In March I travelled the entire Spanish Mediterranean coast, from Begur in the north near the border with France, to Sotogrande in the south, overlooking Gibraltar at the very western tip of the Costa del Sol.

As usual it was research into the Spanish property market that powered my engines. I went to see the most expensive villa in Spain in Sotogrande, and then some of the cheapest villas in Spain in Almeria (price of cheap villas in Almeria just 1% of price of expensive villa in Sotogrande).

It struck me how fabulous the Spanish coasts looks at this time of the year. Everything is fresh, vibrant and colourful, and although the sun blazes away the summer heat hasn’t yet kicked in. In front of you the sparkling blue Mediterranean, and behind you fragrant countryside and mountains.

Meantime it’s cold and rainy in northern Europe – there’s even a blizzard raging in Zurich I hear – so one can see why people might rush into buying a property on a quick trip to Spain at this time of the year. My point, therefore, is don’t let all this natural beauty and sunshine get the better of your judgement if you are Spain bound to find property. The market is nothing like as tight as it was, so you can take your time, do your research and get things right. But beyond that, happy house hunting.

MARK STUCKLIN

IN DEPTH

Spanish government in the dock for fiscal discrimination against non-resident property owners
The European Commission is taking Spain to Court for discriminating against non-resident vendors, who are forced to pay more capital gains tax than residents who sell their property. This opens up the possibility of non-resident vendors claiming back taxes from the Spanish government.

SPANISH PROPERTY MARKET NEWS

Marbella’s municipal administration dissolved
In keeping with local tradition, the latest mayor of Marbella is in jail facing corruption charges, following in the footsteps of the previous 2 mayors, who were also both arrested for graft. After 15 years of chronic corruption in Marbella’s town hall it appears that the regional government in Seville has had enough. Marbella’s municipal administration has been dissolved by a government fiat until elections next year, and in the meantime the city will be run by a government-appointed administrator. The Andalusian government is also stripping Marbella of town planning powers, as the worst of the corruption has been related to the real estate sector. As a direct consequence of corruption in the town hall there are now an estimated 30,000 illegal properties in Marbella. Some 10 to 15% of these may never be legalised.

The most expensive property in Spain
If the Great Gatsby were house hunting in Spain today, he would probably buy Casa La Manzana in Sotogrande, at the western tip of the Costa del Sol. On the market for  24m (£16.5m), it’s the priciest place in the country.

Radio Liberty antennae in Pals (Costa Brava) finally torn down
Unbelievable as it may seem, the Radio Liberty antennae that have been both disfiguring and protecting (from development) the beach at Pals for decades have finally been torn down. Pals beach, on the Costa Brava, is one of the most beautiful, and least built up beaches in Spain. It remains to be seen what will happen with the land.

Spanish property prices expected to rise 10% this year
A new report from La Caixa – Spain’s largest savings bank – forecasts that Spanish property prices will rise by on average 10% this year. After adjusting for inflation of around 4%, this would mean a real increase in Spanish property prices of around 6% for the year, if the forecast turns out to be correct. >more

The report also forecasts a “soft landing” for the Spanish property market, with property inflation rates falling this year and in subsequent years.

Commenting on the report, Jordi Gaul, La Caixa’s director of research, said “In the next few years Spanish property prices may even rise below inflation, which in real terms means that property prices would fall, as happened in the years 1993 to 1996”.

The report identifies a rising Euribor rate as the principal driver behind falling Spanish property inflation rates. Euribor is the interest rate used to calculate mortgage repayments on the vast majority of Spanish mortgages. As Euribor rises, as it has been doing, it drives up the financing costs of buying Spanish property, thereby reducing potential demand.

Gual was keen to discount the possibility of a “hard landing” for the Spanish property market. “We are not expecting a sudden drop in prices, but rather gradual decline in demand” explained Gual.

Despite the extraordinary growth in Spanish property prices in recent years, the report also dismisses the claim that Spain is suffering from a real estate bubble. The report finds that the present level of Spanish property prices, and recent growth rates, are justified by structural changes in Spain such as employment growth, low interest rates and high immigration levels.

The report dismisses the concerns regarding the Spanish property market raised by “certain international organisations” – an allusion to the IMF and the BCE – and points out that the average financial cost of property to Spanish households has barley risen, despite 5 years of substantial increases in Spanish property prices.

La Caixa believes that Euribor could rise from 2.5% today to a maximum of 3.5% in the mid-term future.

Holiday-home owners spend 1 billion Euros a year on maintenance
As a group, foreign owners of holiday homes in Spain spend 1 billion Euros a year on maintaining their properties, according to new figures from the Spanish bank BBVA.

Record number of Spanish housing starts in 2005
According to the Spanish government there were a total of 729,652 housing starts in Spain during 2005, 6.2% more than in 2004 and an all time record for Spain. This compares to around 200,000 annual housing starts in the United Kingdom in recent years. 73.3% of these new Spanish properties were in apartment blocks, whilst 26.7% were detached homes. It should be noted that around half of all housing starts take place in just 12 of Spain’s 52 provinces:
Madrid, Toledo, Guadalajara, Huelva, Cádiz, Málaga, Granada, Almería, Murcia, Alicante, Valencia and Castellón.

Barcelona, San Sebastian and Madrid still the most expensive
A new study by the appraisal company Tasamadrid shows that Barcelona, San Sebastian and Madrid are still the most expensive Spanish cities for buying property

Barcelona tops the list as the most expensive provincial capital in Spain. The average cost of newly-built property in the Catalan capital was 4,267 Euros per m2 in the first quarter of 2006, up by 4.72% compared to the previous quarter. Resale property in Barcelona rose to 3,621 Euros/m2, up 4.65% compared to the last quarter of 2005.

San Sebastian is the 2nd most expensive provincial capital in Spain in which to buy property, according to Tasamadrid’s figures. Newly-built property in San Sebastian costs 3,920 Euros per m2, and resale property costs 4,143 Euros per m2.

Tasamadrid finds that Madrid is the 3rd most expensive city in Spain, although other studies find that Madrid is the most expensive city in Spain in which to buy property. According to Tasamadrid, newly-built property cost 3,717 Euros/m2 and resale property 3,528 Euros/m2 in the first quarter of 2006.

At the other end of the scale, Tasamadrid’s figures reveal that Lugo, in Galicia, is the cheapest city in Spain (1,281 Euros/m2), followed by Zamora (1,405 Euros/m2) and Huesca (1,460 Euros/m2).

Euribor rises to 3.105%
Euribor – the rate used to calculate the vast majority of Spanish mortgage interest payments – rose to 3.105% in March, the highest level since October 2002.

For a typical Spanish variable-rate mortgage of 120,000 Euros at 20 years and Euribor +0.60 terms, monthly mortgage payments will rise from 661 Euros to 708 Euros, a rise of 47 Euros per month, and 564 Euros per year.

The ECB raised base rates from 2.25% to 2.50% on the 2nd of March. A rising Euro reflects market expectations that base rates will continue to rise this years, in response to inflation fears. Experts believe that Euribor could rise to up to 4% this year.

Spanish property buyers who might suffer the most from a rising Euribor are those who bought when Euribor was at an all time low of 2%, between June 2003 and September 2005. These buyers may have been tempted to gear up or withdraw equity from their properties based on unsustainably low interest rates.

63% of urban planning complaints to European parliament concern Spain
According to the Spanish daily ‘El Pais’,15 of the 24 urban planning complaints being investigate by the European parliament concern Spain. The next worst offender is Italy with 3 cases, and France with 2.

Two thirds of promoters in Madrid fail to live up to their promises
A new study by the Spanish consumer protection organisation Fuci reveals that only a third of developers in Madrid are meticulous about delivering on the promises made in leaflets and brochures. The study shows that common problems include vague specifications, vague delivery dates, a failure to specify whether sizes quoted are for useable or built areas, and ‘real’ prices that are only correct in 85% of cases.

Falling demand pushes down housing stars in Alicante – Costa Blanca
Falling demand, a glut of properties, and high prices, are expected to reduce the number of housing starts this year in the province of Alicante by 20%

Almost 1 million properties sold in Spain during 2005
New figures from the Spanish Land Registry reveal that there were 989,341 property transactions in Spain last year, 233,328 of them in the last quarter of the year alone. The majority of Spanish property transactions last year involved resale properties.

Spanish rental prices up 4.2%
The INE reveals that Spanish rental prices have rise by 4.2% over 12 months, almost exactly in line with Spanish inflation.

Average Spanish mortgage value rises to 130,211 Euros
The value of the average Spanish mortgage taken out in January was 130,211 Euros, according to the National Institute of Statistics (INE). This represents a 13.8% rise in value compared to January 2005. Compared to December 2005, however, the value of the average Spanish mortgage fell by 1.5%. The INE also reveals that 98% of new mortgages in January were variable rate, rather than fixed. The average mortgage interest rate offered by savings banks was 3.34%, whilst banks were offering 3.40% (in both cases for 25-year mortgages).

© Mark Stucklin (Spanish Property Insight)