March 27, 2007 at 9:48 am #52748
First of all let me declare my hand. I am an estate agent and if that colours my opinion somewhat then so be it. My opinions are as valid as everyone elses on this forum.
Secondly let me state categorically that this is not a post trying to “Big Up” the Spanish property market because I am an estate agent (and if you bother to read the whole post you will see clearly that this is not the case)
I read an interesting statistic the other day from Marks Newsletter that property prices in Spain have risen by 9.1% overall in 2006, yet i am sure if you ask anyone on this forum how much their properties have gone up in value this year you would get a lot of flak (and probably told you must be an agent – sorry for the dig couldn’t resist it).
With a few notable exceptions property prices have been at best flat and many have dropped in price – so how is it possible that according to Marks Newsletter (which comes from I believe the Nationals Statistics office) we have price rises yet all around are price drops.
Well I have my theories and bear in mind these are only my opinion, and the purpose if this post is to open debate (please try not to get angry at each other) to try and see why others think there is a disparity between statistics abd evidence.
Firstly there have been a lot less properties sold in 2006 than in the previous year. The main areas that have been selling have been in traditionally cheap areas such as Almeria and Murcia where house prices are substantially less in some places. Whilst many buyers may have focussed on other areas such as Bulgaria,Brits and the rest of Northern Europe still consider Spain as first choice for a second home or retirement home. They just dont want to pay overinflated prices, so they look at cheaper areas
This is very to the UK market and the North South Divide. When the South is in recession you tend to find the North rises for a while before the South recovers.
So the fact that these areas have had an increase in prices and the total amount of sales has reduced will have a skewing effect on the overall results, but I cannot imagine that will have such a huge effect.
So the second part of this theory is Black money – yes that dreaded conundrum – do you pay it or not and lose out.
It is fair to say that more people now are well aware of Black money and will not pay it under any circumstances. The fact the market has shifted to a buyers market means sellers need to either accept the fact they cannot accept as much black money – if at all. or lose out on a sale
So what effect will this have?
Lets look a t a very basic example. Suppose you bought a house 3 years ago worth €100,000. You would have probably been told by the agent/developer that Black money is the norm and completely acceptable. Even though it went against the grain of what you knew to be correct you did it anyway because you 1. did not want to lose that house and 2. you were convinced that it was ok because the Bank, Lawyer, notary and everyone involved accepted it.
So you paid €70,000 in white and €30,000 in black. So the DECLARED value is €70,000
Now this year lets assume that you are looking to buy a house worth €100,000. You will not under any circumstances pay any balck money. Not only that you make an offer of €95,000 and because the buyer needs to sell it is accepted. So in this case the DECLARED value is €95,000
if you look at the difference that is an apparent rise of €25,000 in sales value in 3 years when the reality is that there has been a 5% drop
The thrd theory is estate agents commissions. I dont have to explain to everyone that many agents got away with blue murder and charged what they thought they could get away with. So instead of say 3-6% they charged 10, 20 and even 50% if they could. So the buyer paid €100,000, the agent pocketed €10,000 and that pushed the declared price down even further.
These two factors coupled with the first theory of skewing of figures due to less sales would give an apparent rise in sales prices when in fact prices are starting to fall (and I am sure that most will agree that prices are either flat or falling now)
My guess is that in the next two years the market will see appreciable drops as everything falls into line. Marks article suggests a 10% drop, IMHO i think it will be somewhere near 20%. However I have been wrong before.
So now over to you. Why do you think the market is showing a rise when the indicators are that prices are falling
One final point. If you cannot say what you want to say without being aggressive or insulting then please dont bother to say it, or send me a PM if you strongly disagree. This is a post for debate not for open warfare.
March 27, 2007 at 1:47 pm #70367
you’ve pretty much covered why the stats which by definition are historical don’t paint the current reality. I remember in Poole in the second half of 1988 demand for property had fallen off of a cliff, there were no buyers. National stats said prices were still going up . As the crash got worse the stats never ever told the reality.(prices were still going up in the north and scotland, dragging up the average) In the last bust nationaly Uk prices fell arround 18% according to the stats. But if you cut the county in two, south of the west/east middlands prices were dow 35%+. I was in the fortunate position to buy several properties in 1992 at 55% below there previous peak of 1988. Averages can be deceptive and especial so where low volumes of data are used.
There may be othe factors unique to Spain but I think you’ve hit the nail on the head.
March 27, 2007 at 4:53 pm #70373
I am an agent in the Valencia area and my perception is that prices for cheaper villas (below 200.000 euros) have dropped by up to 10% over the past year. More expensive properties are probably holding steady – for the moment.
March 27, 2007 at 6:24 pm #70376
This is an issue I have been bleating on about on some of the other threads about the current market.
The fact is that these statistics are National figures. The areas within Spain vary as much as the UK – can you compare Barcelona with inland Granada? No. Same as you cannot compare London with Abergavenny (sorry if I’m offending anyone from Wales!).
Statistics from the recession of the 80/90’s in the Uk were equally distorted by regional variances.
Prices where I am are dropping. Fact. It is also a fact that they were probably 10/20/30% too high to start with. So is this a crash or a correction? ❓
Statistics are fine for some of those that analyse this and that but for me it is what’s happening on the ground that gives me the best idea of what vendor and buyer confidence is like. Generally speaking vendors are terrified because they may be losing money on their sale (that is if they recognise what’s actually happening) and buyers are terrified because they fear they may lose money on their purchase. 🙄
I’m off to watch Selling Homes Abroad just to cheer myself up 😉
March 27, 2007 at 7:06 pm #70377
Hi Aunty Val
my comments werent really aimed at regional differences. According to Marks statisitical source all areas in Spain increased in value in 2006 (the least gain was 3.3%). However as I said earlier apart from a few notable exceptions, most places have seen actual losses or at the very least remained flat.
It is said that Malaga Province saw rises in excess of 8% but there are many on here who would staunchly disagree
Granted statistics arent perfect and are historical – ie 2006 saw increases and now we are seeing drops. However even last year people were having to reduce their prices – in contrast to the picture painted by the statistics.
I am not for one minute suggesting that Marks statisitics are wrong nor that (in this case at least) the Spanish government are trying to paint a rosy picture, but there is a very real discrepancy here between the painted picture and the reality. As an agent I see this every day. .
This is the reality that we all know. But how is it possible for Spain to have had the past 3 years (and more of course) quoted as rises when we all know that for at least 2 of those years prices have remained static.
I gave my opinion on why I thought this was so, what I was looking for was others opinion (reasoned or otherwise) as to why they thought there was a discrepancy. And I would be very interested to know others thoughts.
As for prices correcting or crashing, I guess it really only affects those who bought too high in the first place and need to sell – ie those who bought at the top end of a rising market. However if you bought low and have no other encumberances but need to sell you can still do so without losing money. It is the people who bought at the top of the cycle who now need to sell (eg. because they bought off plan and expected to buy 3 sell 2 and be left with one apartment free of charge, or who were just unfortunate in their timing and have had personal circumstances dictate they need to sell) who are now in dire straits.
As someone mentioned in a previous thread and as common sense will dictate, if you dont need to sell you havent lost a single penny because eventually the market will catch up, whether in 3,5 or 10 year.
I also wholeheartedly agree with you that many vendors have an over inflated view as o the value of their property. I tend to use the yardstick of the Spanish banks (ie price per sq M) to value houses. Not entirely accurate I know but if it is way out then either the owner needs to “Correct” their price, or I will come back when the market catches up.
Of course there are instances when it goes the other way (ie the owner wants less than the property is worth) and obviiously as an estate agent I just add whatever commission on top I think I can get away with (that was a joke by the way). In seriousness in this case also the seller needs to be advised of the true value so they can make a decision.
The question is can you wait that long (not you personally of course)
Hope your programme helped to cheer you up – personally Im off to drink a glass of wine – though I wont be doing so on the terrace cos its darned cold here (Near Valencia)
March 27, 2007 at 8:06 pm #70378
Cheers Vince, enjoy the wine. Bluddy cold down here as well!
I think the problem is that a general comment about any market place is always going to get a reaction from someone because if I comment on the market down here I will upset someone in Madrid. And vice versa of course.
All I can do is draw upon my experiences (both here and the UK) and reflect on what I see happening on a daily basis.
What happens tomorrow is anyone’s guess!
March 27, 2007 at 8:44 pm #70379
Some good points Vince, puzzles me too. I do know that last year spain was asked by the EU to revise their figures on GDP etc as they were way off mark. Last week the figures for hotel occupation were released which claimed that hotels on the CDS were claiming higher occupancy in Jan than last year. But, more hotels have closed this year than last so it would figure that the ones remaining open would have higher occupancy! I just wonder if their stats have taken account of this.
People are saying on the CDS that bank valuations per m2 are too high. It could be that they use the benchmark from developers setting prices for new build for their stats.
March 27, 2007 at 9:43 pm #70382
The Spanish economy is extraordinarily reliant on the construction sector -it would make perfect sense if the Spanish government cooked the books to encourage one of the country’s biggest earners…
(& I’m sure that some fat brown envelopes would change hands to make the whole process work a bit more smoothly)
I’m not saying that this is definitely the case, but it is my opinion that governments all over the world regularly publish “disinformation” for their own ends. As an example which I hope is not to too irrelevant -how about all of the positive economic data that the US government spewed out post 9/11 in order to restore confidence in their fragile economy?
I think that you make very valid points Vince, and I am also very interested in this question in the macro sense.
I will be interested to see how this thread develops because I think that we are still some distance from getting to the bottom of the question you pose.
March 27, 2007 at 11:30 pm #70383
using price per m isnt (as I said) a totally accurate way of determining a price because it doesnt take into consideration such things as views (which can add a substantial amount) nor location, but does give a rough figure to work from.
Location does have an amazing effect on price. Last week I valued two properties in Valencia City. One right in the centre in El Carmen (a supposedly up and coming area which I wouldnt give tuppence to live there) and the other about 3 kms away in a very popular area but not so central (but very close to the metro.)
Now bear in mind that the average price per sqM in Valencia is €2,200/M the small flat in El Carmen was valued at 130,000 (which is about 2,600/M) and needed complete reform – we arent talking a paint job here this is full reform, walls need installing, building needs to be completely redone (it was condemned thats how bad it was)
Yet the other one which was a large flat (actually 3 large flats over 2 floors of about 360<) had a value of less than €1500/M because no-one would pay more than 180,000 in that area (nothing wrong with it but no one avaiable to have money)
Needless to say the one in El Carmen ahs already attracted a great interest – about 20 phone calls with some 7 or 8 visits so far (and one person who has already seen it wanting it). Incredible considering that you cant even see inside the “apartment” because it is a condemned site and until they reform the building itslef and make it safe you wouldnt know what you are buying. I certainly wouldnt buy it.
But people will. And that is very Macro market. Go 500m away from there and you would never sell that particular property probably couldnt even give it away. So my point about price rises doesnt even just relate to different regions but is much more pin pointed than that. W
Which all kind of relates to your point about the hotels. In Valencia province they are claiming hotel occupancy is up some 8% or so. InBenidorm they have had their best time in 3 years. In Valencia you cannot book a hotel room and I have people waiting to buy hotels in the City, but none are available.
Will this last past Amercias Cup – I dont know
But this is one small part of a big region and doesnt justify the increase in prices overall. So why is that.
And that I guess is my point.
Forestfire. I cannot comment on whether the government are cooking the books to get the result they want (and it wouldnt be beyond the realms of imagination) and whilst it makes sense for them to do so in order to continue the construction industry – if no one is buying and supply outstrips demand no amount of proaganda is going to redress this balance.
I dont wish to paint a picture of doom and gloom because it isnt. If you are a buyer then there has not been a better time in recent times to buy (except five years ago) if you can find the right property at the right price. ut only buy when the conditions are right for you.
Even after all tis I still heard a story yesterday of a buyer who was put an offer in which was accepted. Then the very next day the agent called to say someone had placed a mcuh bigger offer.
The buyer asked me for advice on what to do. So I told him – “walk away” which he did. When the agent came back and said (strangely enough) the other buyer had dropped out – he offered 10% lower – and got it. Unfortunately for the seller the agent cost him money and he should seriously consider taking him to court – but aswe all know that would not do much good.
Anyway interesting to hear different and converging points of view
Your comments are like mine – based on personal experience of your own locale and equally as valid.Perhaps if everyone came on here and gave a brief synopsis of their own area it would give potential buyers a realistic overview of the risk/reward in buying in that area – and that has to be a good thing
Anyway goodnight all and hope everyone sleeps well in the knowledge that Spain is warm (except here at the moment)
March 31, 2007 at 11:22 am #70486
I do agree that you will allways have regional variations and the reasons may be numerous to mention.
As far as statistcs from various bodies are concerned, yes you going to get them distorted. Apart from self/industry interest, the Spanish do not beleive in things being exact. I am sure you have heard of “mas o minus” for almost everything where accuracy is required.
The percentage increase/decreased is also affected by the base levels e.g. areas where the properties are/were cheap the increase will be higher in % terms as against areas that are well established ( Murcia/Barcelona is point)
On the subject of Black money, last week I was in Costa de la Luz, with some friends who were completing on off plans. I asked my friends lawyers about the current situation and she confirmed that it was business as usual.
March 31, 2007 at 12:01 pm #70488
A solicitor told me the same. .
On the otherside perhaps some may not have the issue with capital gains tax as was mentioned on one of the threads. 🙂
Things as normal ? 😮
Of course,it will, just diffent ways to get around the system and why?
Thats the way it has been and very likely will be as the temptation for greed is always there.
Thats why many of these figures can be out as there are many figures you simply cant count.
April 6, 2007 at 10:32 am #70622
Been a while since I posted…but couldn’t resist on this one.
As I am in Lanzarote, I am somewhat protected from all the CDS stuff and it could be argued that we are a different country anyway!
Some very interesting points on rising/falling prices; statistics etc etc. and if you were looking to do a dissertation, then you probably have most of your info on this thread!
At the end of the day though, a property is worth whatever someone will pay for it.
Plain and simple.
Think about it a bit deeper – but not too deep…
No matter what the bank say it’s worth; no matter what the valuer/surveyor say it’s worth; no matter what the producer of the statistics say it’s worth; no matter what the seller says it’s worth…it’s worth whatever someone pays for it.
I showed an apartment to 3 couples last week (in my opinion, a fantastic place with superb views etc) on the market for 140,000 euros.
One couple said too expensive.
One couple said price was fine, but too far up a hill for their little legs.
Third couple loved it and bought it.
So, in the world of statistics in a recent opinion poll conducted with real live people last week, 33% said property was overpriced, 33% said their legs ached and 33% said the property market was priced perfectly. So perfectly, in fact, that they bought a place!
April 6, 2007 at 10:42 am #70624
Why will property prices recover in Spain ?
Look out of the window today and and see what a lovely day it is and someone could have this 300 days a year?
Have a nice day
April 6, 2007 at 10:47 am #70625
Agree that a place is only worth what someone will pay. And the yardstick used to measure price per sq M does not take into account the most important factor when buying a property – location.
However on a national basis when everyone is saying that prices are still rising, yet all around people are having to drop prices in order to sell their property, something doesn’t compute.
One thing that makes me laugh though is when a potential buyer says something is too expensive – many of these people have just come over and probably not done much research (unless of coruse they have seen this forum before) yet they are able to state it is tiii expensive.
This in itself is a subjective statement.
Too expensive because they haven’t go enough money to buy it.
Or too expensive compared to others around that they have seen (but of similar size, location state etc)
Too expensive compared to another area
Or too expensive compared to another country (Bulgaria, Turkey etc)
However one slight fly in your ointment. I may see something, fall in love with it and think it is worth the price being asked. But the bank who I am using says it isn’t worth what I am paying and they are the ones giving out the money. Then it does matter what the bank says
Based on that information I would probably re think. Some wont of course and go ahead and buy it anyway, but thats why we have surveyors – to make sure that what we think something is worth is in fact worth what it is without the rose coloured spectacles.
People like your buyers are very rare these days
April 6, 2007 at 11:47 am #70627
Yep – agree.
But you know as well as I do, if Mr and Mrs X need a mortgage of Y amount and approach the bank, then – miraculously – the valuation comes back at Z amount perfect for Mr and Mrs X to get the mortgage!
Problem? Not for Mr and Mrs X – at least not in the short run.
And maybe not at all, unless of course they are looking to buy and sell in a short space of time to make a profit.
Mr and Mrs X get their property, the bank get their business and the vendor gets a sale. Luvverly Jubberly.
Isn’t that what has happened ever since the first mud hut was bought and sold?
As for buyers like mine being few and far between…
I have just been out for the last hour or so leafletting around the general area trying to get more property on my books.
We have a real shortage of good 1 and 2 beds right now and although the buyers aren’t exactly forming an orderly queue at the door, there are some who can’t find what they want.
So……when a good 1 or 2 bed does come on the market, the vendors can ask an inflated price for it.
But that then poses another question…who decides it is “inflated”?
If, as you correctly say, the price per m2 is subject to a thousand different criteria, then it isn’t worth a jot quoting that.
The vendors know that there is nothing else for sale so they can ask what they want.
The buyers will either buy it or not…if they do then they obviously think the price is OK.
And if the buyers want a mortgage, the bank manager has to hit his targets and he buys the valuer a few beers.
So, who’s to “blame” now for inflated prices?
Oh…I nearly forgot.
YOU AND ME, of course!
The agents who are talking the market up in order to earn fat commissions.
But we knew that already, didn’t we? Not!
Have a good Easter.
The forum ‘Real Estate Topics, News & Discussion’ is closed to new topics and replies.