Glut of newly built Spanish properties is 2 x demand

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This topic contains 22 replies, has 11 voices, and was last updated by Profile photo of Anonymous Anonymous 8 years, 10 months ago.

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  • #53609
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    Anonymous
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    Spanish developers admit they have built double the amount of homes necessary.

    In a conference today on the rental market, Josep Donés i Barcons, of the Association of Developers and Constructors of Spain, has admitted that “double the amount of homes necessary” have been built in Spain over the last decade, in large part due to demand from investors.

    Donés, who concedes that many of these properties are “not being used,” believes that investors will consider renting if they are offered sufficient guarantees as landlords.

    He is right that landlords don’t have much of an incentive to rent given the rights of tenants, who can almost live rent free if they know how to work the system. But he doesn’t say anything about low rental yields in Spain, which won’t improve until prices fall or incomes rise.

    You don’t want to rent out a property in Spain if you can help it. A lot of work and hassle for not much in return.

    Mark

  • #78216
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    @mark wrote:

    Spanish developers admit they have built double the amount of homes necessary.

    In a conference today on the rental market, Josep Donés i Barcons, of the Association of Developers and Constructors of Spain, has admitted that “double the amount of homes necessary” have been built in Spain over the last decade, in large part due to demand from investors.

    Donés, who concedes that many of these properties are “not being used,” believes that investors will consider renting if they are offered sufficient guarantees as landlords.

    He is right that landlords don’t have much of an incentive to rent given the rights of tenants, who can almost live rent free if they know how to work the system. But he doesn’t say anything about low rental yields in Spain, which won’t improve until prices fall or incomes rise.

    You don’t want to rent out a property in Spain if you can help it. A lot of work and hassle for not much in return.

    Mark

    Holiday lets is the way forward if you have the right location of course

  • #78222
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    I have posted on the subject. The yield should be double than normal the difference in the yield being the risk premium and this should affect the payback period.

  • #78228
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    I assume you mean rental yields should be double that which can be achieved in a risk free deposit account. If that is the case (and i think your premium is too high), I reckon prices might have to fall 40% to 50%. I can’t see that happening, at least not in my area.

    Should prices of decent properties fall by over 25% I would be tempted to buy if in an attractive location for the holiday rental market. In my village I would be an investment buyer of an attractive, fully furnished and equipped 2 bed unit at €100,000. Currently, even with hard bargaining, they are nowhere near that price level.

  • #78230
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    @mark wrote:

    Spanish developers admit they have built double the amount of homes necessary.

    Just to compound the situation, in two years Málaga goes from first to last for the sale of tourist property in Spain.

    Think there is no doubt now a ‘train crash’ is on it’s way in that particular province.

    http://www.typicallyspanish.com/news/publish/article_14898.shtml

  • #78237
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    I think its easy to be negative about the future – and the more of us who do paint a negative picture, the sooner that will become a reality.

    Whilst I agree that Spanish developers have built 2x the demanded property, (or perhaps even more) – the fact is that we are talking about current demand, and current demand is very strongly influenced by….current price! Therefore a simple shift in price = a simple shift in demand. If vendors are prepared to wake up and be realistic, then these unwanted bog standard overpriced apartments soon turn into tasty little rental investments – and the more people that own and actively rent apartments, the more prices of rentals will be forced down through competition, therefore making a weekend in Spain even cheaper to the punter, hence more rentals, and as a result, the demand for rental investments rises. It really is that simple to get the cycle going – Spain is still the 2nd most popular emigration destination for Brits (2nd to Australia) – It is a fantastic country with so much to offer (this message was written whilst sat drinking a coffee outside in the sunshine….In January)

    The high speed train link between Malaga and Madrid has now opened up Malaga and its surrounding areas to a wealth of business and opportunity – In the next few years, we will see large corporations and companies setting up in and around Malaga (IKEA got there already) providing a wealth of work opportunities (other than construction, which up until now has been pretty much the only thing to do round here)

    Thats my 2ps worth anyway!

    Have a great weekend everyone.

  • #78239
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    Ben K wrote:
    apartments, the more prices of rentals will be forced down through competition, therefore making a weekend in Spain even cheaper to the punter, hence more rentals, and as a result, the demand for rental investments rises. It really is that simple to get the cycle going – Spain is still the 2nd most popular emigration destination for Brits (2nd to Australia)

    The rentals are very low already and the houses still do not rent…

    besides, the money for Brits will be so scarce in the next years that few will afford to travel. This might change though after 2011-2012.

  • #78240
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    “and the more of us who do paint a negative picture, the sooner that will become a reality” – I don’t think our thoughts or posts are likely to affect the financial situation as much as the US economy does.

    “Therefore a simple shift in price = a simple shift in demand” – Do you sincerely consider that if property prices dropped say 50%, then the problem would be solved?
    You are assuming that there are sufficient numbers of people out there with the cash to buy all these empty premises?
    Don’t you believe that the banks are getting frightened about lending for holiday homes and holiday lets?

    “apartments soon turn into tasty little rental investments” – OK, sook you buy for 100K. Without expenses and running costs, you need say 6% to “wash your face£, that’s 6K divided by 300 per week, that it 20 weeks p.a.
    Do you consider it easy to rent 20 weeks per year, every year?
    Look at the holiday let sites, see how many have vacancies at peak season.

    At the rate Spain was going, you would have had more holiday home owners than visitors.

    “It really is that simple to get the cycle going – Spain is still the 2nd most popular emigration destination for Brits (2nd to Australia)”
    If it is that simple, please offer the advice to the Government, I am sure they will appreciate it.

    “Spain is still the 2nd most popular emigration destination for Brits” – Which if figures and statistics are to believed, this should read WAS. Cost of living, does matter to so many ex pats.

    “It is a fantastic country with so much to offer ” – Agreed. Pity the developers have raped the country.

    “In the next few years, we will see large corporations and companies setting up in and around Malaga (IKEA got there already) providing a wealth of work opportunities (other than construction, which up until now has been pretty much the only thing to do round here)” – But believe me, if the development growth slows, it make it much less attractive for retailers, so don’t bank on it.
    What is so good about having an IKEA and the likes stores?
    Do they give Spain credibility?

  • #78241
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    @ralita wrote:

    The rentals are very low already and the houses still do not rent…

    Well the simple answer to that ralita is that, they are not low enough! If something is cheap enough, people will buy it…its a basic fact

    Im not sure if you can shed some more light onto your prediction that brits wont be able to afford to travel the next few years?

  • #78242
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    well mg you seem quite convinced that the future is doom and gloom!

    I would love to submit an educated response but Im just off to the supermarket to start stockpiling baked beans before WW4 breaks out!

    😉

  • #78243
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    @mg wrote:

    What is so good about having an IKEA and the likes stores?
    Do they give Spain credibility?

    No but they make our apartments look blooming lovely 😀

  • #78245
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    Ben K wrote:
    ralita wrote:
    The rentals are very low already and the houses still do not rent…

    Well the simple answer to that ralita is that, they are not low enough! If something is cheap enough, people will buy it…its a basic fact

    Im not sure if you can shed some more light onto your prediction that brits wont be able to afford to travel the next few years?

    How low can the rents go?

    I just rented for 175 Pound for the second week of May for 2 bedroom/2 baths.

    Well, people used to have money for holidays. Now all the money of many people go to petrol, mortgage, food.

  • #78247
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    @ralita wrote:

    How low can the rents go?

    I just rented for 175 Pound for the second week of May for 2 bedroom/2 baths.

    Well, people used to have money for holidays. Now all the money of many people go to petrol, mortgage, food.

    This is true – sometimes I wonder how people can even afford their mortgages….but surely the great British adventure seeker will find a way to engage in their holiday activities? Even if it does involve their plastic friend…. ❓

    Its quite a depressing future ahead or the UK but I think thats why so many people continue to move abroad, be it Spain, NZ, anywhere…its just so expensive for anyone to survive in the UK!

    175 pound is a very good price for the rental – can I ask where abouts?

  • #78251
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    Ben K, you say “Even if it does involve their plastic friend…. ” – Are you not aware of the record level of borrowings and the record number of people having already charged their cards to the limit?

  • #78252
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    Ben K wrote:
    ralita wrote:
    Its quite a depressing future ahead or the UK but I think thats why so many people continue to move abroad, be it Spain, NZ, anywhere…its just so expensive for anyone to survive in the UK!

    175 pound is a very good price for the rental – can I ask where abouts?

    Things are becoming more and more expensive in UK, but I think it is a general phenomenon everywhere (we got used to cheap prices…).
    In UK the credit crunch might prevent people from getting credit for holidays or purchases abroad. As the house prices are becopming stationary or falling, houses cannot be used anymore as ATMs…

    I rented somewhere in Puerto de la Duquesa. I do not know the area but seems to be a decent apartment. If I do not like it, I won’t return, it is only one week afterall. :)))

  • #78253
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    But it is not a “phenomenon”, it is a way of life, especially business life and occurs every decade or so. Like everything else, there is never a straight line graph.

  • #78262
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    @mg wrote:

    Ben K, you say “Even if it does involve their plastic friend…. ” – Are you not aware of the record level of borrowings and the record number of people having already charged their cards to the limit?

    An example of relying on your plastic friend:
    “Credit cards are to be withdrawn from 161,000 Egg customers who it believes pose an unacceptably “high risk”.”

  • #78268
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    Hello BenK, I think that the train wreck is coming regardless of how the picture is painted. I don’t think it’s negative to say that the property market is in a downturn, neither do I think that it is pessimistic. It is realistic; it is part of the natural process, and as surely as the market is diving now, it will pick up again in the (distant) future.

    You say that current demand is driven by current price, and that is true to an extent, but I think that there is a new and important factor in play now. It is a lot harder to get a mortgage. Far more people are getting applications turned down, and I have heard that certain banks have stopped offering mortgages altogether.

    Spain may be a fantastic country in some respects, but when they start knocking down expats houses they really shot themselves in the foot and forced those who are intent on emigrating to consider the alternative locations.
    It will be interesting to see the effects of the high speed train link -at a time when people are talking about downturns and recession, maybe it’s come a few years too late…

  • #78286
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    mg

    The customers of egg that have had their cards removed are the ones that are paying their balances off each month. Therefore egg aren’t making any money from them!!

  • #78289
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    “Credit cards are to be withdrawn from 161,000 Egg customers who it believes pose an unacceptably “high risk”.”

    As Egg has been bought by, I believe the Citi group. In USA when a card is being granted with a $10K limit, as the borrower touches say around 70% of his/her limit the banks starts to charge them the card holder additional interest as they seam to become high risk, thus placing them at a higher risk of default and indebtedness. I understand the financial legislators in the USA are looking at curbing this practise by the financial institutions.

    So it does not surprise me of the antics applied by Egg . One day it will be hard boiled like a hard core debt

  • #78290
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    “The customers of egg that have had their cards removed are the ones that are paying their balances off each month” – You have obviously obtained a different set of facts to what is available to all us others?

  • #78291
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    @mg wrote:

    “The customers of egg that have had their cards removed are the ones that are paying their balances off each month” – You have obviously obtained a different set of facts to what is available to all us others?

    No. The BBC also have these facts & highlighted them clearly over the weekend, together with interviews with many Egg card holders who pay the total debt on their cards off before the end of each month. As Jackie says, these are the people whose cards are being withdrawn.

  • #78292
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    “CREDIT CARD customers who pay off their balance each month are as much at risk of being cut off by their lender as those who have lost control of their debts. “

    So this from the Times is obviosly incorrect.
    Suggest you contact them and request correction, deleting “as those who have lost control of their debts”.

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