[Anonymous]

What do you think about the real estate market in Barcelona? Do you think it has room to go down another 10-20% before it hits bottom? The 4% transfer tax is going to expired at 12/31/2012? Anyone knows if the government will extend to 2013?
Thanks,
Irene

[DBMarcos99]

First of all, try and find out what the poster GarySFBCN thinks – he has bought a place in Barcelona this year and should have some interesting opinions for you.
Hard to say what the long term will bring, if you are concerned about fluctuations in property value. What may be more relevant is if you can sell a property within a time-scale if you need to get out. Worth monitoring the number of houses sold on this site – they’ve begun to recover over the last couple of months after several years of falling demand but who knows if that will continue into the future? (see for example http://www.spanishpropertyinsight.com/buff/2012/10/15/balearic-home-sales-soar-by-32pc-according-to-recent-report/ )
Two things that we know of that may impact on Barcelona and Catalunya. One, the high speed rail link to France opens up from April next year. Unless the French economy tanks (and that is a possibility) expect to see yet more tourists coming down to Catalunya.
The other thing is the call for independence. This could have a serious detrimental effect on the economy in the short term as a lot of Catalan sales are to other parts of Spain, and a boycott could well arise. Also the EU are playing hardball on separatist movements and things could get very shaky.

[peterhun]

That link is marked as Publicity – its an advert by an estate agent so you can ignore it.
You can also ignore the talk of Catalunya independence as it will never happen and a railway link will have negligible impact on prices.
Prices will continue falling, simple really.

[logan]

I don’t think you can view Barcelona as any different to the rest of Spain’s cities when it come to property. The market is depressed everywhere. Economics, industrial output and employment all continue to decline. So why would property be any different?

[Chopera]

I seriously doubt that they’ll extend the 4% IVA. AFAIK it’s not the the transfer tax that’s been reduced to 4% anyway, it’s just the IVA on new builds, so for second hand properties you’ll still pay something like 8% transfer tax this year (I can’t remember the exact amount). Another tax break is coming to an end this year as well (desgravación) so there’s plenty of reasons to think prices will continue to fall next year (and the year after that). Other reasons for falling prices include the fact that unemployment is still going up, banks aren’t lending, and house prices are still over priced when compared to renting. The main reason Spaniards bought houses during the decade leading up to the crash was because they thought prices would continue to rise, and that that would compensate for paying more than they would for renting (and also it was a good way to launder money). Now the illusion of ever increasing prices has burst there’s still a fair way down to go. (as peterHun says, the AVE train will have little effect on house prices in Barcelona).

[Anonymous]

We recently viewed some apartments in the old town area in Barcelona. The price range from euro2,600 to 3,100 per meter in Barri Gotic and El Bron area for non-renovated apartments. What do you think about the price/m2? Some people said it can go down to euro2,000 per meter? Would it really go down to that level? What is the price/m2 at the peak in Barcelona?

[GarySFBCN]

I did purchase an apartment in Barcelona in August. I had ‘special circumstances’ so I moved ahead with the purchase.

Would I buy now? It depends. I wanted and purchased an atico (penthouse). Because there are not very many of these available in Barcelona, I was not able to negotiate the price down as much as I would have liked.

If you are not looking for something ‘rare’ I think it is a good opportunity to buy now. The owners/agents of almost every apartment I inspected were lowering their asking price while I was there.

You may find the process of getting a mortgage very difficult. If you need a mortgage, you may want to first consult a few banks to see if a mortgage is possible. Also, most of the banks only provide variable-rate mortgages, which is a ticking time-bomb in my mind.

My advice is to take your time, be deliberate and in your negotiations.

Some of my concerns that persist include the stability of the euro, the stability of Spain, increasing crime rates, increasing despair, the potential for the government of Spain to turn fascist, and the move for independence in Catalunya.

Regardless if Catalunya’s move for independence is effective, I fear Spain’s response will be violent and and stupidly punitive.

I am not concerned about values dropping as I am in this for the long term.

Another factor to consider is that if/when prices do drop, the only bargains will be in truly inferior apartments. When I was in the market, the bank-owned properties being advertised were few and overpriced. That has changed, but maybe not so much in Barcelona. Make sure you check the bank listings.

To give you some idea, we paid 325k for a penthouse of 89m2, with 2 terraces that together are 62m2. The escritura showed that the former owner paid $453k in 2006, and he hinted that he actually paid more, off the books. The price we paid is about 100k below his original asking and 32k below his ‘final’ low asking price of 357k. I believe that had the owner been Spanish (he was Russian), we could have negotiated the price even lower, and I expect that the value may fall further, probably to 260k when the markets bottoms-out.

But I also believe that with two terraces, one facing west and the other facing east, with nice views (including sunrise and sunset) and a good location, our atico will always be sellable, so for me it was worth the risk.

If possible, see if you can talk with your potential future neighbors about the ‘communidad’ – the apartment owners association. Ours is a nightmare, not that it would have deterred me.

I don’t know your age, but waiting for the market to bottom-out may be a long wait. The dynamics of the economy are very different in the US, but most people were caught unaware that the market in the San Francisco Bay Area hit bottom early last year.

Finally, I made this purchase knowing that no matter what happens with the market, politics, etc., it will not affect my overall economic ‘health.’ If having the value of your new apartment fall to nothing for a few years will affect your overall economic and/or emotional stability, you may want to hold off. On the other hand, if buying something to enjoy now and for a long time to come will bring you happiness, go for it!

[DBMarcos99]

@GarySFBCN wrote:

I did purchase an apartment in Barcelona in August. I had ‘special circumstances’ so I moved ahead with the purchase.

Would I buy now? It depends. I wanted and purchased an atico (penthouse). Because there are not very many of these available in Barcelona, I was not able to negotiate the price down as much as I would have liked.

If you are not looking for something ‘rare’ I think it is a good opportunity to buy now. The owners/agents of almost every apartment I inspected were lowering their asking price while I was there.

You may find the process of getting a mortgage very difficult. If you need a mortgage, you may want to first consult a few banks to see if a mortgage is possible. Also, most of the banks only provide variable-rate mortgages, which is a ticking time-bomb in my mind.

My advice is to take your time, be deliberate and in your negotiations.

Some of my concerns that persist include the stability of the euro, the stability of Spain, increasing crime rates, increasing despair, the potential for the government of Spain to turn fascist, and the move for independence in Catalunya.

Regardless if Catalunya’s move for independence is effective, I fear Spain’s response will be violent and and stupidly punitive.

I am not concerned about values dropping as I am in this for the long term.

Another factor to consider is that if/when prices do drop, the only bargains will be in truly inferior apartments. When I was in the market, the bank-owned properties being advertised were few and overpriced. That has changed, but maybe not so much in Barcelona. Make sure you check the bank listings.

To give you some idea, we paid 325k for a penthouse of 89m2, with 2 terraces that together are 62m2. The escritura showed that the former owner paid $453k in 2006, and he hinted that he actually paid more, off the books. The price we paid is about 100k below his original asking and 32k below his ‘final’ low asking price of 357k. I believe that had the owner been Spanish (he was Russian), we could have negotiated the price even lower, and I expect that the value may fall further, probably to 260k when the markets bottoms-out.

But I also believe that with two terraces, one facing west and the other facing east, with nice views (including sunrise and sunset) and a good location, our atico will always be sellable, so for me it was worth the risk.

If possible, see if you can talk with your potential future neighbors about the ‘communidad’ – the apartment owners association. Ours is a nightmare, not that it would have deterred me.

I don’t know your age, but waiting for the market to bottom-out may be a long wait. The dynamics of the economy are very different in the US, but most people were caught unaware that the market in the San Francisco Bay Area hit bottom early last year.

Finally, I made this purchase knowing that no matter what happens with the market, politics, etc., it will not affect my overall economic ‘health.’ If having the value of your new apartment fall to nothing for a few years will affect your overall economic and/or emotional stability, you may want to hold off. On the other hand, if buying something to enjoy now and for a long time to come will bring you happiness, go for it!

Great post. I may not always agree with your opinions but you obviously have an informed knowledge of the Barcelona housing market and its current situation. Thanks for sharing your insights.

[Anonymous]

Gary,
Thanks for your comments! It’s very useful. We’re also a buyer from the US. Besides the price of the property, we also concern the exchange rate between the euro and the usd. We heard its almost impossible to get a mortgage from Spain now so we are planning to take out a mortgage in the US. The issue is if euro is to go down 10%, even with no change of value of the property, we will incur 10% exchange rate loss. That’s something we are taking into consideration.

Is your apartment in the old town? We’re planning to use this place as our second home as well as vacation rental and we are planning to hold it for a long time. Having said that, we are treating this as an investment and certainly don’t hope the price will be the same 10 years from now.

On the other note, we know a rental license is needed for vacation rental in the old town. The question is is the city really reinforce the rule? When I go online and look for vacation rentals from owners posting, I doubt that they all have rental license. Any comments on this topic?

Thanks,
Irene

[logan]

@irene wrote:

we are treating this as an investment and certainly don’t hope the price will be the same 10 years from now.
On the other note, we know a rental license is needed for vacation rental in the old town. The question is is the city really reinforce the rule?
Irene

Buying for investment in Spain is currently a very poor idea. Annual increases in capital value are no longer a given. In fact in the last five years values have steadily dropped. Why should that trend change in the medium term given the state of the economy? It could be a decade or more before capital values start to rise. This market and the Spanish economy are seriously damaged.

My best estimate is that in 10 years time your property will be worth exactly what you pay for it now.

The Spanish government see property, especially second homes as a cash cow. Property taxes are bound to rise. That includes none resident tax, council tax, inheritance tax, income tax. Rental income is taxable and you will have to pay it somewhere.

A rental license is way of ensuring proper taxes are paid. Why would you think it would not be enforced?

[Chopera]

@logan wrote:

…

A rental license is way of ensuring proper taxes are paid. Why would you think it would not be enforced?

Because Spain is crap at ensuring proper taxes are paid?

[Chopera]

I’m not an expert on the US market, and don’t know that much about Barcelona either, but a lot of the UK press seems to be of the opinion that the US economy is going to be revolutionised over the next decade because of shale gas. Commentators are saying the US will become entirely energy independent again and it will be a complete game changer. While the outlook for the eurozone is “uncertain” at best. Based on this, I’d be looking to invest in the US (where there is a much more fluid and regulated property market, prices have probably already touched bottom, and the government is stable). If you are looking to own your own pad in Barcelona, and make a bit of money on the side as well then that might be a different matter, but from a purely investment point of view I’m inclined to go with what Logan says.

[logan]

@Chopera wrote:

Because Spain is crap at ensuring proper taxes are paid?

I understand that Chopera but the actual fact a law is in place to provide a requirement for rental licences should be enough for the ‘investor’ to accept it could be well enforced either currently or in the future.

Incidentally Spain is actually getting much better at collecting taxes. Possibly through EU pressure to reduce debt and dire necessity. The government are now systematically trawling through local Empadron records, then sending round inspectors to the address to see if these records are accurate and if the property is rented out.

Central government pay local councils a fixed sum per year, per head of Empadron recorded residents. Tax bills due on rental income no doubt will follow. 🙁

[Chopera]

@logan wrote:

@Chopera wrote:

Because Spain is crap at ensuring proper taxes are paid?

I understand that Chopera but the actual fact a law is in place to provide a requirement for rental licences should be enough for the ‘investor’ to accept it could be well enforced either currently or in the future.

Incidentally Spain is actually getting much better at collecting taxes. Possibly through EU pressure to reduce debt and dire necessity. The government are now systematically trawling through local Empadron records, then sending round inspectors to the address to see if these records are accurate and if the property is rented out.

Central government pay local councils a fixed sum per year, per head of Empadron recorded residents. Tax bills due on rental income no doubt will follow. 🙁

Yes, but it was resonable for Irene to ask whether these taxes are being enforced or not. Being Spain, you have to be on the ground to have any idea of what the situation is really like, and even then it depends on which part of Spain we’re talking about. A Spanish colleague of mine says he is being stung for a couple of grand in tax each year just for having a second home in Malaga. I know other people with second homes in Extremadura who don’t pay anything.

But I do agree that the Spanish government has upped its game. As I mentioned elsewhere a builder told me a few days ago that all their suppliers now charge VAT, and a friend of mine who works for an energy company tells me the government goes through peoples’ bills to check if properties that are supposedly empty most of the time are in fact occupied and consuming energy (if they are occupied then the assumption is that they are being rented out and there will be a knock on the door).

[logan]

Germany and the northern EU countries will no longer allow the southern peripheral states to tolerate tax evasion. Greece is in trouble largely due to tax evasion on an industrial scale and the inability of the state to deal with it.

It’s clear that if EU bailout money is to be used to help these states in financial difficulties they have to clean up their act and enforce their tax laws with accountable rigor. Otherwise no help will be forthcoming.

Spain has always had a relaxed attitude to taxation. When I relocated many years ago from Spain to France I was astonished how the French tax authorities behaved. My business affairs were subjected to many ‘controls’ ( physical inspections by tax inspectors) and I was ordered on two occasions to present myself to the revenue offices for questioning. I had in fact done nothing wrong and could prove it eventually. I had just got used to years of a relaxed tax regime in Spain.

These are the cultural differences which the EU run by France and Germany will impose on the people of Spain and Greece.
Better get used to it. 🙁

[Anonymous]

It would be better to wait than to buy now, regardless of ones personal circumstances. It just doesn’t make sense to buy a property when you know full well that the property will lose alot of money over the next few years.

[GarySFBCN]

Irene, let me know what bank will give you a US mortgage on a Spanish property – I couldn’t find one. I would be interested in refinancing my Spanish mortgage in the US.

I have the same concern about the currency exchange, even though it would seem that the euro needs to be devalued in order for it to survive. Adding to this are ridiculous fees charged by banks in the US and Spain when transferring money from the US to Spain.

I don’t know anything about adhering to the tax/permit laws, but I have heard that it is no longer the ‘wild west’ in Barcelona, that they have tightened-up the vigilance on this. Also, with a government looking for any excuse at all to increase its treasury, I would adhere to the laws to avoid future penalties.

I agree with the others posting here – if this is considered an investment, it is probably not a good investment to make. It may turn out to be a black hole where all the money goes.

I am familiar with the neighborhoods where you are looking. If this for vacation only, that would be fine. Living there would be a different story – it is very loud and you will eventually get tired of all of the tourists. Please note that when searching for a place to purchase, you have to go back to that location at 1am to see if there are any loud nightclubs below. If there are, you will not be able to sleep until they close.

I did buy nearby – El Born borders on the west side of the park Ciutadella. I am 2 blocks beyond the park on the east side.

Gary

[Anonymous]

Hi,
Is there a website that can check the history of the property recorded price for Barcelona?

Thanks,
Irene

[peterhun]

@irene wrote:

Hi,
Is there a website that can check the history of the property recorded price for Barcelona?

Thanks,
Irene

Not really, the government policy is to fake that sort of thing in order to maximize tax income from property sales.

[Anonymous]

@irene wrote:

Is there a website that can check the history of the property recorded price for Barcelona?

I’m working on this with an agency that have lots of data on real transaction prices in Barcelona. Prices are down much more than any of the indices you see.

The other day they sold a nice flat in San Gervasi for €190k, down from something like half a million, so about 60pc down, if my memory serves me well.

[Anonymous]

interesting, will have a look. quite fancy el poble sec myself; right next to eixample and close enough to ravel and gothic area without having to deal with tourist hordes….

[Author]

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