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I am off to Costa de la luz next weekend to seriously look to buy an apartment. The area I am concentrating is around El Rompido, Punta Umbria and Portil. I have been reading so much about property being over valued by 30% etc and that the market is about to experience an ALMIGHTY crash!
Not sure whether this will affect the area I am proposing to buy in. Will appreciate any sort of comment, advice or warning. Over the last 2 years we have been to this part of Spain often and each time observed that prices have gone up.
Thanks.
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They say that Spanish property is going to drop in value by 30%, but they also say that property on the CDL is 30% cheaper than other costas.
So do the maths. Surely that means that the prices on the CDL are about right, and the prices in other areas will be dropping to nearer CDL levels.
For what its worth I have lived on the CDL for years and have bought a new house this year. Prices are holding, sellers are not accepting offers on their properties like they are on the CDS. For a good property it is still the seller that dictates the terms.
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I haven’t seen any reduction in prices in the whole of Andalucia. The only people who seem to believe it are the ones who have been watching the Trevor McDonald show etc. Not saying it may not happen soon but don’t think you can make silly offers at the moment. The ones that have a reduction were usually put on sale at grossly inflated prices so you aren’t actually getting a bargain if they reduce. Remember the old MFI sales? Everyone knew they had never been the asking price anyway 🙄 And as for bank valuations…most of them are grossly inflated.
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@Jerezgirl wrote:
They say that Spanish property is going to drop in value by 30%, but they also say that property on the CDL is 30% cheaper than other costas.
If you have a budget and you want that Spanish property now then I’d say that CDL is a great idea. Of course there are fewer Brits but they are there. I don’t know your circumstances but if I wanted unspoiled beaches and authentic Spain and I didn’t have to borrow I’d go for it.
@Jerezgirl wrote:
So do the maths. Surely that means that the prices on the CDL are about right, and the prices in other areas will be dropping to nearer CDL levels.
Well, I wouldn’t agree with this. I think it’s probably 30% cheaper because the area has not been developed to the extent that the CDS has been in order to cater for tourists. People pay more in Benalmadena because they want fish and chips and proper beer and there aren’t enough sophisticated expats to fill the other areas of Spain so it probably deserves to be 30% cheaper than the CDS. All in my opinion.
@Jerezgirl wrote:
For what its worth I have lived on the CDL for years and have bought a new house this year. Prices are holding, sellers are not accepting offers on their properties like they are on the CDS. For a good property it is still the seller that dictates the terms.
I lived there for a couple of years. When asked if I was interested in property I told the corredor to tell me when he had something decent in the region of €50K and he laughed in my face. €50K is five times the average annual wage in that area so if that is ridiculously low then there are troubles brewing there as much as anywhere else in Spain. As an aside, by putting €50K in an English bank I will be earning €2875 euros in interest each year which is exactly what I was paying in annual long term rent so you can afford to wait if you think prices might soften.
Of course local wages may increase to match the property prices but I don’t see what work will be available that will give the locals wages that high. I’m pretty certain it won’t be construction.
If you do go to CDL make sure you like Spanish food as there will be very little alternative without driving, it’s not like British cities where you can quite easily access any national dish you wish
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I think for 50,000 euros I would have laughed too! The prices are only 30% cheaper, not 80!!
But anyway, I imaging people who want the CDL do so for a lifestyle choice rather than because it is cheaper.
Like you say, most people who go to the Costa del Sol do so because they like their fish and chips, karaoke and never plan to speak Spanish. Most people who go the the CDL hate all of these things, and consider it a bonus that the property is cheaper there.
This would be my case anyway. If prices dropped on the CDS by 80% tomorrow, I still wouldn’t buy there. It’s a lifestyle thing.
50,000€ five times the average wage?? Assuming the average wage is a mileurista that would mean 1000 euros a month x 14 months (don’t forget there are fourteen months in Spain) = 14000 euros per year before taxes. Add on the taxes and that is about 18000 euros gross pay. Lower than in the Uk, yes, but not as low as your quote.
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@Jerezgirl wrote:
I think for 50,000 euros I would have laughed too! The prices are only 30% cheaper, not 80!!
By my calculations that would make the average property in CDL at about €175K. Would you agree. I am sure I could get a property for that amount. Not that I would. Add 10% on top for transaction fees, of course, and we have an average CDL person having to find €192.5K to get an average property.
@Jerezgirl wrote:
50,000€ five times the average wage?? Assuming the average wage is a mileurista that would mean 1000 euros a month x 14 months (don’t forget there are fourteen months in Spain) = 14000 euros per year before taxes. Add on the taxes and that is about 18000 euros gross pay. Lower than in the Uk, yes, but not as low as your quote.
Well, someone on €14K per year sounds a little high for CDL but lets accept it as the average wage. They won’t pay income tax on that amount, by the way, so they will take home €1,166 per month (over 12 months).
Now, lets assume that the average wage earner could get together the costs associated with the purchase and 10% deposit. That means that they have saved €35K on their wage. I’m sure you will agree that I am being very generous with my figures.
That would mean that they have a loan of €157.5K and with euriobor at 4.2% and banks typically charging half a percentage on top that will mean an average person paying 4.7% which works out at €616 per month (remember that I have averaged the wages to 12 months). So, €1,166 wages minus €616 per month interest repayment gives the average person €550 each month to live on. That’s interest only that they repay, by the way, to repay the capital they would probably have to stop eating. It’s also over 50% of their wages on servicing the debt alone.
@Jerezgirl wrote:
But anyway, I imaging people who want the CDL do so for a lifestyle choice rather than because it is cheaper.
Like you say, most people who go to the Costa del Sol do so because they like their fish and chips, karaoke and never plan to speak Spanish. Most people who go the the CDL hate all of these things, and consider it a bonus that the property is cheaper there.
This would be my case anyway. If prices dropped on the CDS by 80% tomorrow, I still wouldn’t buy there. It’s a lifestyle thing.
And my point is that the indigenous population cannot afford to live there and either it becomes like the CDS or property prices are lowered to reflect the local wages. I think it will be the latter and €50K properties will become quite common.
In fact, as local average wages are reduced due to greater unemplyment and as banks get more careful with their loans charging a greater differential between the cost of money and their lending rates I can see €50K buying a damned fine property. I might even have a little chuckle myself at those prices
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@mike wrote:
property prices are lowered to reflect the local wages. I think it will be the latter and €50K properties will become quite common.
In fact, as local average wages are reduced due to greater unemplyment and as banks get more careful with their loans charging a greater differential between the cost of money and their lending rates I can see €50K buying a damned fine property. I might even have a little chuckle myself at those prices
You mean like they have lowered the property prices in the UK to reflect local wages and help first time buyers get on the ladder? Oh no, they didn’t do that, did they. Instead banks offer mortgages for 35, 40 even 50 years. Remember the old days when in the UK you could only borrow three times your salary. What is that figure at now? 5? 6?.
Why would the property prices drop when the banks are willing to be more flexi in their mortgage lending?
Average prices for the property? well that depends on whether you are city or campo doesn’ it. Cadiz is quite expensive. Seville is very expensive. Ayamonte, or other small towns are more reasonably priced.
And as for the average salary, well I think 14000 (Net) sounds about right. There are mileuristas galore here, as well as everywhere else in Spain.
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We often spend a few days on the CDL. Like the area and we did have a look at property a few years ago. What we did find is that to get a comparable villa to the one we have now and a similar situation, property prices were about the same. It does seem like the real Spain (if there is such a thing 🙄 ) but some areas are rapidly becoming like the CDS. Love puerto de Santa María but the paseo area is miles of faceless apartments most of them which seem empty out of season. An Aunt has bought at Ayamonte and sadly it seems a bit like the fish and chips brigade to me. Everyone says that the wind is a problem but have to say haven’t noticed it when I have been in the area. Cadiz is great but wouldn’t like to live in a city and the roads around are like málaga.
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@katy wrote:
An Aunt has bought at Ayamonte and sadly it seems a bit like the fish and chips brigade to me. .
A curious comment considering that there isn’t a single fish and chip shop in the whole town!
Buy anyway, I agree with you, Ayamonte (and Chiclana) are probably the most British towns along this coast and are certainly the least Spanish.
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@Jerezgirl wrote:
You mean like they have lowered the property prices in the UK to reflect local wages and help first time buyers get on the ladder? Oh no, they didn’t do that, did they. Instead banks offer mortgages for 35, 40 even 50 years. Remember the old days when in the UK you could only borrow three times your salary. What is that figure at now? 5? 6?.
About 5 or 6 times salary. I certainly wouldn’t buy in the UK now. In fact, I wouldn’t buy anywhere, this is a global phenomenon.
@Jerezgirl wrote:
Why would the property prices drop when the banks are willing to be more flexi in their mortgage lending?
The figures I gave were for interest only and are at current tight margins. Repayment mortgages over 50 years include repaying the capital over that amount of time as well as paying the interest on the loan. There’s nothing to be done with the interest rate unless banks wish to give money away because they would be lending money at less than it costs them to buy it (savings rates).
@Jerezgirl wrote:
Average prices for the property? well that depends on whether you are city or campo doesn’ it. Cadiz is quite expensive. Seville is very expensive. Ayamonte, or other small towns are more reasonably priced.
And as for the average salary, well I think 14000 (Net) sounds about right. There are mileuristas galore here, as well as everywhere else in Spain.
Well, anyone buying an average priced property of €175K and earning €14K per year is going to struggle for a very long time as it is and if interest rates go up, and it appears very likely that they will, they may well go under. Personally I would only buy at 4 times my salary which would give me, were I average, a budget of €54K.
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@mike wrote:
[quote=”Jerezgirl”
Well, anyone buying an average priced property of €175K and earning €14K per year is going to struggle for a very long time as it is and if interest rates go up, and it appears very likely that they will, they may well go under. Personally I would only buy at 4 times my salary which would give me, were I average, a budget of €54K.A mileurista on their own won’t be able to get onto the property ladder in Spain. It’s the same in the UK. An average wage will not buy you a starter home these days.
However a pair of mileuristas would have twice the income. Factor in their deposit (probably partly given to them by the cash rich parents) and a starter home becomes affordable.
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@Jerezgirl wrote:
@mike wrote:
[quote=”Jerezgirl”
Well, anyone buying an average priced property of €175K and earning €14K per year is going to struggle for a very long time as it is and if interest rates go up, and it appears very likely that they will, they may well go under. Personally I would only buy at 4 times my salary which would give me, were I average, a budget of €54K.A mileurista on their own won’t be able to get onto the property ladder in Spain. It’s the same in the UK. An average wage will not buy you a starter home these days.
However a pair of mileuristas would have twice the income. Factor in their deposit (probably partly given to them by the cash rich parents) and a starter home becomes affordable.
You are right. If each partner were to earn €14000 per annum and they had parents that could afford a €35K deposit and if they never have children and if they keep their jobs for the next 25 years and if interest rates don’t rise and the economy doesn’t go into recession then they can probably afford a starter home.
But it’s a little like “what did the Romans ever do for us?” speech, isn’t it?
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Don’t forget the 2500 euros per kid that they will be getting from now on!
It’s a fact that these days young people will have to depend much more on their parents to get them on the property ladder than in the past. They are lucky that there are a lot of middle aged cash rich Spaniards around to help them.
Anyway, at least mortgages are still tax deductible in Spain.
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@Jerezgirl wrote:
Don’t forget the 2500 euros per kid that they will be getting from now on!
Given the price of property I hope that €2500 is every year and not just a one off payment, it still wont replace a wage much needed to repay the loan on a starter home.
@Jerezgirl wrote:
It’s a fact that these days young people will have to depend much more on their parents to get them on the property ladder than in the past. They are lucky that there are a lot of middle aged cash rich Spaniards around to help them.
Not according to the Economist of July 23 2007. They say “As a result of high indebtedness on the part of households and companies, domestic consumer and investment demand will grow less than in recent years
You can read more here: http://www.economist.co.uk/countries/Spain/profile.cfm?folder=Profile%2DEconomic%20Data&CFID=13069908&CFTOKEN=42728843
@Jerezgirl wrote:
Anyway, at least mortgages are still tax deductible in Spain.
Mileuristas don’t pay tax
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@Jerezgirl wrote:
@mike wrote:
[
Mileuristas don’t pay tax
How do you figure that one?
Drakan confirmed this for me half way down page 14 of this thread when he confirmed that people who are employed will not pay tax until they earn around €21K.
http://www.spanishpropertyinsight.com/forums/viewtopic.php?t=2242&postdays=0&postorder=asc&start=195
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@Jerezgirl wrote:
I find that very odd. In my last job I earnt 1200 euros a month (over a 12 month year). A fraction more than a mileurista would earn, but well below the 21K threshold you gave. I had to pay income tax like everyone else.
I looked it up before making that statement which Drakan agreed with. I’m sorry that I don’t have a link. I will do a search tomorrow but maybe Drakan or someone else can confirm at what level income tax starts for Spanish citizens
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@Jerezgirl wrote:
When I did my RENTA I think only about the first 3600 euros was exempt from income tax.
On this site, http://www.spainlawyer.com/guialegal/guialegal.cfm?IDCAPITULO=11010000 it states that At the moment, only those individuals earning more than € 21,035.42 a year in Spain, are obliged to make the income tax . declaration, above this amount carries a progressive tax structure.
Now, I wonder what this means in practise. Does it mean that anyone earning below this amount will not pay tax or does it mean that they needn’t worry about tax because the company that employs them will deal with it? When offered a job do they get told the top or bottom line?
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