unemployment will exceed 19 percent of the workforce. These forecasts are contained in a statement, arguing that the weakness of economic activity, coupled with rising unemployment and slower income, will “depress” the residential property market, which estimates that prices have fallen 9, 5% from their highs in 2008. Oversupply of housing in Spain, with about 1.5 million vacant homes will lead to a “long process of adjustment” for the housing market, warns Moody’s. The agency also said that low interest rates have helped many of those with mortgages to cope with the economic “turbulence”, but warns that the faster recovery in the rest of the euro zone can make the price of housing rise later this year, which “may be premature” to Spain. Despite this outlook, the agency believes that the market for mortgage-backed securitizations (RMBS) has stabilized in November, although the outlook remains negative. Story from Barcelona Reporter

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Spanish Recession to Persist in 2010

The likelihood of a defeat for Labour is positive for the pound. Euro zone economic data are uninspiring but not harmful to the euro. Monday’s €1.1250 opening proved to be too rich for sterling’s blood and it quickly began to retreat. It traded below €1.11 on Tuesday, rebounded to €1.12 on Wednesday, fell back below €1.11 on Thursday and bounced yet again to €1.12 on Friday before retracing its steps downwards to open at €1.11 in London this morning. The UK economy delivered some decently positive data. Two purchasing managers’ indices, one for the manufacturing sector, the other for services, extended their progress into the ‘expansion zone’ above 50. The manufacturing PMI came in at 54.6, taking second place to the equivalent US measure. Services, with a score of 56.8, led the international field. The Halifax house price index added 1% in December, putting it 1.1% higher than it was at the end of 2008. Factory gate prices went up by 3.5% last year, squeezing manufacturers who had to cope with costs rising twice as quickly over the same period. But it was not the economic data that shaped sterling’s performance, it was politics. News of an attempt to oust prime minister Brown sent the pound lower; confirmation that the coup had failed sent it back up again. Investors believe that a solution to Britain’s spending gap requires a change of government. As long as it looks as though Labour will be out of office by June they are inclined to be patient with sterling. And as long as Gordon Brown is leading his party into the general election they are confident that will happen. The euro zone economy did not have much to shout about. Inflation ticked higher again, rising to +0.9% but still leaving it at less than half the target rate. Unemployment was up too, reaching double figures at 10% in November, its highest level for a dozen years. Spain was one of the biggest culprits on the unemployment front with one in five out of work and 40% of young people looking for a job. Euro zone retail sales fell by a disappointing -1.2% in November after a less than inspiring +0.2% increase the previous month. Sales were down by -4% compared with a year earlier. The second and final revision to third quarter gross domestic product confirmed that Euroland’s economy grew by +0.4% in the third quarter of last year. Investors will be keen, as ever, to hear what the European Central Bank has to say after its first meeting of the year on Thursday. No change is expected to its 1.0% Refinancing Rate but ECB President Jean-Claude Trichet will doubtless vouch an opinion about what might lie ahead for the euro zone economy. Although he never predicts where monetary policy is going he frequently drops hints. The pound has spent most of the last three months between €1.09 and €1.13. It starts this week comfortably within that range and showing no sign of wanting to escape. We therefore stick to the existing risk management strategy: Buyers of the euro should stick to a hedged position, locking into a rate for half the money they will need. Get the best foreign exchange rates with no bank fees or commission charges using your Moneycorp Privilege Card

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Politics Drives Sterling

Anyone interested in property in Andalucía, or Spain for that matter, should read this annual report on the market by Barbara Wood of The Property Finders, a buyer’s agent. It turns out the quality end of the market is alive and well and delivering great opportunities for buyers. I totally agree with Barbara’s comments about the lack of reliable house price data in Spain: “The official Ministry of Housing figures are distorted by under-declarations of the sale price in the past, while the oft-quoted TINSA stats are based on subjective market appraisals.” Unfortunately, I’d include our own Spanish house price index in that category of ‘unreliable’ data too. We’ve just published an update for Q4 2009 but this catalogue of property asking prices bears no relation to actual transaction prices. Again, as Barbara states: “If the owner has no urgent reason to sell and the asking price remains at a 2007 level, even in a prime location it won’t find a buyer. It may well happen that they eventually do get their price but that will be because it converges with a rising market. Much of what’s currently on offer in Spain at the moment falls into that category. As evidenced by our own price index, asking prices haven’t fallen sufficiently to reflect the reduced prices buyers are now willing to pay. Unfortunately, even pricing property competitively isn’t enough to ensure a sale - it also must be a ‘quality’ property. One more quote from Barbara’s article: “.. There are no buyers for second-rate positions. Buyers are able to pick and choose like never before and things overlooked in the boom will be flagged as a problem now.” If you’re at all interested in buying Spanish property in 2010, make sure you read the complete article here . Aside from continuing to sift through the mountain of news stories over the break, we also launched a new Spanish current affairs blog. It’s updated several times a day from mostly Spanish-language news sources and translated into English for you. Here are a few articles which caught my eye: New Year Spanish Tax Hikes Spanish EU Presidency Begins Tax Evasion on Rental Properties in Spain Spanish Minimum Wage Rises We’ll also be experimenting with some non-English language blogs during January and, with our Portal47 hat on, we’ll be blogging for other countries too. Here are our early efforts at collecting news stories related to French property and property in Portugal . Kyero.com certainly has a lot on its plate in 2010 - and it seems that you are also revving up for a busy year. On Sunday, January 3rd we recorded our busiest day ever for Spanish properties viewed on Kyero.com. Our statistics for December 2009 also showed increases of around 80% over the same period in 2008. It looks like 2010 is set to be a lively year. Martin Dell, Kyero.com

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2010: A Lively Start for Spanish Property