December 2004 news review

Though we have now reached the end of 2004 it will be several months before we have the official figures for price changes and building activity for the whole of 2004. The official figures are always interesting but I have my doubts as to how accurately they reflect real changes in the market. Anecdotal evidence from many different sources points towards a slow down in the market whilst the official figures paint a picture of robust growth. A time lag between official figures and feedback from the sales frontline is to be expected but even allowing for this I believe that official figures overstate the rate of change. They are based on valuations done by appraisal companies, mainly on behalf of mortgage lenders. Mortgage lenders need to lend and generous valuations help them to do so in times when, as now, competition is fierce and lending criteria become loose. However it can’t be denied that 2004 has been another year of impressive growth for the Spanish property market – the 8th consecutive year of real growth (after adjusting for inflation) and the 6th consecutive year of double-digit nominal growth. All I know for sure is that the growth won’t last forever.

In 2005 news bulletins I will be including a monthly roundup of Spanish political, economic and social news on the grounds that if you own or plan to own property in Spain you have an interest in knowing a little bit about what is going on in the country at large.

Wishing you the best for 2005.

MARK STUCKLIN

Average time-to-sell on the increase

According to information presented by the council of estate agents (Consejo de Colegios de APIs) and the Association of Developers and Constructors of Spain (APCE), apartments in Spain now take on average 5 months to sell as opposed to 4 months in the recent past. The report blames higher prices for the increasing (average) time-to-sell of property in Spain. It should be pointed out that whilst the average time-to-sell is getting longer with fewer transactions taking place than in previous periods, Spanish property prices are still increasing robustly according to official figures.

IMF urges Spanish government to reduce imbalances in Spanish property market

The International Monetary Fund, now run by Rodrigo Rato – previously in charge of Spain’s economy – has urged the Spanish government to introduce measures to temper escalating Spanish property prices. Proposals include reducing tax breaks for property buyers, overhauling the laws governing land development to provide more building land and introducing new fiscal incentives to stimulate the rental market.

8% of Spanish properties sold during first viewing

In the first 6 months of 2004 8% of properties were sold during the first viewing, rising to 60% in the week after the first viewing, according to a new study by Knight Frank. In the same period the total number of property visits were down on a year earlier but the ratio of sales to visits was up, implying fewer ‘curiosity’ visits.

Spaniards spend over 50% of the average annual salary on mortgages

A new report by the Bank Of Spain on the mortgage situation in the 2nd quarter of 2004 reveals that the average mortgage in Spain now eats up 54% of the average annual Spanish salary. This is 20 points more than the recommended target of 33% used as a rule of thumb by most mortgage lenders for determining how much to lend to avoid default. On the other hand mortgage defaults in Spain are now at the lowest level ever, at less than 1% according to the Association of Spanish Mortgage Lenders (AHE).

Construction costs in Spain 40% lower than Eurozone average

A new study by the property consultants EC Harris shows that building costs in Spain are around 40% lower than the Eurozone average, but between 30% and 50% higher than in new EU members such as Poland, the Czech Republic and Slovakia.

60% of properties sold in Spain are resales

Findings presented during the II Congress of Spanish Registration Professionals (Congreso de Registradores de España) show that 57.9% of all properties sold in the year to date were resales. Of the roughly 40% new build sales only 2.7% were newly built social housing sales subsidised by the Government.

Government announces intention to reduce cost of changing mortgage

Up until 27th April 2003 mortgage lenders were allowed to charge clients a penalty of up to 1% of outstanding capital for changing to a different mortgage provider during the lifetime of the mortgage. From the 27th April 2003 the law capped this fee at 0.5% on mortgages taken out after this date. Now Pedro Solbes, Economy Minister, has announced his intention to introduce a law prohibiting this penalty (for changing mortgage providers during the lifetime of a mortgage) altogether.

Building land available for 20 million more properties in Spain

To counteract the charge that a lack of building land is distorting property prices in Spain the Ministry of Housing has published figures showing that enough land with building permits is available in Spain to provide another 20 million properties. At the same time the Ministry has announced that the new laws being drafted to govern planning permission and building land in Spain will change the way that land is valued with a view to reducing speculation that drives up prices.

Demand for holiday homes forecast to increase to 151,000 in 2008

Research consultants Grupo I claim that demand for Spanish holiday homes – both new and resale – will increase from 116,000 in 2004 to 151,000 in 2008, a 30% increase in 4 years. They also forecast that foreign demand for Spanish holiday homes will outstrip Spanish demand by a narrow margin in 2008, with 76,000 foreigners buying a holiday home against 72,000 Spaniards.

8% rental yield renting out apartments on the Spanish coast according to Knight Frank

According to Alberto Prieto – residential director at Knight Frank Spain – the average rental yield since 2003 for Spanish coastal apartments has been 8%, rising to 9% in provinces such as Almería, Castellón and Murica.

Savings Bank predicts property price rises of 9% in 2005

A new report by the savings bank Caixa de Cataluña titled ‘ Demand and family finances’ forecasts that average property prices in Spain will rise by 9% after finishing 2004 with a rise of 15.1%

After increasing in September Euribor falls to 2,316% in October

Euribor – the base rate used in Spain to calculate mortgage repayments – has fallen back to 2.316% in October after a small increase in September. Mortgage interest rates remain near their historical lows in Spain and the real cost of money, after adjusting for inflation, remains close to zero or negative.

96% of all Spanish property purchases involve mortgage financing

The latest report from the Council of Notaries (representing the almost 3,000 Notaries in Spain) covering property transactions in the first 6 months of 2004 shows that only 4% of the 438,000 properties sold in the period were purchased without any mortgage borrowing. The report also states that the average mortgage value has risen to 202,826 Euros with duration of 21.9 years.

© Mark Stucklin (Spanish Property Insight)

 

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.