April 2007 news review

Spanish Property News

+ Developer of Portocala opens stylish showroom in London’s Conduit St.

+ Hacienda del Alamo golf resort bucks the market
+ British Government crackdown on untaxed Rental Income in Spain
+ Spanish mortgage costs go up again
+ New properties still flooding the market
+ Change in property market sentiment – it’s official
+ Bank lending to real estate developers surges
+ Ministry of the Environment warns of residential developments without water
+ Resale asking prices in Barcelona and Madrid hold steady
+ What’s really going on in the Spanish property market?

Companies, Products, Services

Developer of Portocala opens stylish showroom in London’s Conduit St.

Onofre Miguel – the developer of Portocala Resort (Benicassim, Costa del Azahar) has opened its London showroom at 61 Conduit Street, just off Regent Street. This stylish showroom,  where clients can choose from 100 different specifications,  includes an example interior of an apartment at Portocala, giving visitors a clear idea of the quality and style of the resort before even travelling to Spain. Anyone considering buying a property in Spain should make a visit to Onofre’s Conduit Street showroom an early priority.

Hacienda del Alamo golf resort bucks the market

Hacienda del Alamo Golf Resort in Murcia has smashed sales records with a “sell-out” of its latest release of properties.

The upmarket resort sold 100 luxury apartments in just ten days as buyers went on an £18 million/€27 million spending spree.   The purchasers, from all over Europe,  snapped up the first batch of “The Oasis”, a much-praised, exclusive, gated community of apartments within the resort with prices starting at just £123,000/€185,000.   These first 100 properties were launched with a 90-day-only price but sold out after just ten days.

“It’s a sensational success story” commented a delighted Rafael Ruiz the resort’s Commercial Director.  “We believe this is the fastest sell-out in the history of resort golf property in this area.   It was down to customers recognising that this is a fantastic investment at a price that offers true value-for-money on a resort that is on target to be the very best in Spain.   There may be predictions of a slow down in the property market nationally in Spain but we have bucked the trend and shown that quality, exclusivity and price are the most important factors for purchasers.”

Hacienda del Alamo Golf Resort’s sales team are now putting the next batch of 172 apartments in “The Oasis” on the market with a new price tag, again for a limited period.  The final group of properties in the 352-apartment complex will then go on sale with a price raised by a further ten per cent.

“We believe our strategy has shown buyers great opportunities to invest at a competitive price and see the valuation of their properties rise before the ink is even dry on their contracts” says Hacienda del Alamo’s Investment Manager Aisling Brew. “We can offer purchasers unbeatable payment terms so their exposure for at least a couple of years is relatively low whilst they watch their money grow as the building is completed.”

Sales Manager Philip Brockbank issued a bullish analysis of what’s make Hacienda del Alamo tick:   “We are the sales success story of 2007.  In the 1st quarter of the year we are already considerably up on the last quarter in 2006.  We have invested in spending time with our support network, and our new agent training days have helped focus our partners and many are reporting a growth in HDA sales.  Added to this is that we are breaking into new markets for us and in particular our new Scandinavian partners have now come on line and are proving a huge success.”

Looking to the future, he commented:  “It is our intention to launch more phases with totally new designs in the coming months. Phase 5 is now well underway which is a new product with spectacular designs for Townhouses and Executive style Villas, all off plan and ideal for investment growth.   Our new sister resort Los Altos de Las Palas will also be launched in the next few weeks. Just 15 minutes drive from HDA and set in the wonderful mountainside over looking the village of Las Palas. Villas and townhouses ideal for country living and will prove a great investment over the 20 month build time.”

The Oasis

The Oasis is a superior ten hectare development of one, two and three bedroomed homes. There is plenty of space and this exclusive community will have its own security entrance. The Oasis is ideal for those who like the outdoors and will include children’s playgrounds, tennis and paddle courts within the grounds and adventure circuits, jogging tracks etc close by.

This upmarket phase, the seventh at Hacienda del Alamo, consists of 352 luxury apartments, each with their own private plunge pool as well as access to larger communal swimming pools. There are magnificent terraces allowing plenty of private space for sunbathing and outdoor dining. With a three-hectare lush park lining one side of The Oasis all of the properties have been carefully designed so that each apartment has views of the large gardens and large communal pools.

Superbly situated next to the resort’s centre which will include a five star hotel, spa, golf club house and “Spanish Village” development of shops, restaurants and apartments, The Oasis is predicted to prove to be a fantastic investment.  Properties come in one bedroom/ one bathroom, two bedroom/two bathroom and three bedroom/two bathroom configurations.

Commented Hacienda Sales Manager Philip Brockbank:  “We can also offer potential purchasers an added incentive: Unrivalled payment terms. This means that it costs our clients less of an initial outlay and they can watch their properties appreciate in value in the meantime. By doing this we are showing potential purchasers as well as agents that we are confident in the progress and quality of our building that we are allowing buyers the luxury of so little financial commitment until they see exactly what they are getting.”

A deposit of just €3,000 (approximately £2,000) is required to reserve a property in most sections on the top class resort, which has been dubbed “the new number one in Spain”.  But, even better, a deposit of just 15% (less the €3,000 initial deposit) is needed on the signing of the contract and the Caixa Catalunya, which backs the resort, is offering mortgages of up to 85% on a 30-year payback period, subject to conditions.

Alerts

British Government crackdown on untaxed Rental Income in Spain

By Bill Blevins, Managing Director of Blevins Franks

The UK tax authority, HM Revenue and Customs (HMRC), has instigated a massive crackdown on unpaid tax. The Offshore Disclosure Facility (ODF), which some are calling a ‘tax amnesty’ (although it’s not), is aimed at UK residents who are not declaring their offshore bank accounts. All offshore assets would have to be declared at the time, including Spanish property and any rental income or capital gains made from it.

The initiative is primarily targeted at people who hold, or have held, an offshore account, either directly or indirectly, which has not been declared for UK tax. In effect, HMRC is offering to cap penalties to 10% of the maximum 100% allowed. People have until 22nd June to come forward and notify the tax authority of their intention to disclose. Then by 26th November, just five months later, full disclosure of tax irregularities must be made, along with payment of the back tax, plus interest at 7.5%, and the 10% penalty charge. HMRC will send out an acknowledgement of the disclosure and payment. Notice of whether or not the disclosure has been accepted as complete will be sent by the 30th April 2008.

An elite crack team from the Special Civil Investigations Unit within HMRC is poised to rapidly target suspected tax evaders, and will send out letters immediately after the deadline of 22nd June to those who have not notified their intention to make a disclosure and where information suggests that tax may have been underpaid. Mitigation of any penalty is then highly unlikely.

Many UK residents who own holiday homes in Spain open a Spanish or other offshore bank account and the interest earned on these accounts is not declared to HMRC, either purposely or by people not realising that tax is due in the UK. UK residents who receive rental income from their Spanish properties, must declare the income in the UK as well as Spain, and also declare any bank interest whatsoever.

The launch of the ODF provides an opportunity for other tax defaulters to come clean as well as offshore account holders. Under the terms of the amnesty, UK residents cannot use the ODF itself if they have not held an offshore account that has been connected with a loss of UK tax. But disclosures and payment of other undeclared (e.g. purely onshore) liabilities can be made at any HMRC office under the same terms as the ODF facility. This is interpreted as meaning within the same deadlines set by the amnesty and with the 10% penalty capping applying. To deny this would contravene the Human Rights Act, apparently.

The disclosure must be a full disclosure of all undeclared offshore and onshore liabilities, not just those connected with offshore accounts, including details of offshore assets that were held at 5th April 2006. This will include rental income from Spanish property and any capital gain on a sale. Full details are at: https://disclosures.hmrc.gov.uk/oaics/

Spanish tax on rental income for non-residents is a flat 24% of gross income. The net income is also liable to UK income tax at a rate of up to 40% for higher rate taxpayers, but any Spanish tax paid can be deducted from the UK tax due. The sale of a second home in Spain will attract a capital gains tax levy of 18% in Spain payable to the Spanish tax authority, and up to 40% in the UK above the tax free amount of £9,200.

It would be unwise for anyone who has undeclared income to ignore this opportunity to come clean and benefit from a 90% penalty reduction.

Bill Blevins is Managing Director of Blevins Franks who provide high quality financial advice for expatriates

Spanish Property News

Spanish mortgage costs go up again

Euribor – the interest rate most commonly used to calculate mortgage payments in Spain – rose in April to 4.25%, pushing up average monthly mortgage repayments by 88 Euros to 856 Euros per month, or 1,050 Euros per year. At the same time figures from Spain’s National Institute of Statistics show that the overall number of new mortgages taken out in Spain is falling (by 4.3% in February compared to year earlier), whilst the value of new mortgages is increasing (by 10.6% compared to a year earlier. New mortgage numbers are falling because there are less property transactions taking place – a sure sign that the Spanish property market is cooling- whilst the overall value of new mortgages continues to rise, because Spanish property prices appear to be still increasing in many areas.

New properties still flooding the market

Planning approval was given for 915,745 new properties in 2006, up 11.9% on the record 818,573 planning approvals in 2005, according to Spain’s professional association of architects. 75% of these new approvals were for properties located in Madrid or the Mediterranean regions of Catalonia (129,534), Valencia (106,568) and Andalusia (181,988).

Planning approvals are not the same as housing starts, as some projects are abandoned after the approvals stage. In recent years most planning approvals resulted in housing starts, because of the booming housing market. Now, as the Spanish property market cools down, the number of planning approvals that are abandoned before construction is on the increase. According to Spain’s Ministry of Housing, there were 664,924 housing starts in 2006, a 5% increase on the previous year, and 597.632 new properties finished in 2006, a 13% increase on 2005.

The number of planning approvals last year was given a one-off boost by the introduction of new building regulations, which encouraged developers to get planning permission before the new regulations came into force in March of this year. The new building regulations, know as the Technical Building Code ( Código Técnico de la Edificación -CTE), aim to increase the security and energy efficiency of new properties in Spain. They also drive up the cost of construction, which is why there has been such a rush for planning approvals before the new code takes effect. Developers worry they won’t be able to pass the cost of the new regulations on to buyers, which will squeeze profit margins. Buyers, on the other hand, are better off buying newly built properties that meet the new regulations.

After last year’s all-time record number of both planning approvals and housing starts, this year has started with a fall. According to figures from the Government the number of planning approvals in January fell to 59,268, a 0.81% drop compared to a year earlier. The drop in the overall number of approvals was driven by a substantial fall of 34.2% for detached homes, whilst planning approval for flats actually increased by 9.6% to 49,811.

Change in property market sentiment – it’s official

Pedro Solbes, Spain’s Finance Minister, recently said that Spanish property prices in some areas are rising more or less with general inflation, and that there are clear signs of a change of cycle in the Spanish property market. Solbes forecasts that the construction sector will remain buoyant this year, despite the slowdown, whilst observing that the ideal level of housing starts for Spain is around 450,000 per year.

Jesús Miranda, the director of Spain’s Cadastre (official inventory of real estate for tax assessment) has also noted that Spain’s property market is “beginning to show signs of saturation”. As a consequence he expects housing starts to fall to the ‘ideal’ level of 450,000, describing the 900,000 odd planning approvals in 2006 as “excessive”. On the other hand Miranda does not expect average property prices in Spain to fall, despite the market saturation.

Bank lending to real estate developers surges

Evidence of a downturn in the Spanish property market does not appear to be discouraging banks from lending to developers for new residential construction projects. Figures from the Bank of Spain show that banks and savings banks lent a record 249 billion euros to developers in December 2006, an increase of almost 50% on December 2005. The increasing indebtedness of developers and builders against a background of rising interest rates and slowing demand is a cause for concern, according to the Bank of Spain. In its latest report on stability in the financial system, the Bank notes that “in the past, strong credit growth has ended in high levels of default whenever economic conditions have deteriorated significantly.”

Ministry of the Environment warns of residential developments without water

Officials from Spain’s Ministry of the Environment have warned that 300,000 or more homes around Spain will be built in future without adequate access to water if urban plans go ahead and ignore the advice of local water boards. Some developers and town halls have taken advantage of the fact that access to water is considered a ‘basic right’ in Spain by building residential projects in areas without access to water, and then expecting the government to provide access to water, however impractical.

Resale asking prices in Barcelona and Madrid hold steady

Asking prices for resale properties in Spain’s biggest cities barley changed in the first quarter of the year, according to figures from the Spanish property portal Idealista. Asking prices in Barcelona increased by 0.5% to 4,888 euros/m2 in the first 3 months of the year, and by 0.8% in Madrid, to 4,310 euros/m2. Asking prices in the city of Valencia jumped 2.9% to 2,827 euros/m2, recovering lost ground after several quarters of falling prices in the city of Valencia.

© 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.