2006 could well be a watershed year for the Spanish property market. The naïve off-plan speculators who so distorted the market are no longer buying, indeed many of them are now undercutting the market by trying to offload discounted contracts they can’t complete on. Overall buyer numbers are down, and prices in many popular areas are falling. So it looks like this will be the year in which the effects of excessive speculation in coastal property unwinds, with a certain amount of pain for some and opportunities for others. But a reassuring note from the market seems to be a continued bedrock of buyers looking for holiday homes and permanent homes in Spain’s beautiful surroundings and sunny climate, rather than investors looking for risk-free, tax-free, double-digit returns on investment. Agents who focus on these buyers, rather than the fickle ‘investors’ now about to lose their shirts in Bulgaria et all, report that business is steady.
Euribor rises to 2.78% in December 2005, pushing up Spanish mortgage repayments
Euribor – the rate used to calculate interest payments for most mortgages in Spain – rose to 2.78% in December, the highest level in 3 years.
SPANISH PROPERTY MARKET NEWS
EU takes Spain to court over 35% capital gains tax for non-residents
The European Commission is taking the Spanish government to the European Court of Justice over discriminatory capital gains taxes that favour Spanish residents over non-resident EU nationals.
Under Spain’s present tax code, non-residents have to pay capital gains tax of 35%, compared to 15% for residents. The EU argues that this contravenes EU agreements governing the fee flow of capital and non-discrimination. The commission has referred the issue to the courts after Spain made no effort to change the legislation, despite a formal complaint from the Commission in July of 2005.
Regional governments reviewing short-term tourist lets
By some estimates a majority of tourists visiting Spain rent apartments from private owners, many of who fail to comply with rental and fiscal regulations. This deprives regional governments of tax receipts and reduces the revenues of hotels. Consequently the Regional Governments of the Balearics, Valencia, Catalonia, Andalusia, Murcia, Galicia, Asturias and Cantabria are now discussing measures to clamp down on illegal short term tourist lets.
Plans to build 450,000 Spanish properties in areas without sufficient water
Two of Spain’s southern regional water authorities (Las Confederaciones Hidrográficas del Júcar y del Segura), controlled by the Ministry of the Environment, have declared water resources insufficient to cope with plans to build 450,000 properties in 50 municipalities in the provinces of Castellón, Valencia, Alicante, Murcia and Almeria.
FUCI received 10,424 property-related complaints in 2005
The Spanish consumer organisation known as FUCI, a delightful acronym of ‘La Federación de Usuarios y Consumidores Independientes’, received 10,424 construction-related complaints last year, 2,000 more than in 2004.
The majority of consumer complaints (3,309) concerned construction faults in newly built properties, such as fixtures and finishings defects and damp. Of the remaining complaints, 2,554 concerned the failure by developers to deliver agreed specifications, 2,082 related to abusive clauses in purchase contracts, and 1,224 were caused by overruns on the delivery of finished properties.
62% of young Spanish adults despair of buying a property
A new study by the Youth Institute (Instituto de la Juventud) reveals that 62% of young Spanish adults believe it will be difficult or impossible for them to buy a home given their economic circumstances and Spain’s high property prices. 50% of all Spaniards in the 18-34 age bracket live with their parents.
Midas touch of the high speed train from Madrid
Even in Spain’s exuberant real estate market there’s nothing like the high-speed train from Madrid to set off property prices.
New lines for Spain’s equivalent of the French TGV, known locally as the AVE, now make commuting to Madrid from previously far-flung places like Albacete and Cuenca a realistic alternative to paying the giddy prices for housing in the capital.
Property prices in regions and municipalities with new high-speed connections to Madrid inevitably surge to reflect the value of being a part of Madrid’s commuter belt. It happened in Ciudad Real, and is now happening in Toledo, Guadalajara, Ávila, Segovia and Cuenca. In 2005 property prices rose by 18.2% in Albacete and 20.6% in Ciudad Real, compared to a national average of 12.8%
Resale property prices up 34%in Valencia City
A report in January from the real estate agents of the provinces of Valencia (APIs) shows that resale property prices in the city rose by 34% in 2005. The best performing district was Marchalenes, where property prices rose by 72% last year, followed by Fuente de San Luis-Malilla with 61 % and Burjassot with 47%.
European property price inflation cooling down
According to the investment bank Barclays Capital Euro-zone property prices rose by an average of 7% in 2005, with French property rising by 12% and Spanish by 13%.
In 2004, Euro-zone average property prices rose by 8.5%, so property price inflation dropped slightly in 2005. The trend towards slower property price growth is expected to continue in 2006, with the bank forecasting property inflation this year of 6% (8% in Spain).
More homes planned for the shrinking population of Asturias
A recent article in La Voz de Asturias – a local Asturian newspaper – has questioned plans to build up to 60,000 new properties in coastal municipalities of Asturias where population growth is either stagnant or negative.
Europe’s highest residential skyscraper to be built in Benidorm
Over the next 4 years Europe’s highest residential skyscraper will be built in Benidorm, on the Costa Blanca. The new building, expected to be completed in 2009, will be 200 metres high with 47 floors, and will be called “In Tempo”.
New construction slows around Malaga, but takes off in Cadiz and Almeria
New construction in Andalusia’s Malaga province – home of the Costa del Sol – fell least year for the first time after a decade of vertiginous expansion. Figures from the College of Architects reveal that 37,532 housing starts were approved in the province last year, down 6.7% on the previous year. On the other hand housing starts rose by 14% in the province of Cadiz – home to the Costa de la Luz – and by 20% in Almeria.
Rental prices up 4.3% in 2005
Figures from Spain’s National Statistics Institute (INE) show that average Spanish rental prices rose by 4.3% in 2005, slightly ahead of inflation (3.7%) and fractionally above the 4.1% increase in 2004. In inflation-adjusted real terms rents rose by only 0.6% in 2005.
Economic migrants expected to buy 40,000 Spanish properties annually
The Spanish bank Banesto forecasts that economic migrants flooding into Spain (at the highest rate in the EU) will end up buying 40,000 Spanish properties per year until 2008. According to the bank’s figures the average immigrant property buyer’s budget in 2005 was 142,000 Euros.
© Mark Stucklin (Spanish Property Insight)