The A Place in the Sun Live show will be on in London at Earl’s Court from 26th to 28th March. Aside from an impressive list of attractions , there are two extra reasons to put the dates in your diary. First, we’ll be offering free tickets to the show - we should have more details about this for you next week. Second, the AIPP have chosen the event to announce the winners of the AIPP 2010 awards. AIPP Chief Executive Paul Owen says: “Awards Nights can often be closed events for industry only and, enjoyable though that can be, we felt that the winning would be even sweeter in front of real, live clients!” The AIPP awards are an independent, non-profit-making initiative to reward customer service excellence in the international property sector. As such, they have a real impact on the quality of service you should expect when buying Spanish property . The winning companies will be announced on Friday, 26th March at A Place in the Sun Live. Check back here next week for more information on how to get your tickets to the show. There’s very little ‘new’ in the news this week that warrants further comment from me. Spain’s economy is still fragile - but not quite as shaky as the economies or Greece or Portugal. Both of those countries have hogged the economic headlines this week. Germany has had its share of press too. The most interesting perspective came from The Telegraph which points out that Germany’s economic strength is driven by exports. Even though their domestic economy is one of the strongest in Europe, the fact that it’s neighbours are buying fewer German products means that Germany’s own recovery may slow to the overall rate of recovery in Europe. Clearly then, weaker countries such as Spain, cannot count on Germany’s spending power to pull them out of recession. Mr Zapatero will need to figure that out all by himself - and the country’s presidency of the EU has prompted a fair amount of comment about Spain needing action rather than words . In other news which didn’t make the newsletter this week: Mark Stucklin comments on TINSA’s latest house price index as inconclusive, and the latest government data as ludicrous. Meanwhile, over at our new Spanish current affairs news site, these articles caught my eye: Spanish Small Business Closures Up 5.1% Spanish Property Rental Price Boost Electric Cars To Be One of Spain’s Greatest Aims Alhambra, Granada - Spain’s Most Visited Attraction 20% of Spain’s GDP In Black Economy Martin Dell, Kyero.com

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Free Tickets to A Place in the Sun Live

Economic figures released Thursday provided little evidence that the 16 countries that share the euro are enjoying a strong recovery from recession. Eurostat, the EU’s statistics office, confirmed that the eurozone’s economy grew by 0.4 percent in the July-September quarter from the previous three-month period - unrevised from its previous estimate - and that retail sales were flat in October from the previous month. According to Eurostat, Greece and Spain remained the only two eurozone countries in recession. Germany, the currency bloc’s biggest economy, posted quarterly growth of 0.7 percent. The third quarter rise was the first in six quarters and brought to an end Europe’s sharpest recession since World War II. Though the eurozone’s banks were not at the epicenter of the financial crisis that triggered the global economic downturn, the region suffered as demand for its high-value products fell off a cliff. The EU as a whole, which includes non-euro members such as Britain and Sweden, grew by 0.3 percent, just above the previous estimate of 0.2 percent, while retail sales rose 0.3 percent in October from the previous month. In addition to Greece and Spain, Estonia, Cyprus, Hungary, Romania and Britain continued to see output shrink during the quarter. The severity of the recession is evident in the annual comparisons - despite the modest third quarter growth, Eurostat said eurozone output was 4.1 percent lower than the year before while the EU’s GDP was down 4.3 percent. However, both were improvements on the 4.8 percent and 5.0 percent contractions recorded in the second quarter. Despite the modest third quarter improvement, growth is not expected to return to pre-crisis levels for a while yet, meaning the output lost during the recession will take years to be made up. Thursday’s data comes ahead of the latest policy statement from the European Central Bank. Analysts expect a number of significant decisions and announcements from the central bank for the 16 countries that share the euro - even though the benchmark rate will likely stay at the record low of 1 percent for months to come. In particular, they will be looking to see what President Jean-Claude Trichet says in his press conference about liquidity measures introduced to keep the banking system from collapse and to limit the scale of recession. Story from Forbes

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Eurostat: Spanish Economy Still Shrinking

News this week of new laws to help Spanish companies reduce employment costs may seem like a backward step for full employment, but it’s a necessary one if Spain is ever again to be competitive in Europe. At last, Zapatero’s government has conceded that they need to reform Spanish labour laws . I doubt these changes will be implemented quickly, or that they’ll be universally welcomed, but I’m glad to see Spain taking these first tentative steps towards being competitive within Europe. The main reason I look out for this kind of news article is that employment and the economy are inextricably linked. Full employment drives the economy upward while unemployment drives it down. Right now, with close to 20% unemployment in Spain, its economy and the Spanish property market are suffering - because people without jobs don’t buy houses. Personally, I believe that encouraging employers to hire again by revising the labour laws is the smartest thing Spain can do to revitalise its economy. Spain is also planning to increase its VAT rate from 16% to 18% in summer next year. The bill has not yet been passed and, again, this will be met with some resistance. In relation to ECB Will Exit Cautiously , I was surprised to read elsewhere that Spain has been given until 2013 to get its public deficit under the maximum allowable of 3%, while the UK has been given a year longer. That says quite a lot about the state of the UK’s finances and, Edward Harrison makes a good case for how ineffective Quantative Easing really is. Nick Snelling has some good advice in Spanish Property: How to Negotiate the Price . Nick writes with great authority and clarity about the Spanish property market because he lives and works in Spain, and he’s a published author. His new book, How to Move Safely to Spain is worth ten times its €12.75 cover price - and would make a great Christmas gift for anyone even remotely interested in moving here. Finally, despite the expectation that repossessed or otherwise distressed properties in Spain would offer the public the best deals, the reality has proved to somewhat different. We hinted at this last week in Spanish Banks Should be Better Estate Agents , but the truth is that they are not very good at it at all. We’ve just closed an advertising campaign for CAM Bank for this very reason, but we believe that key-ready properties might offer a viable alternative. These are mostly brand-new, fully legal properties that the developer is motivated to sell before the banks get their hands on them. You can find out more here . Martin Dell, Kyero.com

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Full Employment is Key to Spanish Economy

Unfortunately, negotiating the purchase price of your intended property in Spain is not always simple. This is because the seller may have two sale ‘prices’ The declared price. This is the sale price that will be placed upon the Escritura (deeds) and that will be the price upon which you will pay purchase tax (7%) and upon which the seller will pay any Capital Gains Tax (18%). The real price. This may be different from the declared price and include a proportion of ‘black’ money. So, for example, you may agree to buy a property for 300,000 Euros but only declare the sale price as 275,000 Euros. In this case, the Escritura will state 275,000 Euros and you will pay 7% purchase tax (and the seller any CGT on profit made) on the 275,000 Euro value - rather than the ‘real’ value of 300,000 Euros. The 25,000 Euros difference will be paid by you to the seller in undeclared cash. Clearly, both you and he will have saved money by not being taxed at the correct amount. Two ‘sale’ prices can certainly make life complicated. So, for example, both you and the seller may agree a sale price of 300,000 Euros for your desired Spanish property . However, you and your seller may not be able to come to an agreement as to the ‘black’ money element - and therefore the price to be ‘declared’ on the new Escritura. Your seller may, for example, want a ‘dangerous’ amount (say 100,000 Euros) of ‘black’ money. Wisely, you may refuse to pay this amount as its proportion with regard to a Spanish property with a fair market value of 300,000 Euros is very considerable. Without doubt, a discrepancy of a third could alert the tax authorities and result in a heavy subsequent fine – which you (not the seller) would have to pay! Alternatively, you may refuse (rightly) to pay any ‘black’ money at all or simply be unable to do so because you have a high mortgage requirement. In the latter case, paying any ‘black’ money may be academic. Your mortgage provider, for example, will, obviously, only bring a cheque or banker’s draft for the seller at the signing of the Escritura. So, if your mortgage is very high then you may never have any cash with which to pay a seller in any event. Of course, your seller is well within his rights to refuse to sell you his property - albeit that the only reason is his desire for a certain amount of ‘black’ money which you refuse to pay. Indeed, to your chagrin, you may find ‘your’ seller agrees with another buyer to reduce his ‘real’ sale price if that buyer offers him a really substantial amount of ‘black’ money! In reality, the Spanish authorities and the ever tighter European regulations concerning money laundering are making ‘black’ money deals ever more difficult. Indeed, I would strongly advise you to avoid any ‘black’ money deal and make sure that the declared value on any Escritura is the ‘proper’ sale price. Certainly, you should bear in mind that if ever you re-sell then your buyer may be someone who needs a large mortgage. If this is the case then he may be unable to pay you any ‘black’ money at all. In this case, you may have to agree to a declared value that represents the proper sale price of the property despite your Escritura value being artificially low. Obviously, you will then have to bear a potentially far greater Capital Gains Tax burden than ever you intended! Finally, if a ‘black’ element to your purchase price is unavoidable then be extremely wary of paying too much. Crudely, within the Spanish property ‘industry’, 10% -15% of the ‘real’ purchase price is now considered (informally!) around the viable maximum to pay. However always, always try to avoid any ‘black’ deal regardless of the amount. It is dishonest, illegal, invariably troublesome, can lead to a very unwelcome fine and significant complications when you come to resell your Spanish property. From Nick Snelling’s latest book: How to Move Safely to Spain

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Spanish Property: How to Negotiate the Price

The European Central Bank is set to begin the delicate process of phasing out its financial crisis support on Thursday, backed by new staff forecasts which should show greater economic optimism. With markets still some way from normality, all 80 economists in the latest Reuters poll expect interest rates to be kept at 1 percent. Instead the focus will be on what ECB President Jean-Claude Trichet says about scaling back the emergency lending it has used to get the euro zone’s financial system through the credit crisis and limit the recession. Trichet has dropped a number of hints since the last policy meeting that this month’s handout of one-year loans will be the last, while he and other policymakers have stressed the ECB’s support will not be needed to the same degree going forward. “The ECB is set to confirm its decision to stop 12-month refinancing after December,” said Nomura economist Laurent Bilke. “Beyond that, we look for some limited restrictions to 6-month maturity operations, such as reducing their frequency.” The expected moves would bring an end to more than a year of rapid policy easing by the ECB and herald a change of direction. But policymakers will probably to want to avoid pushing a rapid exit plan at this stage with countries like Spain still in recession after their decade-long Spanish property boom, unemployment expected to rise further and an already-strong euro threatening to sap the fledgling recovery. Some central banks such as Australia’s and Norway’s have already begun to raise rates. But the U.S. Federal Reserve has stuck to its commitment to ultra-low interest rates while taking some small steps to wind down its emergency support, while the Bank of Japan this week offered to pump more funds at banks to lower longer-term money market rates. Bilke said markets are hoping to hear how long the ECB plans to keep uncapped lending in place, while the rate of interest it charges on the one-year funds will be seen as a key indication of its mood and future interest rates moves. It has the option of either leaving the cost of borrowing at its main interest rate or charging banks a little bit more. The latter would be taken by traders as a signal it intends to raise rates at some point next year, but another option that now appears under discussion would be to have the one-year rate track any future benchmark rate hikes. A new set of ECB staff forecasts on the economy are also due. For the first time they will stretch as far as 2011. Markets are expecting a hefty upgrade to 2010 growth given the euro zone’s emergence from recession in the third quarter. Inflation numbers should also be nudged up after a stronger than expected return to positive territory last month. “They will upgrade staff forecasts but remain relatively cautious,” said HSBC economist Janet Henry, who expects 2010 growth at a mid point of 0.8 to 0.9 percent compared with the 0.2 percent seen in the ECB’s last forecasts. She added 2011 numbers should show inflation — the ECB’s main focus — still well under its target of close to but just below 2 percent. “Looking at futures prices there is a very, very modest rise in oil prices so I think the mid-point of their inflation projections will be well below 2 percent,” she said, noting that would keep down chances of a rate hike before September. Trichet is again expected to try and push down the euro. He and other European officials failed last week to convince China to let its currency appreciate, but were he to sharpen his tone on the euro it could rattle the common currency. Story from Reuters

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ECB Will Exit Cautiously

The tie-up of the two Catalan institutions, Caixa Penedes and Caixa Laietana, will create the country’s ninth-largest savings banks by assets. Plus, Unicaja and Cajasur of Andalusia are the latest two banks to merge in the midst of the nation’s worst recession. Two Spanish savings banks, Caixa Penedes and Caixa Laietana, said Wednesday they had agreed to merge, creating the country’s ninth-largest savings bank by assets. The tie-up of the two Catalan institutions will create a savings bank with over EUR 32 billion in assets, over 900 offices and a staff of around 4,000, the two said in a statement. Last week, Bank of Spain governor Miguel Fernandez Ordonez said he would like to see a third of the country’s 45 savings banks quickly absorbed by stronger institutions. He suggested the radical reform in a bid to help the sector which is struggling in the midst of the nation’s worst recession in decades. “I think there are at least 15 institutions that should merge with others. I hope (by) next spring we have restructured all these institutions, that’s my idea. We now have many, many mergers that we are discussing,” he told the Financial Times newspaper. Spanish commercial banks got off relatively lightly from the subprime mortgage crisis in 2008, as the country’s strict rules meant they did not invest heavily in the high-risk loans that caused the economic chaos. But many, especially smaller unlisted saving banks usually controlled by regional politicians, were badly hit by the collapse of the country’s once-booming Spanish property market. Unlike in several other European nations, no bank in Spain has been formally nationalised as a result of the global credit crisis, but in March Madrid placed the regional Caja de Ahorros Castilla La Mancha under special administration. And in June, Spain announced a multi-billion-euro fund to help revive the financial sector by buying stakes in banks hit by the global crisis to get them lending again. Story from Expatica Two more regional Spanish savings banks, Unicaja and Cajasur, said they had agreed to merge as the pace of consolidation in the sector gathers pace due to a recession which has fuelled bad loans. The two banks, based in the southwestern region of Andalusia, reached the deal late on Monday, they said in a statement sent to Spanish stock market regulator CNMV. Unicaja and another savings bank based in Andalusia, Caja de Jaen, agreed in August to merge and by joining force the three banks will give rise to a powerful regional financial institution. Story from Expatica

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Two Bank Mergers in Spain - Many More to Come

Mikel Echavarren, head of Irea, a Spanish real estate consultancy, talking about the state of the real estate sector in Spain. As an experienced professional in touch with many different companies in the sector it is worth listening to what he has to say. Here is a selection of comments from his Q&A with Idealista News, the news section of the property portal Idealista. Do you think there are any good investment opportunities in Spanish real estate today? I think so but they are risky. In three years we’ll probably be kicking ourselves for not advising investors to invest now. There aren’t many opportunities in commercial real estate because there isn’t much product and rents haven’t yet adjusted. In residential, on the other hand, the correction has been very strong and fast. The ideal profile now is an opportunistic investor buying properties off banks by taking on the existing debt, a type of real estate venture capital. So you think there are opportunities in a residential sector because the adjustment has already taken place? There are hundreds of thousands of possible Spanish property transactions, but not many genuine opportunities. What there is not is any financing, so anyone who wants to take advantage of this market has to take the debt with the asset, but there are still very few people prepared to do that today. Has the price of housing and land touched bottom? House prices touched bottom some time ago, they have already fallen all they had to fall. And the price of land has fallen faster than house prices although it could even fall a bit more. We have been saying at the top of our lungs that the price statistics published by the government are worthless, and damaging to the sector because they give international analysts the impression we are a country of idiots. In the US and the UK prices have fallen around 20% from the peak whilst here we have only fallen by 8%. We work with close to 28 property companies that have been restructured, and you see that valuations are down 30% in 2 years, and then banks buy those assets with discounts of 10-15% off valuations. What’s wrong with the official statistics? They are based on valuations. One has to look at real property transactions and a survey of developers to see not only their asking prices but how far they are prepared to drop prices to sell. Do you think there is any residential property that will never sell? What there is is a stock of land that will never be sold, at least not in 10 years. There are areas of Spain where the town plans look like they were designed for an invasion of extraterrestrials, parts of Almeria, Murcia and Alicante. There is an overdose of land that will lie in the warehouses of banks for many years. On the other hand, the stock of finished property will be absorbed sooner. Is there any real demand for housing at the moment? Yes, quite a few homes are being sold. We would have to place it at more than 200,000 homes a year. What is not selling is off-plan, as there you take the risk of the developer or builder going bankrupt. It’s a good time to buy newly built homes with Euribor at 1.24%. They won’t be any cheaper next year. And when prices start to rise they will do so at a rate of 10% per year. How does one get the Spanish property sector to recover? The residential sector is already recovering, just not the developers, who won’t see the light at the end of the tunnel for three years; it is very bleak for them. Clients of ours tell us they have sold a lot this summer, and some banks tell us that they have had more mortgage requests this summer than in all 2009. Furthermore, we believe that developers have dropped their prices to the minimum. There is mortgage financing available, not much, but there wasn’t any at all in 2008, and now there is. Mortgage costs are low, and it appears that the future is not going to get any worse. The recovery is underway, although this won’t show up in the official statistics until the first half of 2010. As soon as there is a general perception that things are getting better, house prices will stop falling and start rising. Story from Mark Stucklin

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Spanish Property Recovery Already Underway?

Up to 90,000 Britons who have sold a holiday home in Spain in the past 12 years could be owed thousands of pounds by the Spanish tax authority. During that time, the price of holiday homes in Spain enjoyed a huge boom, with prices peaking in 2007. But while the locals paid just 15% in capital gains tax (CGT) on their profits when they sold, Britons and other non-residents were charged a hefty 35%. Experts estimate the homeowners who sold since 1997 could be due an average £13,500 tax refund. The European Court of Justice has opened the door to this huge tax rebate for nonresidents by ruling that the tax regime was ‘unlawful and discriminatory’ to other EU citizens. This latest ruling paves the way for tax rebates totalling £283m, according to calculations by foreign currency specialists HiFX. The ruling applies to homes sold after 1986, when Spain joined the European Community, but the differences in the level of CGT charged to Spanish and UK nationals mean that rebates are only due to those who sold from 1997 onwards. Someone making €100,000 profit on the sale of their holiday home, for example, would pay €35,000 in tax if they were British, but only €15,000 if they were Spanish residents - a massive 133% difference. So they would be entitled to a rebate of €20,000 (£17,680). In addition, they can claim interest on the amount of 6% a year. Spain’s two-tier CGT system was changed to a single rate of 18% for all in 2007, after the Spanish High Court found in favour of a British couple who argued that they shouldn’t have been charged more for selling their holiday home. But at that time the tax authorities allowed only claims for tax rebates going back to 2004. Now the limit for claims has been extended. The amounts owed will be boosted by the exchange rate as the euro has soared 27% against the pound in the past two years. However, it is not easy to calculate exactly how much you will receive as you still have to allow for CGT in Britain. Under UK tax rules, if you are taxed less overseas than you would have paid here, then you have to pay our taxman the difference. So once you receive your refund from the Spanish you may have to hand some back to HM Revenue & Customs. Until April 2008, the top rate of CGT was 40% but rates were tiered - the longer you’d held the property, the less tax you had to pay. Everyone has an annual exemption from CGT which they can set against their gain before tax has to be paid. This amount rises every year. Those most likely to gain are basic-rate taxpayers and those who owned their property for more than five years. For more information, and details of how to register your interest, visit spanishtaxreclaim.co.uk Story from This is Money

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Spanish CGT Tax Rebate Stretched Back to 1997

The technical end to recession in Europe makes both Spain and the UK look a little sick, although it also represents an opportunity for Spanish growth. If the country also deals with the systematic corruption of its Town Halls - maybe there really are blue skies ahead? The big news last week was that Recession Ends Across Europe - except in Spain and the UK. In Spain, however, we read that Deflation Concerns Subsiding , while an article calling Britain the economic sick man of Europe concluded: “Of the five largest European economies, only Britain and Spain are still in recession, and even the stricken Spanish economy is performing marginally better than the UK.” For Spain, at least, the prospect of a general European recovery is very good news indeed. In European Recovery is the Best News for Spain we learn that 70 per cent of Spain’s exports go to the eurozone. If Spain’s European neighbours now have more disposable income available for Spanish products, that will become a significant factor in returning the Spanish economy to positive growth. As I’ve been predicting for quite a while now, this definitely applies to the Spanish property market too. In Mallorca - a Taste of Things to Come in Spain , Mark Stucklin highlights the fact that foreign buyers are ready and waiting to snap up prime Mallorca property - because while the Spanish economy is still frail, property prices are temporarily suppressed. On a related note, there’s more good news in Finally, Spain Wakes up to Corruption . It seems that Spaniards are now willing to accept that the property boom also brought about massive municipal corruption. Aside from being miffed about these criminals lining their own pockets, it’s starting to dawn on them how Spain’s international status has also been badly damaged. We can only hope that when our economies return to ‘normal’ that the Spanish property market will emerge with greater transparency and a little less prone to the excesses of boom and corruption. There’s a new and very useful article from Peter Christian for those of you keen to speak Spanish as the locals do. In Tasty Phrases To Help You Enjoy Delicious Food in Spain , Peter provides some surprising examples. My favourite phrase translates literally as: it smells of death whereas in Spanish the meaning is quite the opposite - good to know. Last, your response to last week’s article about the upcoming Spanish Property Auction was huge. Download the catalogue to see which lots are for sale and also to read some very professional background advice. Martin Dell, Kyero.com

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Blue Skies Ahead for Spanish Property?

Once a star performer in Europe’s 11-year old monetary union, Spain has become the wayward laggard. Growth data last week showed the Spanish economy - hit badly by a property market collapse and soaring unemployment - stuck firmly in recession in the third quarter, while the eurozone as a whole grew 0.4 per cent. The rollercoaster ride might suggest the European Central Bank would have difficulty calibrating policy steps to suit Spain and the other 15 eurozone countries. During the economic crisis, Miguel Fernández Ordóñez, Spain’s central bank governor since 2006, has rarely given interviews. Talking to the Financial Times in the library of the bank’s plush Madrid headquarters, he strikes a distinctly cautious tone, but his messages are not so different from those of his colleagues in Frankfurt. After the collapse of Lehman Brothers investment bank last year, the ECB cut its main interest rate farther and faster than ever before, to a record low of 1 per cent. He hints this monetary policy stance will remain for some time. “It is clear that any increase in [interest] rates is off the screen. The markets do not expect any change before the second half of next year,” he says. He agrees, however, that with financial markets normalising, the ECB’s governing council should plan to remove emergency support, such as offers of unlimited liquidity for up to one year. “My reasoning is that those measures were exceptional because the markets did not work well. When the markets are working well, we should take them away because otherwise the markets will never work perfectly, ever. Support should be exceptional.” Jean-Claude Trichet, the ECB’s president, indicated this month that the “exit strategy” would start in December, with the ending of one-year liquidity offers. But is Spain ready for the start of such an ECB strategy, given its weak growth prospects? “Well, it’s ready for recovery,” Mr Fernández Ordóñez replies, “because recovery in Europe is the best news for Spain.” Some 70 per cent of Spain’s exports go to the eurozone, he points out. His biggest concern is that Spain pushes harder to bring public finances under control and increase labour market flexibility. From one perspective, eurozone membership acts as a straitjacket in a downturn because devaluation is not an option. Worse, the euro is strengthening. Mr Fernández Ordóñez does not see things that way, however. “Of course you are right that we cannot devalue, and what does it mean? This means that we have to do more structural reforms so that you have the advantages [similar to those] of devaluing.” As such, he is happy to see Spanish consumer prices falling faster than elsewhere. “Deflation in the euro area would be a disaster. But if you don’t have deflation in the euro area and we have a negative inflation differential in Spain compared with the rest of the eurozone, that would be the best thing. Reducing prices and regaining competitiveness is what we have to do.” Story from FT.com

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European Recovery is the Best News for Spain