Re: Re: Spanish Estate Agents Think Prices Will Continue To Drop

#104033

Chopera
Participant

Some on here may be able to expand on this, but I believe in Spain land has traditionally been the only way to get rid of cash (be it black money or be it fast depreciating legal money). The Spanish never really went in for funds and shares since land is something tangible and less prone to be taken from you. So the Spanish mentaility has not been so much “how much can I rent this for” but “how can I get rid of this cash”. Before the euro it was a given that nominal land prices would always outperform cash – the government would simply increase the money supply to make sure of it. When I came to Spain 7 years ago I suggested that perhaps that wouldn’t be the case with the euro but I don’t think people here really understood what I was getting at. Anyways my point is that in Spain most people assume there’ll always be a medium term increase in land values, so rental yields don’t figure so prominently in their “investment strategies”.

There are a few exceptions to this – I know a few Spaniards who chase rental yields here in Madrid, but they consider 6% to be an excellent return. You have to remember that they won’t declare their rental income to Hacienda so it’s basically a tax free income, and it beats what most savings accounts are paying.