Spain
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Costa Del Sol

Spanish House Prices Rise – And Foreign Buyers in Spain Face Regulations That Give With One Hand, Take With the Other

House prices in Spain are rising again. In the second quarter of this year, prices in the country, one of the worst affected by the financial crash of 2008, have risen for the first time in six years, according to the Instituto Nacional de Aestidiscica (INE).

The annual variation in the property price index (IPV) increased more than two points in the second quarter of 2014, rising to 0.8%, the first positive rise since 2008. The price indicator of new houses showed an increase of 1.9%, three points higher than the first quarter of this year and the first positive increase since the last quarter of 2008.

These positive indicators have provoked analysis out of all proportion to the tiny 0.8% rise in prices, exactly because it is a rise. What it isn’t is a sustained long-term growth in a housing market powered by a real economy. In fact, Spain’s unemployment rate has actually risen slightly. Construction industry data is unpromising, and credit availability is an ongoing bone of contention in Spain.

Further price adjustment could be around the corner, and there is the danger that a modest rise in prices might trigger vendors, both institutional and private, to act to shed properties which they have been eager to offload for some time. A major obstacle to the development of fluidity in the Spanish market has been the unwillingness of vendors to drop prices any lower: the current slight rise might trigger a fresh round of sales.

As with many national statistics, the figures hid major regional variation. What’s really happening in Spain isn’t a timid recovery: in some areas it looks like full recovery, while in others the nosedive continues. In Valenciana, sales rose by 4.3%, a respectable increase. In Murcia, they fell by 11.8% year on year. The big winner is Malaga province, location of the Costa del Sol, where prices have jumped by 24% year on year – as against 10.7% nationally.

For British buyers, the ground in Spain is shifting in other ways too.

Plans to axe the tax allowance for retirees are mooted right now, meaning that British expatriates living on pensions could face a tax rate of 20% on their income, losing up to €4, 000 a year. The move would be wildly unpopular: expats, and those who would like to become expats, can look to better news from elsewhere on Spanish taxes though.

The European Union’s top court in Luxembourg recently ruled that Spain’s tax system is against EU law, and that accordingly, the Spanish government will have to alter inheritance tax laws which disproportionately privilege Spanish over non-Spanish people. Spain’s government has yet to be clear on when this will happen, but it does have to comply with the instructions from the EU.

What does this mean for British and other overseas buyers? If your income is mostly from a fixed source like a pension you probably stand to lose out financially. Others stand to gain from the changing tax rules. And the market remains uncertain: there are bargains to be had, and growth in some areas is already well underway, while others remain depressed, meaning the potential for rental is reduced. Some Spanish locations will always be popular – witness the revival of the Costa del Sol.

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After years of recession, it appears sunshine may finally be glimpsed through the rain in Spain as surging foreign investment looks set to fuel a recovery within the nation’s property market.

As one of the main tragedies of the Eurozone crisis, recovery seemed a distant dream for most Spaniards. However, last year saw foreign property purchases exceed €6bn for the first time since 2004, propelling the once doomed nation onto the brink of recovery.

This surge of foreign investors flooding back to the Spanish property market has positively impacted upon the country’s general economy, which grew by 0.6% in the last quarter of 2013 – the first time it has expanded in over six years.

This resurgence, however, is yet to take effect on house prices, which still continue to dip.

The price falls though are far slower than at the height of the recession, leading many experts to predict that the Spanish economy is set to bottom out, with the recession’s end seemingly in sight.

Home prices fell 7.2% on average in January 2014, 2% less than a month earlier and almost half last year’s 13.8% decline, while prices on the Mediterranean coastal resorts fell just 4.8%; a dramatic reduction from the 11.7% drop in December 2013.

Traditional foreign investment locations, Seville and Barcelona, even managed to see price hikes in January 2014, jumping 3% year-on-year, as a result of increased interest among foreign investors.

Foreign investment levels, in fact, rose throughout the country by as much as 9.8% last year, as interest levels in Spanish property soared for the first time in years.

Indeed, the latest Overseas Guides Company Quarterly Index reported a 37.8% year-on-year increase in foreign enquiries into Spanish property last year, as investors flocked back to the market.

This interest is set to remain consistently high within the coming months, with property experts Knight Frank claiming to have experienced a 29% increase in searches for properties in Spain in Q1 2014, compared to the same period last year.

Banks burdened with re-possessed real estate following the crash are also experiencing surging interest levels. Spanish bank, Sareb has sold an average of 60 properties daily since the beginning of the year, doubling their company target of selling 30 a day in 2014.

The exchange rate has been cited as a key factor in this revival. The pound dramatically increased in strength against the euro during Q3 2013, from £1/€1.141 at the end of July to over £1/€1.19 by the end of the year.

This increasing strength of currencies, like the pound, against the euro led investors to purchase scores of Spanish property last year, after seeing how much more they could get for their money.

Another factor behind this resurgence has been the new golden visa scheme, which grants automatic residency to non-European citizens investing €500,000 or more in Spanish property.

Savills claim a similar scheme in Portugal succeeded in attracting Chinese investors and, although no figures have been published yet to assess the impact of the deal, estate agents across the country are reporting surging interest levels from the Far East, Middle East and Russia as a result

UK-based property firm Knight Knox International were quick to react to the positive changes in Spain.

The property investment company formed strong on-the-ground relationships in the country a number of years ago and were kept well-informed of the market changes in Spain.

In response to an increasing number of enquiries regarding investment in Spain, the firm promptly launched developments in the popular seaside resorts of Alicante and Marbella.

Their latest Spanish development, Reserva Marbella, was launched at the end of April. It is fully managed by VIME hotels and comprises of fully-furnished one bedroom apartments, which occupy a massive 69 square metres over two floors and have huge 32 square metres terraces.

The one bedroom duplexes are priced from €129,000 euros and the resort expects high occupancy rates throughout the year.

International Business Development Manager, Matthew Lavin, is Knight Knox International’s expert in the Spanish property market and believes the numerous enquiries he receives daily into Spanish property represent a positive change in investor sentiment towards the country.

Lavin commented: “Spain is always going to be a popular destination for overseas investors with 2014 presenting arguably the best time to invest.

“With historically low prices and a strengthening GBP, buyers can remain confident of mid to long term returns, running alongside the lifestyle benefits owning a property in the sun brings.”

A report by Spain’s society of property registrars shows that Spanish property remains the most popular among British investors, claiming Britons are responsible for more property purchases in Spain than any other country, accounting for 15% of all sales to overseas investors.

French investors purchase the second most Spanish property accounting for 10% of overseas investment, while Russians are the third keenest on acquiring Spanish property representing 9% of foreign investment.

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Spain is an easy going yet culturally dynamic place to live and to go on a holiday. However, there’s so much to the country that you should undertake some serious research before you buy a property there. Here are three essentials before you commit to that Spanish property of your dreams.
Tourism Levels Should Be a Driving Factor When You Buy

Despite the economic crisis, there are still plenty of people booking holidays to Spain and other Mediterranean countries, like Portugal and Italy. The consistently warm weather makes them not just popular holiday destinations but also optimal countries to purchase property. In the long term it will be much easier to advertise and rent out the property for short-term or long-term rental from an influx of travellers.

This contrasts with other burgeoning holiday destinations like Bulgaria and Romania. While these are vividly beautiful countries in their own right; they’re not as westernized or developed, so you can expect a vast amount of red tape to purchase property. Plus these nations aren’t as tourism-centric and may alienate potential visitors.
Do the Legwork First

It’s vital to find out if a country suits to your lifestyle, budget and personal requirements. In terms of property, what may be heaven for one person could be a living hell for another. You should also consider the wider cultural and social environment where you live before you part with your hard-earned money. That means you should thoroughly investigate the way of life in different regions of Spain. This is the fun part, so kick your heels up and visit some local fiestas, get to know locals and ask all of the right questions.

If you’re purchasing a property for retirement, the desirability or location of a property in Spain may matter a touch less but still you want to retire somewhere comfortable. If, however, you’re buying for the purpose of holiday rental, you need to take a whole raft of aspects into consideration, including the location and compliance with various safety and accessibility regulations for tenants.
Transport Links and Amenities

The influx of potential tenants to the property will depend on the locality of air, rail, ferry and car links to the region. Consider the regular flights of budget airlines to the nearby area. It’s also important to consider the distance to the nearest hospital, supermarket, bank and cash point. People want the reassurance that it’s easy for them to get back to civilization. It’s a catch-22 situation in so far as that everybody wants to live in a secluded paradise but still have instant access to all of the mod-cons.

Make sure that a property is 100% right up your alley before committing to purchase. To be on the safe side, have a contingency fund in case of any additional financial costs.

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The property market in Spain may have been experiencing extremely difficult times until very recently, but market experts are certain that the worst is over and that the nation can look forward to the future with a positive attitude. Price Waterhouse Coopers and the Urban Land Institute recently published a report regarding their forecast on the future of the Spanish property market.

According to the report, the weight of foreign capital is urging investors to take a chance in recovering markets like Spain. The Iberian country is said to have undergone an exceptional turnaround as far as investor confidence is concerned. Over two-thirds of the respondents of the survey reported that they strongly or slightly agree that Spain now has fairly good purchasing opportunities.

Prices are on the rise

The European Union’s statistical office also released published data which has played its part in further boosting the confidence of foreign investors. Eurostat revealed that home prices in the country had gone up by 0.8 per cent in the third quarter of 2013 in comparison with the second quarter, when it had recorded a decline of 0.8 per cent. Many market insiders have commented on the improvement with positive words.

They have also expressed their views on Price Waterhouse Cooper and Urban Land Institute highlighting Spain’s turnaround, saying that it is highly encouraging given that world-renowned experts are taking notice of the changes Spain has undergone. They also say that there is enormous potential that remains untapped in the Iberian nation.

Real estate companies performing well

Leading experts in the market have been anticipating an improving situation for many months now. The market for second homes is performing especially well with steady improvement. Many real estate agencies in Spain have reported good performances – some recording their best numbers since 2006 as far as sales volumes go.

The sums invested into Spanish properties by both investment funds as well as private individuals is significantly large in comparison with previous years, confirming that there are still some good opportunities for investment in Spain.

Quality properties available for affordable prices

High-end properties in Spain are still available for attractive prices. Real estate agents report that prime properties with access to golf courses, swimming pools, gymnasiums and other luxurious amenities can be found for affordable prices on the world famous Costa Blanca.

These properties usually have three bedrooms and boast of large private gardens and club houses and are located in close proximity with restaurants and bars, and bilingual Spanish/English schools. Such properties can be purchased for less than 150,000 euros as sellers have now reduced their asking price.

Apart from the properties on the Costa Blanca, the townhouses in the Brisas de Alenda offer a serene location with all the luxury amenities you need. Closely located to the beaches of the Costa Blanca, these properties are hardly 15 minutes away from the Alicante airport, making them the ideal option for those who are looking for second homes in Spain.

Images courtesy of Property-Abroad.com Ltd

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Spain has announed plans to grant permanent residency status to foreign nationals who buy Spnish property priced at €160k or above.

The Secretary of State for Trade, Jaime Garcia-Legaz, announced the plan at a conference in Madrid in November of last year.  “In coming weeks,” Mr. Garcia-Legaz told reporters, “we will start to reform the law regarding foreigners to reactivate demand abroad and contribute toward reducing housing stock.”  Spain normally grants 90-day visas to foreign purchasers, but under new plans will give permanent residency status to those who buy properties worth €160k (£130k).

The hopes of the plan hang on the response from Chinese and Russian buyers, since these two countries represent the largest markets outside the EU for Spanish property.

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Spanish construction industry was over saturated and houses stayed empty

Spanish banks whose extensive portfolios were paid for by credit during the boom years are selling them off to pay off their debts.  But does that mean it’s a good time to get into a market at the bottom, as the banks would have you believe?  Or is it just an opportunity to get sucked in to the whirlpool that is the Spanish property market?

The Spanish property market bears strong comparisons to the US property market.  In the case of the US debt was much more diffused throughout society.  In Spain, a large part of the problem was a property construction bubble, and the under capitalizing of the real estate firms involved was often a simple case of over-reaching and then being beached by a receding economic tide.  But the result, that banks and property crashed more or less simultaneously, is sufficiently similar to be uncomfortable for market-savvy Americans.

One result isn’t so bleak, however, at least not if you’re planning to invest in Spain.  Prices have fallen there by as much as 60%.  As a result, Santander’s Spanish property website, Altamira, is offering ‘housing for all, at yesterday’s prices.’  One example of the company’s ‘retro prices’ is a four-bedroom, two-bathroom Valencia apartment for €18,000, though the property is far from a dream holiday home.

Bankia was formed from seven troubled regional banks in 2010, two years after the property market crashed.  It was a marriage of convenience, and the member banks brought their increasingly burdensome debts with them to the altar.  Two years on, Bankia has been bailed out to the tune of €24bn, precipitating a sovereign debt crisis and forcing Spain to ask for bailout money from the IMF and ECB.  This followed 2011’s news that the organization had made a loss of €2.9bn.  Unsurprisingly, Bankia is eager to sell its property portfolio and it is doing so by means of an ‘andando a la playa’ (‘walk to the beach’) promotion, selling repossessed beachfront properties for as little as €39k.

All of which paints a picture of a market that’s not necessarily in free fall, but isn’t exactly in rude health either.  (In fact, Spain’s economy is in such trouble that it might not be able to run its Benicassim festival this year.)  Market analysts see better times ahead though and especially for expatriates.  Property values are falling in areas where there’s little chance of employment; as other European nations feel the pinch, they stop visiting Spain on holiday and areas that are dependent on tourism for their economic well-being suffer.

Properties here might be cheap, but with rental demand poor and falling, they’re not such great investments.  They are appealing for some expatriates though, which might explain why expatriates are slightly swelling the property market in Spain.  As 12% more foreign buyers enter the Spanish market this year, they’re concentrated in the Valencia region, home of the Costa Blanca.

Spanish construction industry was over saturated and houses stayed empty

The fullest picture of the Spanish market is one that includes strong rental demand in major cities, where economic life continues and rental demand is traditionally strong among a nation who rent more than they buy.  But the housing in the Spanish boom docks that crippled banks are offering for peanuts is a liability to whoever owns it, as Clare Nessing, director at Conti, points out: ‘Many so-called bargains are being offered at bargain basement prices because they are of poor quality and in undesirable locations.’  Some are such turkeys that they’re dangerous to the Spanish market as a whole.  Fernando Rodriguez de Acuna Martinez, a partner at Acuna & Asociados, says, ‘some of it may have to be demolished in the future to stop the slide in prices.’

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According to a recent report from a risk adviser to Banco Santander SA (SAN) and five other lenders, Spanish banks are currently holding 30 billion Euros worth of property that they can’t sell.

“I’m really worried about the small- and medium-sized banks whose business is 100 percent in Spain and based on real- estate growth, Pablo Cantos, managing partner of Madrid-based MaC Group, said in an interview. I foresee Spain will be left with just four large banks.”

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The Spanish property market continues to suffer acutely according to the latest reports. Some 600,000 homes are currently languishing on the market unable to find a buyer, and a further 200,000 part-completed properties are in the same boat. Most of these are in the popular holiday areas.

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Madrid office rents have fallen 30% since the crisis began, but still rents have risen, which shows just how much prices of commercial property have been eroded in Spain. But still the consensus indicates that investors should be waiting for a little while yet before pouncing on the bottomed market.

 

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The heavily indebted Spanish economy is in almost as bad shape as that of Greece. But the Spanish economy accounts for 12% of European Union gross domestic product, 4 times the size of the Greek economy. Some say this makes it too big to fail. Undoubtedly its failure could mean the death of the EU and the single European currency, sparking an every-country-for-itself financial free-for-all that no one could predict the outcome of.

Needless to say European and World leaders are keen to stop this happening. This led to them — including a personal intervention from Barack Obama — putting pressure on Spain’s minority left wing Prime Minister, Jose Luis Rodríguez Zapatero, to enact a strict regime of austerity in order to bring down the budget deficit and the country’s debt to put the world and its markets at ease.