The Spanish property market is in too much of a mess for a real BMV market to exist, according to agents specialising in distressed property in the country. Struggling developers, desperate homeowners and banks stocked with repossessions are all setting their prices according to how badly they want to sell, meaning a benchmark price is virtually impossible in many of the tourist hotspots. And without a standard to measure against, agents are left to secure whatever price they can for each situation. “Something is worth what someone else is prepared to pay for it and that’s that,” says Inez Rix, owner of Direct Auctions. “You have an open market price (not value), a bank valuation (upon which they base their lending), the offer price and the declared price at notary! No wonder there is no benchmarking for Spanish property .” The problem is so severe that one unit might be on sale for 50% less than the identical unit next door, says Darren Carter, owner of distressed agent Goldberg & Partners. “It all depends on the seller, the buyer and even the weather or what week it is as to what price will be agreed. A developer or bank might have sold three units at one price last week and not want to sell at the same price this week.” The ability to sell at a below market value is also hampered by the banks’ mortgage regulations. In Portugal, developers are offering units with 100% LTV mortgages by fixing prices at 80% of the lending bank’s valuation, effectively removing the need for a deposit. “In Spain this isn’t legal as the Bank of Spain ensures their normal lending criteria is adhered to,” says Rix. “In order to achieve a percentage of borrowing against the higher bank valuation, one now has to obtain a doctored purchase contract.” Carter says there are now better finance deals for buying bank product in Spain, “even 90 or 100% LTV on the price of the property but not including closing costs”, but the mortgage market has become too dynamic. “It feels like banks will offer one LTV one week and a different one next week once they’ve got their quota for the month.” Story from OPP (subscription)

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The Myth of BMV Spanish Property

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

There was a small uptick in Spanish housing sales during the fourth quarter of last year, according to data released today by the Ministry of Housing. Small, maybe, but enough for the Government to get excited about. “The transactions in the fourth quarter represent a rise of 4.1% with respect to the same period last year, this being the first year-on-year rise since the fourth quarter of 2006,” goes the first sentence, in bold, of the Ministry’s press release. In fact, if you just look at the ordinary housing market, the uptick was even better. Excluding social housing there were 116,664 house sales in Q4, a rise of 5.5%. Regrettably, that’s where the good news ends. Take the year as a whole, there 413,112 transactions last year, a fall of 19% compared to the previous year, and a whopping 46% down on 2007. Even the Q4 was down 33% compared to 2 years ago. Some regions did better than others. Looking at a selection of regions popular with holiday home buyers, the inland province of Teruel suffered the most in 2009, down 36%, followed by Las Palmas in The Canaries, down 32%. At the other end of the scale, Spain’s two big cities did the best, down just 1.7% in Madrid and 3.9% in Barcelona. The small national uptick in Q4 that got the Ministry excited was almost entirely driven by big increases in Catalonia and Madrid (Barcelona +35%, Madrid +41%). Why the big surge in home sales in those two cities in the last quarter of 2009? I don’t know. But I wouldn’t be surprised if it had more to do with banks shifting Spanish property around their balance sheets than families buying homes to live in. Story from Mark Stucklin

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Spanish Property Market Grew Q4 2009

Sterling makes the most of its I’m-not-a-euro credentials. Euro has no such defence to Greece’s problems. The pound drifted down from €1.14 to €1.13 before jumping nearly two cents higher on Thursday. It peaked at €1.1550 on Friday and opened in London this morning at €1.15. Sterling has been doing its best to develop a career in not-being-a-euro. With the problems in Greece holding investors’ attention, the pound wore a badge of non-involvement on its sleeve and managed to avoid the banana skins which usually litter its path. UK economic data were fairly well balanced between the helpful and the hurtful. Retail sales suffered in January because, according to the industry body BRC, arctic conditions kept shoppers at home. Britain’s trade deficit widened again in December, suggesting that exporters are not using the weak pound to price their goods more competitively in foreign markets. There was better news from industry. Manufacturing production grew by a decent +0.5% in December and the broader industrial production (which includes mining and suchlike) was up by +0.9%. The Bank of England’s Quarterly Inflation Report (it does what it says on the tin) raised the spectre of a further round of quantitative easing. It was a possibility that sterling’s supporters would have preferred not to see. There is still the impression - warranted or otherwise - that the Bank is happy to see the pound weaken and that it chooses its language to help that cause. nd if the statements out of Paris, Berlin and Luxembourg over the last few month are anything to go by, the majority of Euroland finance ministers would like to see a more competitive (i.e. weaker) euro. This might explain why they have put so little effort into reassuring investors about their plans to help Greece out of its budget bind. An ‘agreement’ in that direction masterminded by the EU last week was worth less than the very small piece of paper it was printed on. In order to gain the approval of France and Germany it had to be pruned so severely that all it said was ‘Don’t worry’. Its exact wording was ‘Euro area member states will take determined and coordinated action if needed to safeguard stability in the euro area as a whole.’ As reassuring statements go it was useless. It did not help matters for the euro when revised figures for the fourth quarter of 2009 showed slower economic growth than previously thought. Until EU leaders can formulate a coherent and credible plan to make Greek government bonds saleable the euro will remain weighed down by fears about the fiscal viability of Club Med. After three months spent between €1.09 and €1.13 the pound has attached itself to a slightly higher range between €1.13 and €1.16. For the moment, the euro’s Greek albatross is a significant burden, balancing investors’ slightly different worries about Britain’s political and financial situation. Buyers of the euro should take advantage of any spikes to hedge 50% of their exposure. Get the best foreign exchange rates with no bank fees or commission charges using your Moneycorp Privilege Card

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A Panic-Free Week for Sterling

The number of houses sold in Spain fell 0.3 percent in December from a year earlier, the 24th straight month of declines, the National Statistics Institute said on Wednesday. The drop compared to an annual fall of 2.6 percent in November and a record slide of 47.6 percent in April. The sale of homes fell 7.7 percent in December from November, the data showed. Spanish banks have been told by the Bank of Spain to devalue the housing assets on their books by 20 percent, El Mundo reported on Wednesday, citing sector sources. The Bank of Spain was not immediately available for comment. Spain’s banks hold an estimated 100 billion euros ($137.1 billion) worth of Spanish property , the newspaper said, taken on over the last couple of years as property companies went bankrupt and their creditors forced to mop up their unsold assets. Analysts are concerned the country’s banks have been keeping a lid on potential losses by valuing the homes on their books at pre-crisis levels, while real property prices have dropped by more than 14 percent from their high in 2007. Spain’s second largest bank BBVA shocked investors at the end of January when it reported full year earnings with higher than expected provisions, raising broader doubts about Spanish banks’ ability to absorb a property market crash. Story from Interactive Investor

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Two Years of Declining Spanish Property Sales

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

Spanish property developers’ debts with banks at the end of September were worth around a third of the country’s gross domestic product, the Spanish Mortgage Association said on Monday. A spokeswoman said data up to the end of the third quarter showed hard hit property developers owed 324 billion euros ($458 billion) as a property crisis continued to worsen. Property promoters have faced a torrid time since a property bubble burst in 2007. The mortgage association said many property developers could not pay back their debts and that, in turn, was affecting the credit rating of Spanish banks which have largely emerged unscathed from a severe recession and credit crisis. Spanish property prices fell just over six percent last year but many analysts still say the market has further to fall and data may underestimate the true scale of the slide so far. Story from XE.com

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Spanish Property Developer Debt Totals €324B

The number of Brits buying euros for property purchases has increased in the last few days after sterling reached a rate of €1.15 for the first time since August 2008. Foreign currency brokers have seen a 40% increase in clients buying euros, while new enquiries have shot up by 24%. “A number of our clients in the market for euros are taking advantage of the improved exchange rate and buying their euros for overseas mortgage payments, property purchases etc now,” World First’s head of private clients, Elisabeth Dobson, told OPP. “They are delighted to be getting a rate that is up to 12% better than the lows we have seen over the last 17 months. There are a number of clients who will have been holding off on property purchases and overseas investments due to sterling’s weakness against the euro. This rate move will certainly spur people on.” A run of economic good news from the UK, including a fall in unemployment, rising inflation and an anticipation that the country is out of recession, has helped increase the pound’s strength. Meanwhile, economic problems in Spain and Greece have weakened consumer confidence in the euro. Not all currency brokers have seen a substantial increase in business. “€1.15 is a bit of psychological barrier but most clients are still waiting for the magic €1.20 number,” Marc Morley-Freer, commercial director at Moneycorp , told OPP. “After the UK election we could see improvements that could push people to make lifestyle purchases – things are too uncertain before then.” World First’s chief economist Jeremy Cook remains bullish following sterling’s 9% growth over the last year. “I don’t think this run in particular will last because it has happened so quickly, but the pound could be up to around €1.22 by the end of the year,” he told OPP. Story from OPP (subscription required)

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Brits Buy As Pound Gains Against Euro

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

Spanish banks and cajas (savings banks) may have to deal with a tidal wave of repossessions this year, with big implications for the property market, according to a recent article in the Spanish daily Publico. To make matters worse, the auctions banks normally use to dispose of repossessions are struggling to attract buyers, as the credit crunch has hit even the opportunists who traditionally bought at auction. Banks will have to cope with between 100,000 and 150,000 repossession coming to a head in 2010, claims the article. Many of these foreclosures started as far back as 2008, but have been delayed by overloaded courts unable to process the avalanche of repossession demands. From now on these foreclosures will be the “biggest problem of the banks” claims one real estate professional quoted in the article. Spain’s General Judicial Council (CGPJ) forecasts 180,000 foreclosures this year, up from 114,958 last year. The problem is that the people who normally buy at auction, known locally as subasteros, have disappeared from the market. “The companies that used to come to auctions have stopped doing so due to a lack of credit,” a source at the courts in Madrid told the paper, where foreclosures rose 300% in 2009. With few buyers at auction, banks will have to take back the properties onto their books at the ‘write-off price’ of 50% of valuation, which implies recognising a loss. That could have big implications for the banks and the property sector in general. “No financial institution is ready for this new stock of Spanish property , neither in terms of provisions, nor in terms of management capacity,” one professional is quoted as saying. The big question is what impact this new batch of repossession – the equivalent of 15% to 20% of the current inventory of property for sale – will have on the market. Unable to sell at auction, the banks might end up offering them for sale at their write-off values. The danger is that an avalanche of these properties dumped on the market at write off values will send the market into a spin, with prices falling another 20% to 30%. The danger, or perhaps the opportunity, depending on how you look at it. Story from Mark Stucklin

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Spanish Repossessions Could Cripple Market