"Spain will face a brutal adjustment over the next 2 ye

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This topic contains 14 replies, has 5 voices, and was last updated by Profile photo of mike mike 9 years, 7 months ago.

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  • #52844
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    Anonymous
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    Euro helps topple Spanish property
    http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/25/cnspain25.xml

    By Ambrose Evans-Pritchard
    Last Updated: 1:20am BST 26/04/2007

    Fears of a property crash swept the Spanish stock market yesterday, sending shares of construction companies into free-fall, and hitting banks exposed to the mortgage market.

    Spain’s biggest property group, Sacyr, fell 8.15pc, while developers Colonial and Inmocaral plunged over 11pc.

    Spain graph; Euro helps topple Spanish property

    Valencia builder Astroc first set off alarm bells last week after the regional junta changed planning laws. Its shares have since fallen 62pc, but there appears to be no obvious trigger for the sudden switch from euphoria to panic on the Madrid bourse.

    Enrique Banuelos, Astroc’s president, said he had no idea why investors had turned on his company. “Astroc is just the same company it was in January,” he said. The firm’s value was then €9bn (£6bn), after rising tenfold since listing in June. It has now given up almost all the gains.

    The gloom spread to Banco Sabadell and BankInter, which both fell over 5pc on concerns over mortgage arrears. Madrid’s IBEX index closed down 2.73pc.

    Low interest rates set by the European Central Bank have fuelled a housing boom since Spain swapped the peseta for the euro in 1999, but excess stimulus has now seriously distorted the economy.
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    The current account deficit has reached 9.5pc of GDP, a sign of extreme over-heating. Spain is now the second biggest net contributor to global demand after the US, far outstripping China, astonishing for a country of only 40 million still living in the shadows of the Franco regime a generation ago.

    More than 800,000 homes were built last year, beating France, Germany, and Italy combined, leaving a glut of property hanging over the market. House prices have risen 270pc over the past decade to an average price of €276,000, but began to slow sharply late last year. Household debt has risen to 133pc of disposable income from 75pc in 1995.

    Manuel Romera, director of Madrid’s Instituto de la Empresa, said: “I can see a mortgage crisis building. We have a serious property bubble in this country and everyone is in denial; it’s worse than the US.” Re/Max International said it had cut prices by 25pc on holiday homes in saturated regions earlier this year. Some four million foreigners own property in Spain.

    Miguel Fernandez Ordonez, the Bank of Spain’s governor, blamed the bubble on the wrong interest rates caused by euro membership.

    “The single monetary policy has meant that excessively loose conditions for our economy have been almost continuous,” he said. “A less relaxed tone would have been better for our needs.” A report by the bank concluded that house prices were 35pc overvalued.

    The monetary policy is switching rapidly from too loose to too tight as the ECB caters to German needs. Interest rates have risen seven times to 3.75pc since December 2005, hitting Spain with an “asymmetric effect” since 96pc of mortgages are on floating rates. Most loans in Germany are on fixed rates.

    Spain could now find itself facing a monetary squeeze just as the economy swings from boom to bust, more or less the fate suffered by Britain in the ERM debacle of 1992, except that Spain has no way out.

    Bernard Connolly, global strategist for Banque AIG and former head of economic research for the European Commission, said the country will face a brutal adjustment over the next two years – if it can remain in the euro at all.

    He said: “Spain is going to face the very direst of economic circumstances: a cycle of recession, deflation and widespread private sector default – a depression in fact. This stock market slide is not just a ‘correction’. It has a very, very, long way to go.”

  • #71456
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    Anonymous
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    This discussion is already running on another thread dakz.

    I think I may have found an answer!

    http://www.themovechannel.com/News/2007/April/26f.asp?ito=EC1000

    Looks like I need to switch from the Spanish to French classes! 🙂

  • #71274
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    Anonymous
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    This discussion is already running on another thread dakz.

    I think I may have found an answer!

    http://www.themovechannel.com/News/2007/April/26f.asp?ito=EC1000

    Looks like I need to switch from the Spanish to French classes! 🙂

  • #71474
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    Anonymous
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    maximus wrote:
    This discussion is already running on another thread dakz.

    I think I may have found an answer!

    http://www.themovechannel.com/News/2007/April/26f.asp?ito=EC1000

    Looks like I need to switch from the Spanish to French classes! 🙂

    France offers a betted deal in what sense?? French property is falling faster than the Spanish one (for the moment being).

  • #71283
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    Anonymous
    Participant
    maximus wrote:
    This discussion is already running on another thread dakz.

    I think I may have found an answer!

    http://www.themovechannel.com/News/2007/April/26f.asp?ito=EC1000

    Looks like I need to switch from the Spanish to French classes! 🙂

    France offers a betted deal in what sense?? French property is falling faster than the Spanish one (for the moment being).

  • #71503
    Profile photo of Anonymous
    Anonymous
    Participant

    Keep up dakz as this is one bit of doom that you missed 🙂

    As can be seen on other threads and confirmed ralita reply dont believe all you read.
    One report has U.K property heading for a crash,still suppose it sells news papers.
    Two sides of a coin you see and I think that posting about summed up the overall stuation.

    Regards
    Jim 🙂

  • #71303
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    Anonymous
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    Keep up dakz as this is one bit of doom that you missed 🙂

    As can be seen on other threads and confirmed ralita reply dont believe all you read.
    One report has U.K property heading for a crash,still suppose it sells news papers.
    Two sides of a coin you see and I think that posting about summed up the overall stuation.

    Regards
    Jim 🙂

  • #71511
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    Anonymous
    Participant

    I admire your optimism Jim. I’ve always been lucky with property which probably reflects my age, however I remember the last slump in the early 90’s, and seen the distress caused to friends, who overnight couldn’t sell, and owed banks a fortune in negative equity. I wouldn’t wish that on anyone. 🙁

    If America, France and Spain are in difficulties then the UK will follow. Probably a good time to sell but not buy.

  • #71311
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    Anonymous
    Participant

    I admire your optimism Jim. I’ve always been lucky with property which probably reflects my age, however I remember the last slump in the early 90’s, and seen the distress caused to friends, who overnight couldn’t sell, and owed banks a fortune in negative equity. I wouldn’t wish that on anyone. 🙁

    If America, France and Spain are in difficulties then the UK will follow. Probably a good time to sell but not buy.

  • #71539
    Profile photo of mike
    mike
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    @dakz wrote:

    Bernard Connolly, global strategist for Banque AIG and former head of economic research for the European Commission, said the country will face a brutal adjustment over the next two years – if it can remain in the euro at all.

    You have to admit that from an intellectual perspective we do live in interesting times. I wonder if this is what it felt like in 1929

  • #71339
    Profile photo of mike
    mike
    Participant

    @dakz wrote:

    Bernard Connolly, global strategist for Banque AIG and former head of economic research for the European Commission, said the country will face a brutal adjustment over the next two years – if it can remain in the euro at all.

    You have to admit that from an intellectual perspective we do live in interesting times. I wonder if this is what it felt like in 1929

  • #71551
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    Anonymous
    Participant

    Mike
    Thats the difference ?
    I will look at this and think how can I make some money out of this if it does happen.
    So I may loose on the roundabouts but I will try to gain on the swings.
    Just bought a business involving glass ( sorry to change the story)
    All figures sood up ,then Wales decided to offer subsidies to those in the same business which meant that I could not compete.
    My customers being window frame manufactures were screwing me down on price that meant I was loosing money while they were doubling the price of the glass I supplied to them to the end user.
    S–it better do something about this so I started buying in the frames from them and putting my own glass in them and screwing them down on price and making money out of their frames and my glass.
    This about sums up me and why I almost always have a balanced view as to me I cant see how some can turn bad situations around without it.
    I understand that you may say that word IF ? but we are what we are.
    I am the Bank managers worst nightmare by the way 🙂

    Regards
    Jim 😀

  • #71355
    Profile photo of Anonymous
    Anonymous
    Participant

    Mike
    Thats the difference ?
    I will look at this and think how can I make some money out of this if it does happen.
    So I may loose on the roundabouts but I will try to gain on the swings.
    Just bought a business involving glass ( sorry to change the story)
    All figures sood up ,then Wales decided to offer subsidies to those in the same business which meant that I could not compete.
    My customers being window frame manufactures were screwing me down on price that meant I was loosing money while they were doubling the price of the glass I supplied to them to the end user.
    S–it better do something about this so I started buying in the frames from them and putting my own glass in them and screwing them down on price and making money out of their frames and my glass.
    This about sums up me and why I almost always have a balanced view as to me I cant see how some can turn bad situations around without it.
    I understand that you may say that word IF ? but we are what we are.
    I am the Bank managers worst nightmare by the way 🙂

    Regards
    Jim 😀

  • #71552
    Profile photo of mike
    mike
    Participant

    @glassman wrote:

    Mike
    Thats the difference ?
    I will look at this and think how can I make some money out of this if it does happen.

    Good for you, Jim. I think there are opportunities in most situations, personally I’m back in Blighty and I’ve just joined the CAB. They are employing debt workers by the shed load and I think they are going to get even busier in the future. I think I’ll tread water for 5 to 7 years and then look at North Western Spain. I think that Andalucia is finished, even if they did manage to populate all the properties they have built I don’t think they’ll be able to provide the water cheaply.

    @glassman wrote:

    This about sums up me and why I almost always have a balanced view as to me I cant see how some can turn bad situations around without it.
    I understand that you may say that word IF ? but we are what we are.
    I am the Bank managers worst nightmare by the way 🙂

    Regards
    Jim 😀

    I think you should reread what I wrote and think particularly in which context the word IF was used. You see, when the stock market first collapsed in 1929 people were a bit shocked but they expected it to recover, wise men and experienced speculators calmed nerves by reassuring people that it really didn’t matter and the underlying economy was sound. It seems like that in Spain at the moment and so I will ask again

    I wonder IF this is what it felt like in 1929

  • #71357
    Profile photo of mike
    mike
    Participant

    @glassman wrote:

    Mike
    Thats the difference ?
    I will look at this and think how can I make some money out of this if it does happen.

    Good for you, Jim. I think there are opportunities in most situations, personally I’m back in Blighty and I’ve just joined the CAB. They are employing debt workers by the shed load and I think they are going to get even busier in the future. I think I’ll tread water for 5 to 7 years and then look at North Western Spain. I think that Andalucia is finished, even if they did manage to populate all the properties they have built I don’t think they’ll be able to provide the water cheaply.

    @glassman wrote:

    This about sums up me and why I almost always have a balanced view as to me I cant see how some can turn bad situations around without it.
    I understand that you may say that word IF ? but we are what we are.
    I am the Bank managers worst nightmare by the way 🙂

    Regards
    Jim 😀

    I think you should reread what I wrote and think particularly in which context the word IF was used. You see, when the stock market first collapsed in 1929 people were a bit shocked but they expected it to recover, wise men and experienced speculators calmed nerves by reassuring people that it really didn’t matter and the underlying economy was sound. It seems like that in Spain at the moment and so I will ask again

    I wonder IF this is what it felt like in 1929

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