Implications of possible Spexit

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  • #57009
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    Anonymous
    Participant

    It would be interesting to get views from the forum on the following:

    1. How likely is Spain’s exit from Euro and when might this happen?
    2. What would be the implications on Spanish house prices as they would then be valued in a much weaker peseta compared to when euro was first introduced? Presumably foreign sellers of Spanish property would still sell in Euro/Pound/Dollar and get paid in these currencies when selling to other foreigners.
    3. Spanish mortgages would presumably be converted from euro to peseta, but at what rate? Would also non-residents’ mortgages be converted to pesetas? As the value of peseta would collapse if Spain left the Euro, would this not be beneficial to foreign holders of Spanish mortgages but catastrophic to Spanish banks?

    Haven’t seen any good articles shedding light on the above but, in addition to your views, would appreciate links if you know of any good analysis.

    Many thanks in advance!

  • #111637
    Profile photo of Anonymous
    Anonymous
    Participant

    1 > Possible but unlikely. The most informed observers I know give a 10-20% chance that it will exit within the next ten years.

    2 > Academic given (1). A new peseta would probably decline +/-30% against the euro. House prices accordingly.

    3 > Again academic. If converted it would be at whatever rate the Spanish government set.

  • #111638
    Profile photo of Chopera
    Chopera
    Participant

    Been discussed a lot on here (and always ends up in an irrelevant argument 😉 )

    E.g. viewtopic.php?f=2&t=5704

    To answer your questions:

    1. No idea

    2. Nominally asking prices would remain the about same but sales volumes would increase as the “new peseta” devalues, making properties appear cheaper when measured in other currencies

    3. I guess everything will be converted at a rate of 1 to 1. Why complicate things? Of course the exchange rate thereafter will change rather quickly. I imagine all mortgages held with Spanish banks will be converted to pesetas, regardless of whether the mortgage holder is resident in Spain or not. Difficult to say how it would affect Spanish banks because even though a lot of money owed to them would be converted to pesetas, I imagine a lot of the money owed by them would be converted to pesetas as well. Either way, with a return to the peseta the Bank of Spain would be able to bail out the Spanish banks. It would benefit foreign holders of Spanish mortgages in the sense that their mortgage would be devalued when measured in foreign currency, but then again so would their property.

    If Spain left the euro my main concern would be the Spanish government going beserk with the printing press in order to kick start the economy, which might lead to hyperinflation. It’s impossible to predict, but the one consolation is that if Spain did leave the euro it would probably be after Greece, so we’d have a better idea of what to expect.

  • #111639
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    angie
    Spectator

    As chopera says, watch for Greece to exit first, if that happens anything is possible and there would be more indicators and lots of speculation as to who would be next. The markets would react quickly. A learned accountant friend from a large London Company reckons Greece will leave before end October this year, but who knows really?

    Just my personal view if I held Spanish property I would feel safer selling it now if it was possible, and/or waiting before buying in Spain. 😛

  • #111643
    Profile photo of Chopera
    Chopera
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    @angie wrote:

    As chopera says, watch for Greece to exit first, if that happens anything is possible and there would be more indicators and lots of speculation as to who would be next. The markets would react quickly. A learned accountant friend from a large London Company reckons Greece will leave before end October this year, but who knows really?

    Just my personal view if I held Spanish property I would feel safer selling it now if it was possible, and/or waiting before buying in Spain. 😛

    I think Katie pointed out that it rather depends on the circumstances of the sellers – if they can easily rent the property out for a certain amount of money then it puts a floor on the price. People will be reluctant to sell a property for less than say €200k if they can rent it out for say €20k gross each summer, and similarly some people will be prepared to pay more for such properties. Especially if the rental demand is international as that should mean the rental income wouldn’t be too affected by Spain leaving the euro: nominal rents would increase as the peseta decreases in value. Well in theory at least.

  • #111653
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    Just my personal view if I held Spanish property I would feel safer selling it now if it was possible, and/or waiting before buying in Spain.

    Well, you can use me as a test case. I just purchased a place in Barcelona 2 weeks ago. I paid 29% below the last purchase price in 2006 (what is listed on the nota simple), which was still a tiny bit more than appraisal. I do expect the price to drop some more and then stabilize. I do have a mortgage, but not the good mortgage I though I was going to get. Now the major renovation begins.

    As this will be a home (and second home), I don’t care if it loses value in the short term. I’m there to stay.

  • #111655
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    angie
    Spectator

    Being in one of Spain’s main cities Gary I doubt property will fall too much if at all, there will always be demand from people working there too, you’ve probably done your homework and bought in a good area. It can’t be anything like the overbuilt Costas down South. 😉

  • #111657
    Profile photo of Chopera
    Chopera
    Participant

    Congratulations Gary – now you can be free of us poor property “pundits” and get on with your life 😉

    (By the way, the price that appears on the nota simple may well be less than the price that was actually paid in 2006 since a large wad of cash usually passes under the table as well)

  • #111664
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    Congratulations Gary – now you can be free of us poor property “pundits” and get on with your life

    (By the way, the price that appears on the nota simple may well be less than the price that was actually paid in 2006 since a large wad of cash usually passes under the table as well)

    Thanks! I suspect that the atico sold for more than the nota indicates. It certainly was ‘worth’ more than the price on the nota in 2006.

    Being in one of Spain’s main cities Gary I doubt property will fall too much if at all, there will always be demand from people working there too, you’ve probably done your homework and bought in a good area.

    Well, just as there have been hundreds of ‘secure investments’ in the stock market that have all fizzled, nobody really knows what will happen anywhere in any industry. There appears to be little logic even in real estate. The atico is in the vila olympica neighborhood, in a great location, but in the ugliest building. It has many things I wanted and also, it has 2 terraces (62m2 total), both with views. It needs MAJOR work and I will be meeting with an architect in a few weeks.

    I’m looking at this purchase as a costly experiment: Even though it is nothing more than a coincidence and significant of nothing, the Chinese word for ‘crisis’ is the combination of the characters that symbolize ‘danger’ and ‘opportunity.’

    I keep wondering if now is a great opportunity and many of us do not recognize it? Anyway, if prices fall substantially, I may purchase another flat to rent out.

  • #111668
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    Anonymous
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    @garysfbcn wrote:

    Just my personal view if I held Spanish property I would feel safer selling it now if it was possible, and/or waiting before buying in Spain.

    Well, you can use me as a test case. I just purchased a place in Barcelona 2 weeks ago. I paid 29% below the last purchase price in 2006 (what is listed on the nota simple), which was still a tiny bit more than appraisal. I do expect the price to drop some more and then stabilize. I do have a mortgage, but not the good mortgage I though I was going to get. Now the major renovation begins.

    As this will be a home (and second home), I don’t care if it loses value in the short term. I’m there to stay.

    GarySFBCN,

    Don’t do it! Don’t buy that property in Barcelona. You must be stark raving bonkers to buy a property in Spain now regardless by how much you negotiated the price down by. The simple fact is that in three or four years time I will be able to buy your type of property in Barcelona for 75% less than what you paid for it, and this is particularly so when Spain drops out of the Euro and adopts the Peseta. On dropping out of the Euro the Peseta will experience a catastrophic devaluation which will mean that your property will be valued in worthless Pesetas and I will be able to buy your property at a fraction of the price you paid for it.

    Despite the property crash house prices in Spain still remain well above fair value and the disasterous state of the Spanish economy, where a quarter of the workforce is unemployed, and youth unemployments stands at fifty percent, suggests that house prices will not just keep dropping but will keep plummeting like a stone for many years to come!

    I wouldn’t like to own a property in Spain at this moment in time. The smart money is getting out of property and only the mugs are buying property in Spain right now.

  • #111669
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    Chopera
    Participant

    @jakesuper wrote:

    @garysfbcn wrote:
    Just my personal view if I held Spanish property I would feel safer selling it now if it was possible, and/or waiting before buying in Spain.

    Well, you can use me as a test case. I just purchased a place in Barcelona 2 weeks ago. I paid 29% below the last purchase price in 2006 (what is listed on the nota simple), which was still a tiny bit more than appraisal. I do expect the price to drop some more and then stabilize. I do have a mortgage, but not the good mortgage I though I was going to get. Now the major renovation begins.

    As this will be a home (and second home), I don’t care if it loses value in the short term. I’m there to stay.

    GarySFBCN,

    Don’t do it! Don’t buy that property in Barcelona. You must be stark raving bonkers to buy a property in Spain now regardless by how much you negotiated the price down by. The simple fact is that in three or four years time I will be able to buy your type of property in Barcelona for 75% less than what you paid for it, and this is particularly so when Spain drops out of the Euro and adopts the Peseta. On dropping out of the Euro the Peseta will experience a catastrophic devaluation which will mean that your property will be valued in worthless Pesetas and I will be able to buy your property at a fraction of the price you paid for it.

    A somewhat unsurprising post from jake there

  • #111670
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    Anonymous
    Participant

    @angie wrote:

    Being in one of Spain’s main cities Gary I doubt property will fall too much if at all, there will always be demand from people working there too, you’ve probably done your homework and bought in a good area. It can’t be anything like the overbuilt Costas down South. 😉

    Buying property in a good location is by no means a guarantee that the property will not drop in value in the future. Spain is an economic disaster area where there is mass unemployment, no work and the situation is getting worse by the day. Barcelona is not immune from Spain’s economic woes. There is another factor you must consider – many flats where built in the boom and now they are lying empty and are unsellable and it is this chronic over supply of property that will drag down the value of all other flats/apartments.

  • #111671
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    A somewhat unsurprising post from jake there

    No offense taken from his post.

  • #111674
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    katy
    Spectator

    I will make a prediction, Jake will never be able to afford a property in the UK or Spain 😆

  • #111679
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    Anonymous
    Participant

    😆 😆 agreed! Jake should stop claiming his workseeker allowance and spend his time finding a job to keep him occupied; maybe as chief economist at UBS 🙄

  • #111687
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    Anonymous
    Participant

    Anybody buying property in Spain right now has to be clinically insane because they are buying into a falling property market and things in Spain are just going from bad to worse on a daily basis. Imagine being one of those suckers and mugs who own property in Spain right now. Many expats who own property in Spain but have not yet put their property up for sale would love to get out and sell their property but can’t because there are so many properties on sale and as such would struggle to sell their property. If these people could sell their property they would and get out of Spain right now if only they could. Life in Spain is becoming a living nightmare in which many expats are trapped in their homes they cannot sell and all around they are seeing the Spanish economy falling around their ears and seeing property prices weakening by the day.

    Spain is becoming another Greece

  • #111691
    Profile photo of katy
    katy
    Spectator

    You just keep repeating the same manta, that’s not debate. You are a troll. You admit to being banned several times from another forum so what is your agenda ❓ Is it that you are just a loser and have spent years envying people who own property and are now popping in to gloat.

    I agree with a lot of what you say. Many old people are trapped in unsellable properties but, what is the point in putting on old news that everyone has read 😈

  • #111695
    Profile photo of Fuengi (Andrew)
    Fuengi (Andrew)
    Participant

    @jakesuper wrote:

    Anybody buying property in Spain right now has to be clinically insane because they are buying into a falling property market and things in Spain are just going from bad to worse on a daily basis.

    So at what moment do you start to buy properties? only when prices are increasing then? seems like a bit of a herd instinct to me.

    @jakesuper wrote:

    Imagine being one of those suckers and mugs who own property in Spain right now. Many expats who own property in Spain but have not yet put their property up for sale would love to get out and sell their property but can’t because there are so many properties on sale and as such would struggle to sell their property.

    I guess that would be me, as i am an expat and own in Spain. MY property is not for sale. in my area (surrounding km2) there are about hundred properties for sale. of which about 18 are townhouses. Most are smaller than mine. I could sell at 30% less per m2 than them and still clear all debts and make a small profit.

    @jakesuper wrote:

    If these people could sell their property they would and get out of Spain right now if only they could.

    and go where? I like Spain.

    @jakesuper wrote:

    Life in Spain is becoming a living nightmare in which many expats are trapped in their homes they cannot sell and all around they are seeing the Spanish economy falling around their ears and seeing property prices weakening by the day.

    And it can only get worse. as we all know the property market and general economy can never can improve. Spains population will not increase, there is no room for economic improvements, etc….
    Unlike many european countries, Spains population has increased, and there is plenty of room for improvement. unlike many others

  • #111696
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    Anonymous
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    @fuengi wrote:

    @jakesuper wrote:
    Anybody buying property in Spain right now has to be clinically insane because they are buying into a falling property market and things in Spain are just going from bad to worse on a daily basis.

    So at what moment do you start to buy properties? only when prices are increasing then? seems like a bit of a herd instinct to me.

    You buy a property at the price that you think is reasonable for the property rather than at an inflated price that the vendor wants taking into account the dire economic situation of Spain. It is generally advised to buy when the bottom in house prices has been reached but knowing exactly when this has been reached is difficult. It is obvious that property prices in Spain are still way too high with vendors reluctant to drop their asking prices and these asking prices do not reflect the appalling economic situation in Spain. It will take another three to four years before vendors come to their senses and price their properties realistically. It is not the case of buying a property when prices start rising but buying when you think prices have stopped falling.

    Set yourself a target price for a property. I would say don’t pay more than 15,000 euros for a two bedroom apartment in the Canaries or more than 30,000 euros for a three bedroom house on mainland Spain. Think of it this way, properties that are currently advertised on sale are overvalued and you should take around 50%-75% off the asking price in order to get anywhere near a sensible price for the property. Until such reductions in price have been achieved I would recommend that you stay out of the property market and wait. There is still a long way to go before house prices will have dropped to sensible levels. Wait for Spain to crash out of the Euro and adopt the Peseta before buying a property as this event will almost certainly result in further significant falls in house prices.

    @fuengi wrote:

    @jakesuper wrote:
    Life in Spain is becoming a living nightmare in which many expats are trapped in their homes they cannot sell and all around they are seeing the Spanish economy falling around their ears and seeing property prices weakening by the day.

    And it can only get worse. as we all know the property market and general economy can never can improve. Spains population will not increase, there is no room for economic improvements, etc….
    Unlike many european countries, Spains population has increased, and there is plenty of room for improvement. unlike many others

    Things are going to get a whole lot worse before they get better. Spain is in economic depression that will last twenty years. It is difficult to see any kind of recovery in the economy or the housing market over the next twenty years.

  • #111697
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    angie
    Spectator

    Jake, whilst a certain amount of fact within your posts is right, ie the state of the economy, over supply and other things, don’t you think it’s unfair to label all those who own property in Spain, no doubt France next as ‘suckers and mugs’?

    Many are just trapped by circumstances beyond their control, some have inherited property, or their partners have died whilst there, some may need to move back because of health or family reasons, many bought in ‘good faith’, others became victims of Land Grab and illegal builds etc etc Not everyone was or is a sucker or mug, and others are managing to sell too. 🙄

  • #111698
    Profile photo of Chopera
    Chopera
    Participant

    I’m going to follow jake’s mantra and set myself a target of €5. Yup, when properties that I like can be bought for €5 then that’s my buy signal. I don’t expect that to happen for 60 years though, because it’ll take deluded sellers that long to figure that their property is only worth the amount I say it is. But it’ll happen, don’t you worry. All those expats will be left rotting on the costas, reduced to scavenging for food, living in caves and occasionally eating each others brains, probably, and all because they arrogantly paid more for their properties than I could afford, and selfishly priced me out of the market. Which somehow prevented me from procreating as well, let’s not forget. But they’ll learn the hard way, and then who’ll be laughing, eh?

  • #111699
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    angie
    Spectator

    Sorry chopera, I’m waiting for jake’s prediction of an 80% fall in French property, I’ve seen a very nice stone built fully renovated period house on edge of small western Provencal town already reduced from 300k (looks a bargain then) to 220k, which means apply the 80% reduction will mean 44k for cash, 4 beds 3 baths, room for pool, fantastic views, a comfortable 12 hour drive from UK, everyone welcome to stay. 😉

    Can nip over to Spain occasionally to stock up on Riojas and Serano to compliment the French fare, might buy some Spanish properties too while I’m shopping if Jake is right, I’ll have one of those fincas over there, one of those townhouses, no maybe two, a dozen apartments with my oysters, and the odd 100 Hectares of land to go in my shopping basket, then the whole of Barcelona too probably 😛

  • #111703
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    Anonymous
    Participant

    What is really dragging down the property market in Spain is not just the terrible state of the Spanish economy or the collapse in demand for property but the most significant factor causing property prices to fall is the huge over supply of properties for sale and this is only going to get worse as more and more people decide enough is enough and give up waiting for a recovery that will never happen and cut their losses and put their properties on the market adding even more properties to an already massive amount of property that nobody wants to buy at today’s high prices knowing that they can buy alot cheaper in a few years time.

  • #111704
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    Anonymous
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    @angie wrote:

    Jake, whilst a certain amount of fact within your posts is right, ie the state of the economy, over supply and other things, don’t you think it’s unfair to label all those who own property in Spain, no doubt France next as ‘suckers and mugs’?

    Many are just trapped by circumstances beyond their control, some have inherited property, or their partners have died whilst there, some may need to move back because of health or family reasons, many bought in ‘good faith’, others became victims of Land Grab and illegal builds etc etc Not everyone was or is a sucker or mug, and others are managing to sell too. 🙄

    Many expats who bought property in Spain during the boom were hoping to see spectacular returns on their investment and viewed their property not just as a home but as a lucrative investment. However these people assumed that the Spanish property market behaved in exactly the same way as the British property market but they were very mistaken. The Spanish reaction to the ever rising property prices during the boom was to make them embark on the mother of all house building booms in which the landscape on the Costas were littered with cranes building a vast number of homes and it is this over supply of new homes entering the market that has really undermined the value of the expats properties in Spain because the more you produce of something the less is its individual worth.

  • #111705
    Profile photo of Fuengi (Andrew)
    Fuengi (Andrew)
    Participant

    @chopera wrote:

    I’m going to follow jake’s mantra and set myself a target of €5. Yup, when properties that I like can be bought for €5 then that’s my buy signal. I don’t expect that to happen for 60 years though, because it’ll take deluded sellers that long to figure that their property is only worth the amount I say it is. But it’ll happen, don’t you worry. All those expats will be left rotting on the costas, reduced to scavenging for food, living in caves and occasionally eating each others brains, probably, and all because they arrogantly paid more for their properties than I could afford, and selfishly priced me out of the market. Which somehow prevented me from procreating as well, let’s not forget. But they’ll learn the hard way, and then who’ll be laughing, eh?

    How would the media brand that?

    Costapocalipse?

    Costa del Strife?

  • #111706
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    Anonymous
    Participant

    @angie wrote:

    Jake, whilst a certain amount of fact within your posts is right, ie the state of the economy, over supply and other things, don’t you think it’s unfair to label all those who own property in Spain, no doubt France next as ‘suckers and mugs’?

    Many are just trapped by circumstances beyond their control, some have inherited property, or their partners have died whilst there, some may need to move back because of health or family reasons, many bought in ‘good faith’, others became victims of Land Grab and illegal builds etc etc Not everyone was or is a sucker or mug, and others are managing to sell too. 🙄

    angie,

    Apart from me going on about the dire state of the Spanish economy and the chronic over supply of property on sale I also go on about the poor and sub-standard build quality of many of the properties that were built. It is the poor quality of workmanship, the use of bad building materials and shoddy construction together with the ever increasing supply of properties for sale in Spain that is really putting the death nail into the spanish property market.

    There can only be a recovery in the Spanish property market when the pool of unsold properties starts to reduce but more people are realising that things in Spain are only going to get worse and they are getting out and are putting their properties on the market leading to even more properties for sale and this together with collapsing demand will mean the the supply of properties will only increase and as long as this is the case then there won’t be any recovery in the Spanish property market.

  • #111707
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    angie
    Spectator

    Jake, I can’t disagree with much of the content of your last post, in fact I’ve often pointed out the same things myself and still do. My gripe was your labelling everyone who owned properties as ‘suckers and mugs’, true a lot of them may have been mugged or duped into buying at the top but many bought property to live or holiday in for life and didn’t see their purchase as an investment whilst hoping too that property wouldn’t decrease in value. Just think that there are many people suffering as a result of this probably through no fault of their own.

    I agree the overbuild needs to be cleared first somehow including those unfinished blocks with cranes on them, this doesn’t help the market at all, and it will be a long haul back for Spain I believe 🙄

  • #111709
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    Chopera
    Participant

    jake the empty housing estates with shoddy builds will never be sold. Nobody involved with their construction ever believed they would be sold. It was a scam to get cheap credit from foreign banks and the EU, and if any poor sod actually did get duped into buying one then all the better. But now the game is up nobody wants to live there, there is no demand for them, and they are not part of the market. At some point they will be bulldozed and that will be the end of the matter.

  • #111716
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    Anonymous
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    The real bottom is reached when consumers “the majority” start pricing properties at values at which they can buy without loaning money. When this happens I will know it’s the right time to buy. This doesn’t mean that it will ever reach this level because the financial institutions may actually survive somewhat. The closer we are to this “loan free” levels the more safe it will be.

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