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The Spanish property boom is over, and we are heading into the unknown. We might be heading for a soft landing, or maybe we are bound for a crunch with significant price falls, high levels of foreclosures, lots of property companies going bust, developments left half finished, etc. It’s still too early to be sure, but I don’t subscribe to the soft landing scenario.
Assuming the market takes a dive, and prices fall significantly in 2008, then you have to assume that holiday-home buyers will disappear completely. But what do you think the Brits and other foreigners who dream of moving to Spain will do? Will they still come and rent instead, or will they stay away and sit tight until they think it’s a good time to buy? Or will they just abandon their Spanish dreams? I had a heated discussion about this last night, so I’m interested to know what others think.
Mark
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Hi to you all,and a happy new year. I hope the many people that have contributed to this forum and have had terrible stories to tell will have a better 2008
Mark
We are still looking to buy on the CDS after having three deals go pear shaped in 2007, and we wil buy just as soon as we can.
My rationale is simple, do all your research etc then ask yourself a question,will this house in my opinion be worth the same in 1 years time, if the answer is yes, then buy it
Spanish property to me is no different to any other financial investment, its all about your atitude to risk, if you are looking for cast iron guarantee you should not buy in Spain at the moment.
For this reason I think buyers will be scarce in the first six months of 2008,by May we will know for sure if its going to be soft landing or a collapse.
Steve V
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Mark
Debate fuelled by the ole vino no doupt. 😕 🙂
Think if you ask any group of people they would give varied opinions but one thing is for the short time least it doesn’t look good for property prices in Spain, if your asking for opinions thats mine.
As with any potential crash in prices if say anyone has added increases in the values of their properties since 2003 or the paid over the top then they could be in for a disapointment but thats only if they are selling ❓ .
Many will probably loose deposits out of personal situations,the pound/euro situation or developers going bust. 😥
Depending on the effects the credit crunch has on the U.K market will effect holidays in any country not only Spain.
However its a big world and some slack may be taken up by countries that are doing O.K 🙂
Spain is always the safe choice and its only my opinion that normal destinations will do O.K however rental yields may take a hit as hotels fight for business.
Only an opinion here 😉Frank 8)
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Hi Mark,
I’m newly registered to the site but have kept an eye on developments for the last year or so as my parents (or at least my dad!) want to buy a property in the sun. They already have a second home off the west coast of Scotland so but I don’t think that qualifies as a second home in the sun just yet, although with global warming, you never know….!
I discussed the gloomy picture that you and others have outlined in other posts with my dad over xmas dinner and he seemed fairly unfazed – his view is that he has worked all his life and his intention to buy in Spain in 2008 is based on his personal circumstances and the potential quality of life on offer, rather than what sort of investment a property will return. As he intends to have a property in Spain for the long term, he thinks 2008 may actually be not too bad a time to buy, even though things may very well get worse before they get better. He has benefited from the property bubble in the UK and though things may not be as bad in the UK as they are in Spain, he thinks it is all very much ‘swings and roundabouts’!
So while I wouldn’t try and answer your question as I simply have no experience, I hope this example is an indication that things may not be all too bad.
Happy New year to all.
Cheers
Ian -
“We might be heading for a soft landing, or maybe we are bound for a crunch”
Whichever, although many may suffer, I believe that long term it is good for the market.“high levels of foreclosures”
Many through the ignorance of the owners.“lots of property companies going bust”
Through greed but will rise again when the market improves, under a different trading company.“developments left half finished”
This is one thing that certainly doesn’t tempt people to buy in an area.“I don’t subscribe to the soft landing scenario”
Me neither.“But what do you think the Brits and other foreigners who dream of moving to Spain will do?”
Depends how they can fund and if they can sell their main home wherever, but with the market in the likes of UK not too good, they may not have a choice.“Will they still come and rent instead”
I assume you mean as a resident?
If so, I think that over the next 12-18 months, anyone thinking of re-locating, unless have their own funds to do so and can afford the risk, will abandon their plans.Time for investors to sit back for a while now and wait for the foreclosures to come to the market.
I believe that by the end of 2008 it could be a good time to consider investments.
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First of all, what is a “crash”. Lets say >20% off a peak – a common rule of thumb in the stock market.
Let’s say a “correction” is a decline of 10% off a peak.
Now which one is more likely?
If ANYONE can show me a period when house prices slumped at the same time interest rates are being reduced I’ll eat my PC.
Is there going to be a major recession/high unemployment in the CDS buying economies. Probably not. No recession – no slump.
For a slump to occur you have to have many, many FORCED SELLERS. Not a couple of hundred but thousands. Don’t see it myself.
Is there lack of confidence in property at the moment? Yes, so a decline can be expected.
Is there oversupply? In some areas, yes, so prices may decline.
Are off-plan prices so low that developers have stopped work or not started on new developments? Here and there, yes, perhaps. But on the whole the cranes still grind on and the bulldozers still clear new sites.
In short, it is virtually impossible for prices to slump unless major economies tip into recession and/or interest rates massively increase. There has NEVER been a housing “crash” without BOTH of these events. NEVER, NEVER, NEVER!
So, I reckon a soft landing in all but the most overdeveloped/overpriced/badly built areas exposed to lower income/highly mortgaged consumers.
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Happy the year has kicked off with a good debate. Bodes well.
Ian, welcome to the forum, and I was fascinated by your first post. I’m writing a piece on the outlook for 2008, and your father fits perfectly into one of the potential buyer groups I discuss in the article. His rational is totally sound, and it’s great to see the theory made real in a personal story. If he does buy just make sure he is well informed, avoids the pit falls, and does his research. And try to keep him away from the clutches of the dodgy agents, lawyers and developers, of which there is still no shortage. If he deals with good people all will be fine. It always boils down to who you deal with.
Back to the central question. Given the fact that buying property in Spain is obviously no longer a one way bet (it never was, but people tend to forget), and given the high transaction and ownership costs, will more people now consider long-term rentals here, or is it always buy or nothing? If you think about it, renting can be a better option for many people, cheaper and more flexible, assuming they find what they want in the rental market. If you get to live the dream in the sun, who cares if the roof you live under belongs to someone else, if you can rent it for a reasonable price. Or is everyone now obsessed forevermore with owning every property they live in?
Steve, I’m curious, are you looking for a holiday home or to relocate? And why did so many deals fall through in 07?
And yes, Frank, the discussion was well lubricated by Rioja.
Mark
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Happy new year to you Mark and I hope you had all your 12 grapes.
As, I have indicated in the past, prices may go up or down, If you have bought the right property at the right price/location you cannot go wrong.
(ignoring the speculators who will find another so called hot spot) If you buy to nest/quality of life and have the staying power there is no problem.The argument of price falling 10%, etc is purely academic. As we the forum users know the valuations is a hit and miss, the land registry figures cannot be relied upon for reasons of under declaration and Spanish attitude of not being precise. So the pasa nada attitude distorts the statistics further.
I think long term rental could be an issue as the owners would use the property for themselves, family/friends from time to time. As there is no real buy to let market due to law being biased towards the tenants/court delays and tax issues for non residents. I cant see the rental market evolving into a proper sector for years to come.
Happy new year to you.
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mark wrote:Assuming the market takes a dive, and prices fall significantly in 2008, then you have to assume that holiday-home buyers will disappear completely. But what do you think the Brits and other foreigners who dream of moving to Spain will do? Will they still come and rent instead, or will they stay away and sit tight until they think it’s a good time to buy? Or will they just abandon their Spanish dreams? I had a heated discussion about this last night, so I’m interested to know what others think.
Mark
A couple of examples:
– La Torre Resort in Murcia. The asking prices for a 2 bedroom villa
is 247K Euros i.e. 181000 Pounds at today exchange rate. A 5% mortage would mean about 1100 Pounds/month payment. Add the cost of light/gas/water and the community fee and it gives about 1250 Pounds per month.The same villa rents for an average of 200 Pounds/week (we paid 175/week but there are months where they rent for more). Consider that they rent for 26 weeks/year (which is veeery optimistic) and this gives
about 400 Pounds/months.The loss is 800 Pound/month.
The advantage of renting is a no-brainer.
– Al Andalous resort in Vera Beach. Cost of 2 bedroom apt. is 150K Euro
i.e. 114 K Pounds. The monthly cost woould be at least 800 Pounds.
One can rent for an average of 170 Pounds/week i.e. would yield about
350 Pounds/month for 26 weeks occupancy (very optimistic, when we were there were about only about 5-10 lights in the windows at night).The loss is 450 Pounds/month.
I can continue with other examples.
My conclusion: the prices need to go 50% down in order to ofeer any incentive to purchase. Anybody who purchases in the areas mentioned by me at current prices is either foolish or does not care about money.
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@ashtondav wrote:
Are off-plan prices so low that developers have stopped work or not started on new developments? Here and there, yes, perhaps. But on the whole the cranes still grind on and the bulldozers still clear new sites.
In short, it is virtually impossible for prices to slump unless major economies tip into recession and/or interest rates massively increase. There has NEVER been a housing “crash” without BOTH of these events. NEVER, NEVER, NEVER!
You seem to suggest that the demand for Spanish property is infinite and therefore supply will never affect the price which I disagree with. I believe that the cranes still grinding on and the bulldozers clearing sites is part of the problem.
I think that to compare renting to buying you should compare the amount of rent with the amount of interest you would receive if you kept the money in the bank.
Less than 3 years ago I was renting an apartment for €2,880 per annum which would have cost €132,000 to buy. The same money in the bank was earning me €6,600 per year at 5% interest in the UK at the time. So, I saved €3,720 per annum.
I calculate that for rent to be considered dead money, i.e. greater than the amount received in interest if the money is kept in the bank, that euribor would have to be around 2% and then ECB base rates would have to be roughly 1.5%. If that happens then it will be a sign that we are in a serious recession.
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Ashtondav, I would suggest a bit of mustard to help your pc go down. It might be worth looking at Japan in the 1990s. During this decade the Bank of Japan slashed interest rates and at the same time the japanese housing market slumped.
I think that there is a basic misunderstanding of what is meant by “interest rates”.
Central banks cut base rates towards the end of last year, however the LIBOR did not fall. The LIBOR is the interest rate that banks charge eachother, the real market interest rate which determines the cost of borrowing in the real world, and hence the cost of mortgages.
Why did real interest rates not fall? Well this all relates to the “credit crunch”. Practically every international bank has recently suffered losses due to the subprime crises in the US; these banks are worried firstly about their own balance sheets, and secondly about lending to other banks because of what subprime losses the other banks might be hiding. In this environment the risk of default is perceived to have increased and as borrowing has understandably got more expensive, so have mortgages
Therefore I would argue on this basis that “interest rates” have not declined. Indeed there was a day towards the end of last year when the LIBOR shot up dramatically by .8 It would be foolhardy to suggest that such a move could not occur again.Another point that Ashtondav raises is that of recession. Many market commentators say that the US is already in recession. We will only find out in the coming months when the retrospective data is released. What is clear though is that certain sectors of the US economy, housing included, is currently in recession.
At the outset of the subprime crises in the US, many european banks came out and said that it would not effect them. Time has shown them to be wrong. I would suggest now that if the US is in recession, the impact in Europe will be far reaching.Do you still reckon on a soft landing Ashtondav?
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What is clear though is that certain sectors of the US economy, housing included, is currently in recession.
Of course it is because of sub-prime lending. Europe doesn’t even come within a million miles of the stupidity of US lenders to NINJAS (No income, No jobs, or Assets).
Now why is US housing crashing? Because of thousands of FORCED sellers. Sellers who are coming off 7% interest rates and going up to 12% interest rates.
That scenario is a squillion miles away from the European “crisis” rates of 5% to 6%.
Is the US in recession? Are oranges purple. The US is enjoying, thanks to a weak dollar, the biggest export lead boom for a decade.
Away with you, gloomsters…
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ashtondav wrote:Of course it is because of sub-prime lending. Europe doesn’t even come within a million miles of the stupidity of US lenders to NINJAS (No income, No jobs, or Assets).
Now why is US housing crashing? Because of thousands of FORCED sellers. Sellers who are coming off 7% interest rates and going up to 12% interest rates.
Wake up Mr. Ashtondav!!!
In Murcia and Almeria there are thousands of resorts where 50% of the properties are for sale as a sign that they are wasting money for their owners.
You can go to the narrowest streets of the most secluded villages and signs of “Se vende” are smiling at you.
And they are still bulding of every single lot of urban land available.
USA has 3 bedroom/3 beds houses for $150K i.e. 100K Euros in
Las Vegas and parts on Florida (15 km from Ocean) (and still nobody bothers buying them).When these houses will be available in Spain, then you can compare Spain with USA.
Till then keep your comparisons for yourself and get informed before you post.
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Sorry wouldn’t consider USA no matter how attractive the prices are. We brought a holiday home in Spain because:
1 The weather
2 The accessibility, no 8 hour flights for us.
3 The family friendly culture.
4 We have no restrictons on when we can use it or how long we can use it.
5 We could afford it.We brought 5 years ago, we haven’t made a profit but we have got what we set out to have an improvement on our lifestyle. We would like to sell only to get something a bit bigger eventually, but we can wait and while we are waiting we are still enjoying and exploring 😆 .
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Not even Northern Rock???
Nope.
The problem there was the business model of lending using wholesale funds rather than deposits.
They do not have a substantial sub-prime borrower problem hence the reason Dicky Branson is interested in ’em.
Simple fact is the ECB put $500bn on the table for the banks a few weeks back. That’s no credit crisis, that’s more liquid than my heinz tomato soup…
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RBS wrote off $4b in subprime losses.
HSBC wrote off over a billion dollars in subprime losses.
Nearly every major european bank has suffered sub prime losses.
The fact that the central banks bail them out does not make them any cleverer than their american counterparts.“That’s no credit crisis”
Central banks are printing money precisely because there is a credit crisis.Market commentators in the US are fairly evenly split over whether the whole of the US market will go into recession in 2008. It is not gloomy to talk of recession -it is realistic. & if the US export market is booming -then what of the import market?
Be as good as your word and start eating your pc…
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As the prices drop I believe we will see more and more people with negative equity try to walk away from their commitments. However Spain is still a very attractive country to live or have a holiday home so sales will not dry up completely, and 2008 could be a very good time to buy for those that want to to enjoy what the costas have to offer.
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Ian
I think your father probably represents the type of buyer we will see in Spain during 2008. If you buy to enjoy the lifestyle and climate and not worry about short/medium term losses then it could be a good time to purchase.
There must be still a large percentage of people that are locked into property that was bought off-plan for investment, whether they complete or walk away will have a bearing on the downturn. -
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gnik wrote:As the prices drop I believe we will see more and more people with negative equity try to walk away from their commitments. However Spain is still a very attractive country to live or have a holiday home so sales will not dry up completely, and 2008 could be a very good time to buy for those that want to to enjoy what the costas have to offer.
The costas can be enjoyed for half price if one decides to rent instead of buying.
There is now a huge range of rental properties that can satisfy any tastes.
Then, in a couple of year time, one can purchase a much better apartment/house for the same price as now. Or the same apartment as now but for a 30%-40% real price discount.
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@ralita wrote:
– Al Andalous resort in Vera Beach. Cost of 2 bedroom apt. is 150K Euro
i.e. 114 K Pounds. The monthly cost woould be at least 800 Pounds.
One can rent for an average of 170 Pounds/week i.e. would yield about
350 Pounds/month for 26 weeks occupancy (very optimistic, when we were there were about only about 5-10 lights in the windows at night).The loss is 450 Pounds/month.
We have just come back from Al Andalus Resort having finally completed on our purchase. We took the opportunity of looking at the prices of properties on ours and the surrounding Al Andalus complexes courtesy of a report shwn to us which included purchase price of the property and recent selling prices. I couldn’t see any 2 bed apartments at the price you mention, although on some of the non Al Andalus complexes in Puerto Rey, they were somewhere near that price. The monthly cost utilising an 80% LTV interest only mortgage on 150,000€ is much less than £800pm, just over half of that when you take into account community fees, utilities and mortgage payments.
Mark
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A great topic to start the new year and very interesting postings. 🙂
0ne thing is for sure that any real downturn will be effected by over reaction of media and related reports and again suggest that some LISTEN to Marks last quarter report on this very subject throughout 2007.
Many are assuming that most want to rent and point out that many may just be happy to have a property for a second home,holiday home and longer term investment/even pension.(what they bought it for ?)
Interests on there way down ?with stock markets looking as wobbly at least property is a tangible asset assuming repayment can be made.
Many may loose if they as they do when the stock market gets hit but one thing is for sure it will return,it always does.
So quickly we look and some panic at suggestions of a 20% to 30%+ drop and these in the main will be from over inflated asking prices but what about the years of 15% rises.
What is clear is that reports are all based on Euro ,U.K and America however perhaps consideration should be made to other countries that are now starting to drive economies of the world.Frank 8)
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Jackie,
I agree with you 100%, we bought our property in 2005 and we also have not made a profit.
Each year we reduce the amount owing on the repayment mortgage and the savings we make on previous family holidays during school holidays makes up for a large amount of the costs.
Our flights in August 2007 cost £250 plus £150 for the hire car, our last package holiday in August cost £2500 just for flights and accomodation.We will not rent out our property unless our financial situation changes considerably.
We considered several countries before making our final choice and in the end it came down to accessability from our local airport. With 2 daily flights in the winter and 4 in the summer the Costa del Sol/Malaga fit our criteria perfectly, it’s open all year round and perfect fot those winter weekend get aways.
We would also like something a little larger in the future.
If you want to look at holiday homes that lose money, look at the mobile home market in the UK and there never appears to be shortage of buyers.
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marksfish wrote:Rey, they were somewhere near that price. The monthly cost utilising an 80% LTV interest only mortgage on 150,000€ is much less than £800pm, just over half of that when you take into account community fees, utilities and mortgage payments.
If one has a 100% interest only mortgage on 150,000€ this is about 500 Euro/month for 25 years at 5% rates. Add the maintenance fee of about 100 Euro and utilities bill of at least 100 Euro to get at least 700 Euro/months.
If you rent for 26 weeks/year (which is extremely optimistic) at 200 Pounds/week i.e. a total of about 500 Euro/month.
So there are 200 Euro/month to be put out of pocket which is a big negative yield.
The prices need to fall by 40% in order to obtain a zero yield.
I did not count the purchase fee, the bills for unexpected damages to the property, the cleaning fees and the advertisement on rental site fees.
So a 50% price decrease is necesary in order to obtain a profitable investment. Maybe a 75K Euro price in the Vera region might be almost acceptable for a 2 bedroom apt.
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@Just Frank wrote:
Many may loose if they as they do when the stock market gets hit but one thing is for sure it will return,it always does.
Eventually.
@Just Frank wrote:
So quickly we look and some panic at suggestions of a 20% to 30%+ drop and these in the main will be from over inflated asking prices but what about the years of 15% rises.
Well, if my €100K property investment had increased by 15% for 5 years it would be worth roughly €200K. If we get a 30% drop it will be worth €140K. Not bad. If you had put €100K in the bank earning 5% return per annum you would now have €127K. Not as good but you can get your hands on that money immediately, how long does it now take to sell a property in Spain?
@Just Frank wrote:
What is clear is that reports are all based on Euro ,U.K and America however perhaps consideration should be made to other countries that are now starting to drive economies of the world.
Frank 8)
Of course. You could get a influx of buyers from China and the Indian subcontinent but I doubt it.
I remember that the investors I knew were aware that there were some dodgy dealers and bad practises in the Spanish property market but they were prepared to tolerate them because their investment would rise in value pretty quickly and they would make a profit regardless. Now I would imagine that those investors will be more cautious, more suspicious and more willing to walk away.
In those circumstances what happens to the agents commission? Will they simply hold out or will they put pressure on vendors to reduce their price at the same time that the agents reduce their commission?
I’d advise anyone to put their €100K in the bank for a few years and see what bargains you can pick up in 5 years, you may be very pleasantly surprised.
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Hi Mike
1 Any percentage increases would be on the price paid and when.
2 In or around 2003 many paid well over the top and they considered the market would carry on,some by as much as 100,000 euros and were promised extra luxury and value only to be short changed.
3 So 400,000.00 euros paid when the end result is a 300,000.00 property in 2003 leaves these in a particular bad situation.
4 The situation has not improved if either U.K purchaser has to part with cash soon if the exchange rate stays the same.( no suprise that so many havent completed when the legal/corruption is added its a nightmare)
5 Those that did complete at the 300,000 euros in 2003 and had a good exchange rate may have a little more flexibility ,so the drop if it happens cant be as bad ( be lucky to get the 300k back though)They will need it as unless its a real bargain Brits are out of the game.
On the development I am on a Chinese couple have indeed just purchased and I dont recall that many U.S sales even in the good times.
Dont think that there are many that would argue that money is best in the bank at the moment but if it aint then they have to get on with it.
As with all problems in the financial market its very easy to talk a real slowdown into a full on recession and notice the guy was controlling the purse strings in Ameria who was somewhat responsible for the credit mess is just washing his hands on it all. 😈Frank 8)
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Katy 🙂
At least the part regarding the building could be right and suprised its not worse than the with all the problems with Marbella.
Maybe the lack of building in Marbella could be a good thing it time so the market can catch up.
Oh if it were true that prices went up like that in that area I for one would be one happy bunny. 😀
As Claire said its media talking but as we are quick to only listen to the negative from them forgive me if I beleive this for the rest on the day. 😉Frank 8)
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Interestingly. other nationalities are not so aware as UK buyers/sellers. Some Norwegian friends who do not live here all the time put their house on sale in August. I saw them over Xmas and they were suprised they had only one viewing. When I said that houses were taking 2 or 3 years to sell and that prices could fall they were suprised and shocked!
I am not sure what will happen on the CDS. Unemployment in the málaga province is just over 11% more than last year and across all sectors. I do get the feeling that there are less tourists about than a few years ago. More hotels and restaurants close down for winter than before too. Less tourists = less potential buyers I suppose. I do hear many French voices around now though.
When we first bought here over 20 years ago we didn’t consider if it was a good financial investment, we bought because we wanted a place and we could afford to. People like us will still buy but there will not be so many. Personally I would not buy just now I would rent. The only draw back with renting is that you cannot leave lots of gear here and leave the gloomy UK for a long weekend (something we did frequently without the need to pack anything). Rentals can be very basic and look “tired”.
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@Just Frank wrote:
Hi Mike
Dont think that there are many that would argue that money is best in the bank at the moment but if it aint then they have to get on with it.I guess that is the crux of the matter. I suppose the only answer is to knuckle down and get on with it. I would hope the market will turn at some point but not until everyone stops thinking of property as an investment and simply as somewhere to live.
@Just Frank wrote:
As with all problems in the financial market its very easy to talk a real slowdown into a full on recession and notice the guy was controlling the purse strings in Ameria who was somewhat responsible for the credit mess is just washing his hands on it all. 😈
Frank 8)
I never saw much analysis in the press of his claim that the era of low inflation was over. I can understand that the powers that be want to calm the masses, and I would be horrified if they did otherwise, but the greatest living economist has said that inflation is coming back and it doesn’t merit discussion in the press. That’s interesting.
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Hi Mike
I guess that is the crux of the matter. I suppose the only answer is to knuckle down and get on with it. I would hope the market will turn at some point but not until everyone stops thinking of property as an investment and simply as somewhere to live.
Yep and hopefully it will give a return for those that are in for financial gain in the future.(however long that may be)
In the meantime enjoy it,live in it,rent it or worry yourself sick. 🙂Frank 8)
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I’d just like to add that it seems to me that most contributers to this thread are looking at it from an investement perspective.
I’m no expert but I do keep my eye on property markets as I still intend to move to Spain in a few years when I retire.
One thing that I did notice over recent years; the boom or bust predictions in the UK had virtually no effect on the perceived value of my UK home. I say perceived because I always feel uncomfortable or unqualified to say what it’s worth, therefore I go by the local market in my area.
If that market dictates that an 82 year-old three-bedroomed townhouse with large garden is now worth £184,000 and 14 months ago it was apparently worth £172,000 then it seems to me that there has not been a crash but a soft-landing in the UK but it had minimal effects on the lower end of the market.
However, I see properties marketed locally now for £510,00 now but they were on the market some time ago for £650,00 on average about 12-14 months ago; a larger drop than in the lower end of the market.Maybe I’m being simplistic or naive here but I don’t see a housing crash on the horizon in Spain although the continued, anabated, excessive building could contribute to the scenario and possible change the course of events in the future. Equally, I do not see a major reduction in people like me wishing to buy to live in Spain and Spain is still the number one option for thousands of people in the UK.
One thing that I do agree with is that the days of making huge profits in the Spanish Property Market by individuals and companies is probably over but that could be a good thing as I’ve seen some vastly over-priced dumps in parts of the Costa Blanca in recent years! -
I’ve been reading for a while but this is my first post. (tend to post over at britishexpats)
A few facts. House prices always reflect wages in the long term. A large reason for prices declines in America (happening in spite of several interest rate cuts) is becuase house price out stripped wages. Take the closest example to Spain California. A land where 80.000 a year is tough to live on. House prices there are compable but wages are far far lower. In Madrid where I live your looking at, at least 450,000 to buy, prices well over a million euros aren’t unusal in the better areas (and that only buys you an appartment) Townhouse run 750.000 plus. This is in a area where the average wage is 1100 amonth. Salaries in Spain either have to increase 10 fold or prices come down alot.
Secondly it is now impossible to get a mortgage in Madrid, have talked to several people who are trying to sell and inspite of droping the price the buyers coudln’t get mortgages.
Lastly while it’s true that everyone in Britain plus thier mother wants to live in Spain the fact is that it is wages that drive house prices and nothing else.
As my Wife and I would like to stay in Spain long term we are looking at buying. We’ve been watching the local market (area north of Madrid) and two things have happened. The sales market has ground to a halt. Everyone I talk to says nothing is moving any more. Secondly prices are softening. Were starting to see prices in our area drop under 200.000.
For example from the SPANISH PROPERTY NEWS
in Valdeluz, a new development in the province of Guadalajara (Castilla La Mancha, to the East of Madrid), an investor is selling 1-bed apartments for 150,000 Euros, compared to the developer’s list price of 240,000 Euros. These apartments cost 120,000 Euros just 2 years ago.
Germany went through the same thing after reunifaction after the bubble burst prices dropped 50%. The good news for anyone buying is that prices are very soft. My recomendation is around the Madrid area is to lop 30% the asking price and on the coast 50%.
Mark my words the train wreck is coming. Good news for my wife and I as we haven’t bought yet.
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Rob in Madrid: your right in stating the correlation between salaries, mortgage multiple etc. However there is something which is demand & supply.
You also know that in Spain parents/in laws help the family to purchase their first home. I believe it is tax efficient in so far as inheritance tax/death duties.
I know in Spain where the parents have sold the flat/house much lower than its market value to their off springs and have moved to a cheaper area themselves. I see this is also started happening in UK but to a smaller scale perhaps.
Sadly, in a dogs eats dog world people with low salaries and not trusting/loving parents will be left out.
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You also know that in Spain parents/in laws help the family to purchase their first home.
We have done that for our children in the UK Shakeel. I think many families have to do this nowadays.(if they are able to) Some even remortgage their own mortgage free homes. Salaries and house prices are poles apart. In the South of England rents are prohibitive. Young people , even on above average earnings would take years and years to save a deposit for a home. Many of these young people are also repaying loans from University days.
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“Young people , even on above average earnings would take years and years to save a deposit for a home. Many of these young people are also repaying loans from University days.”
So no different to years gone by then.
It has always taken years to save a deposit, hence in years gone by, even when young people got married, many lived with parents while saving, but now that seems something that would not be considered.
University days, now don’t make me laugh. In place of loans was 2 or 3 part time jobs to survive. Suppose could have taken the easy option and tried for a loan, but there is such a thing as work ethic.
You get what you work for and if you are not prepared to work, don’t expect it. -
Claire, it great that you helped your children. I am not a fan of Battersea dogs house personally.
The problem comes when their relationships breaks and their partners can claim on them. My friends in Italy & Spain some from very wealthy families have a prenuptial contract and it is acceptable/enforceable in the Courts. Unlike UK which is gold diggers paradise. Earning a very handsome fee for the lawyers & Barristers at the expense of misery to others.
Despite, of some very high profile and heart breaking cases the law has not been changed. Why? You guessed it the lawyers/barristers are now the majority of the member of Parliament.
I also find it very interesting that despite of predominantly Catholic Countries the prenuptial contract is acceptable in the Courts & by the society.
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@mark wrote:
The Spanish property boom is over, and we are heading into the unknown. We might be heading for a soft landing, or maybe we are bound for a crunch with significant price falls, high levels of foreclosures, lots of property companies going bust, developments left half finished, etc. It’s still too early to be sure, but I don’t subscribe to the soft landing scenario.
Assuming the market takes a dive, and prices fall significantly in 2008, then you have to assume that holiday-home buyers will disappear completely. But what do you think the Brits and other foreigners who dream of moving to Spain will do? Will they still come and rent instead, or will they stay away and sit tight until they think it’s a good time to buy? Or will they just abandon their Spanish dreams? I had a heated discussion about this last night, so I’m interested to know what others think.
Mark
Hi Mark,
Depends what bracket the buyer falls into, ive just sold the deal of the century a villa in Marbella for 550k euros valued at 1.2m but the client had the funds to buy it, so I see the market for a certain type of buyer offering fanstastic opportunites but its a horrible and terrible time to sell.
The biggest problem for a lot of brits isnt property prices but its now the cost of living here compared to that of the UK imo.
You can still buy brand new 2 bed apartments in costa del sol for 210000 euros with all the mod -cons but when i came here in 2002 cost of living was about 35% of what it was in the uk but with the current exchange rate its now about 80% of where I came from in Brighton.
People who can afford to come will still come and my advice to them would be rent unless they can get a fantastic deal where somebody has to sell
Anyway its all about opinions
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The attached is a short introduction to investment/market psychology. I’m sure anyone involved in the Spanish property market over he past few years will be able to identify the various phases market sentiment passes through.
http://www.ampcapital.co.nz/MarketViews/Economic/Investmentpsychology.pdf
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Senor Nick wrote:You can still buy brand new 2 bed apartments in costa del sol for 210000 euros with all the mod -cons but when i came here in 2002 cost of living was about 35% of what it was in the uk but with the current exchange rate its now about 80% of where I came from in Brighton.
During our stay in Spain at the end of December 2007, we shopped at Carrefour for all our food neccesities.
The cost of food at Carrefour was about the same as the cost of food at ASDA/Tesco in UK.
Why do people say that the cost of living is much lower in Spain? The only big difference
is the cost of Diesel which is 30% less in Spain.The clothes cost more or less the same, the children toys cost more or less the same.
I do not know about utilties and car/health insurance.
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What we have witnessed in the UK over the last 10 years is the biggest ever-intergenerational debt for asset/equity swap ever!
The over 50’s have all (not all but a disproportionate amount) of the equity and the under 40’s huge debts to support the inflated prices.
To keep this new status quo the FTB (average age 34), and newbie BTL’s need to keep borrowing 5,7 & 10 times wages, taking on 90, 100 and in some cases 125%, interest only, low teaser rate, self cert (no docs) mortgages, and more to the point the lenders would need to have the appetite to keep lending, now there’s the rub!!!
Irrespective of what happens to UK base rates the amount of funds available for mortgages is going down, whilst at the same time the costs of those funds and the criteria to qualify for them will rise.
Also we are just at the beginning of the credit squeeze (currently a liquidity, soon to be a solvency crisis as property prices and financial instruments under pinned by them fall) and banks have another couple of hundred billion dollars of fessing up to do regarding ‘sub-prime’ losses. (the short term liquidity being pumped into the markets by central banks will not solve this but it will drive up general inflation).
I would be very cautious of assisting my offspring getting on the market at the wrong time.
Property/asset inflation is a bad thing as it rewards wealth/ownership as opposed to work/productivity and no economy can function like that for any sensible timescale.
It is indeed ironic that what assists many 45 to 50 year plus Brits run off to a place in the sun is the very same reason that many under 30’s state as wanting to leave, that being property inflation.
You can’t buck the market and neither can Gordon Brown or Ben Bernanke.
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Katy 🙂
Not an agent,just someone who has the common sense to realise that the property had a stupid asking price 👿
Bit like one on our humble two bed development who has priced theirs to sell at 150,000 euros more than I could get for mine i.e around 40% over the top and thats if ? I could sell.Frank 8)
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@ralita wrote:
@Senor Nick wrote:
You can still buy brand new 2 bed apartments in costa del sol for 210000 euros with all the mod -cons but when i came here in 2002 cost of living was about 35% of what it was in the uk but with the current exchange rate its now about 80% of where I came from in Brighton.
During our stay in Spain at the end of December 2007, we shopped at Carrefour for all our food neccesities.
The cost of food at Carrefour was about the same as the cost of food at ASDA/Tesco in UK.
Why do people say that the cost of living is much lower in Spain? The only big difference
is the cost of Diesel which is 30% less in Spain.The clothes cost more or less the same, the children toys cost more or less the same.
I do not know about utilties and car/health insurance.
Ralita, I agree. The cost of living here is not as low as stated. Ok if you smoke and drink a lot 😉 otherwise food is about the same price. Infact I have seen stuff in M&S for less than here. I also visit France and Holland a lot and spain isn’t any cheaper. Furniture, white goods, computers are more expensive in Spain too. People do quote that they pay very little in council tax, maybe in some rural areas but in Marbella we pay over a 1000E and then urbanisation fees for street lighting which the Town Hall should supply!
I believe the cost of living theories are just a myth. It’s bloody expensive here and before anyone quotes inland prices….the campo folk come here to shop at the main commercial centres.!
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Well, you just would have to be an exception wouldn’t you 🙄 Almost everyone (on lots of other forums too!) bemoans the fact that spanish furniture is crap. It is either el cheapo and tacky or expensive and uncomfortable. If you know of a good furniture supplier here that can supply like for like with the UK and warrant the cost of taking it back please put on the details! You must be joking I think to write about taking furniture BACK to the UK 😆 😆
Just compare websites for prices.
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