Cheaper new housing in Spain

The Spanish National Institute for Statistics (INE) has published figures this week which demonstrate that the market for new housing in Spain is deflating significantly. The negative tendency for this sector of the Spanish property market was further underlined yesterday by the Society of Property Valuers. According to the latest research by this organization the price of newly built houses and flats has fallen by up to 9.8% in some parts of Spain in the space of one year (June 2008 to June 2009).

This means that the average price of newly built houses and flats in provincial capitals is now 2,589 euros per square metre (m2). This fall of 9.7 decimal points is higher than the fall of 0.1% in prices registered between June 2007 and June 2008.que However, the fall in prices compared to the end of 2008 is 4.5% which is less than the fall in prices registered in the last quarter of 2008 when prices fell by 5.5%.

The Society of Property Valuers predicts that prices will probably maintain the tendency to fall although exactly how much will depend on the financial pressures that constructors and property developers experience, as well as the difficulties faced by people face seeking to obtain credit for purchasing property.

Cheapest housing in Spain

The value of newly built properties went down in all provincial capitals in Spain during the last 12 months.

The most expensive provincial capitals at the end of the first quarter of 2009 were Barcelona (4,041 euros per m2), followed by San Sebastián (3,822 euros per m2) and Madrid (3,405 euros per m2), with falls of 4.8%, 2.5% and 6.9%, respectively.

On the other hand, the lowest property prices can be found in Pontevedra (1,387 euros per m2), Badajoz (1,445 euros per m2) and Lugo (1,481 euros per m2).

Rise in mortgage defaults in Spain in 2009

Defaulting on mortgage repayments in Spain in 2009 soars to 4%

According to forecasts made by the Spanish Mortgage Association (AHE) defaulting on mortgage repayments is expected to remain at record levels and will close at 4% at the end of 2009 compared to just 2.36% for 2008 due mostly to the rise in unemployment. According to the association ‘the rise in unemployment since the beginning of 2008 will become the principal factor for the rise in the rate of households getting into debt’.

In fact the prediction of 4%, which is half the figure which is expected for overall indebtedness believes that the rate of defaulting on mortgage repayments will slowdown compared to the first quarter of 2009 given that it has already tripled since last year when it stood at just 0.991% for the same period.

Furthermore the association also points out that section of society that is vulnerable to the risk of unemployment is less than that which is at risk from interest rate rises.

The rate of defaulting amongst the private residential sector was registered to be 4,52% last April which is four times the level registered in April 2007 and contrasts with 1.37% registered in April 2008. Experts have also pointed out that mortgages are the last thing that Spaniards stop paying.

With a view to the future the AHE predicts that in 2009 and 2010 defaulting on mortgage repayments due to interest rate rises will gradually decrease given the current low rate of the Euribor (1%).

On the other hand, defaulting on credit used to finance activities related to the property sector stood at 7.58% in March this year which is more than seven times above the rate recorded in March 2008 (0.89%). In addition, defaulting on credit repayments in the construction sector stood at 6.76% in March this year compared to 1.22% for the same month in 2008.

Source: El País

Capital gains tax on property sales in Spain

Spanish regional authorities ignore slump in property sales and continue to increase capital gains tax

With the slump in property sales and the inevitable fall in prices property sellers in Spain are now facing a new problem: the fact that Spanish regional authorities continue to value property at a higher price means that the seller is faced with the problem of having to pay higher capital gains tax on the sale of the property than they should.

In Spain property sellers are bound by law to pay 7% of the price of the sale of their property to the regional government where they live. However, with the significant fall in property sales buyers are able to negotiate better prices and property sellers are more likely to drop their prices in order to obtain a sale. Nevertheless, regional authorities throughout Spain often place the value of property at a higher level. In effect this means that a seller might be forced to pay taxes on a higher amount than they have actually received for the sale of a property.

Each regional authority has their own mechanisms to make sure that fraud does not occur and that people do not declare the sale of their properties at a lower amount than they have actually sold at and during the property boom this system seemed to work well. However, with current slump in the property market regional authorities do not appear to be keen on adjusting their calculations especially since they have seen their own budgets shrinking substantially.

Furthermore the problem of being overcharged for the sale of a property is more serious for those sellers who are willing to drop their prices even further in order to sell their property. This in reality means that those sellers who have adapted to the current economic climate face the sanction of being overcharged for capital gains tax.

According to some notaries this situation is ‘profoundly unjust and even unconstitutional because it violates the principle of proportion in charging taxes’.

Furthermore the situation is likely to get worse as property prices fall even further with regional authorities unwilling to adjust their valuations.

Each regional authority has its own way of calculating the value of a property and that while property sellers can ask for an independent valuation in order to pay the correct amount of tax on the sale of their property this also incurs risks because it could result in them being charged for the valuation.

Related: Property taxes in Spain

Surplus housing in Spain rises

Construction companies will add 385,000 houses to surplus housing stock

The surplus housing stock which construction companies have accumulated and for which they are finding it difficult to off load is now the number one problem for those in the housing sector. An internal report compiled by the Ministry for Housing and released by El Pais today has for the first time not only issued a figure for the number of surplus housing stock (houses and flats already on the market) but also those that are currently in the process of being built. The figure is almost one million – more precisely 997,562. Some experts believe that a number of newly built houses and flats will never be sold.

The report holds a great deal of information on the immediate past and the future for the housing sector. At a time when demand is being stifled by the difficulties in obtaining credit, the increase in unemployment and the expectation that property prices will drop even further the market has in effect found itself in a state of paralysis. This paralysis has led to the number of newly built properties coming onto the market rising rapidly. At the end of 2007 the surplus housing stock numbered little more than 400,000. However, by the end of 2008 it grew to 613,512 units. That is an increase of 51% in just 12 months. To exacerbate the problem even further almost half of the surplus stock of new housing is located along the Spanish Mediterranean coastline.

It is clear that construction companies will find it difficult to get rid of houses and flats which during the boom years were sold at planning stage. Government initiatives such as those to convert privately built flats into state subsidised housing are not working. However, if construction companies think they have problems now worse is yet to come because many of the houses and flats under construction in 2008 are now arriving at their completion stage which means that they will soon come onto the market. Out of 626,000 properties being built just 243,000 have been sold.

This is where the figure of a million comes from – adding the 613,000 properties already on the market to the 385,000 under construction which have not been sold yet. The pessimistic outlook for the housing market means that many houses and flats under construction will never be completed. But it is hoped that those in their final stages of construction will be completed.

Property bargains in Spain as banks sell surplus stock

Houses and Flats for sale in Spanish Banks and Savings banks

The current economic crisis has forced many Spanish banks and building societies to put properties (the majority houses and flats) up for sale at significantly discounted prices or with some very interesting credit facilities for the consumer. The properties on sale are the result of repossessed properties from individual or business clients.

How to buy a house or flat from a Bank or Building Society

Properties for sale with Spanish Banks

PROPERTIES SANTANDER BANK: Up to 1,300 houses and flats have been put up for sale (around 400 have already been sold). Prices discounts range from between 20% and 30%. There are also some special credit facilities with some credits for 100% of the value of the property being offered to some clients over a 40 year period.

PROPERTIES BBVA: There are almost 1000 new houses and flats on offer in 5 regions of Spain and around 600 used houses and flats located throughout Spain (42 provinces). All properties are on sale to the general public. There are some very good offers such as a house in Madrid on sale at 2,232 euros per m2.

PROPERTIES BANCO POPULAR: This bank has more than 700 houses and flats on sale to the general public located throughout Spain. Most of the properties are in Barcelona where some very attractive prices can be found.

PROPERTIES BANCO SABADELL: In this case only land that can be developed on is on offer.

PROPERTIES BANESTO: Only new properties are on offer with around 1,300 houses and flats on sale throughout the Peninsula. There are some very interesting credit facilities on offer with 40 year mortgages with interest rates of Euribor + 0% for the first two years. An example of some of the attractive prices on offer is a two-bedroom house in Ensanche de Vallecas (Madrid) for 164,000 euros.

Properties for sale with Spanish Savings banks

PROPERTIES LA CAIXA: This has 2000 uses houses and flats on sale distributed throughout Spain (49 provinces). There are 320 properties on sale in Murcia. Minimum discounts start at 25% (with a further 5% for those clients whose salary is paid into the building society).

PROPERTIES CAJA MADRID: CajaMadrid has more than 1000 properties on sale mostly in Spain’s largest cities and along the coast. Special attention should be paid to properties offers in Madrid, Valencia, Catalonia and Murcia. The price of some properties has been discounted by as much as 40% and there are some very advantageous credit facilities on offer (Euribor +0,50% without commission). There are also some offers on properties for rent. For more information see: portal de vivienda de Caja Madrid.

PROPERTIES BANCAJA: Bancaixa has placed around 800 on sale located throughout 40 provinces. Weekly offers with three properties at specially discounted prices can be found on its website. More than half of the properties on sale are second homes located along the Valencian and Murcian coastline.

PROPERTIES CAIXA CATALUNYA: There are some 3,600 houses and flats on sale located throughout Spain. Around 1,700 properties have been discounted by as much as 30%. There are also 1,800 properties for rent at around 500 euros a month. Conditions include the possibility of the building society buying back the property if the owners face economic problems in the future.

PROPERTIES CAJA DE AHORROS DEL MEDITERRÁNEO (CAM): The CAM in Alicante has up to 2,500 properties on sale ranging from offices and garages to houses and flats. Price discounts are in the region of 20% to 50%. Direct sales are available and also potential buyers can place offers on properties as well as participating in property auctions.

Average price of property in Spain falls

Spanish estate agents lower their prices in direct competition with banks and building societies

Now that banks and building societies are entering into the direct sales of properties with offers that include not only large discounts but also facilities for financing transactions property developers have been forced to react with even larger discounts. One property developer, Metrovacesa, is leading the way with discounts of up to 55% on some of its properties on offer. Smaller less well known companies are also trying to get rid of their surplus stock of properties by offering discounts of between 40% and 60%.

The association of property developers has accused banks and building societies of ‘disloyal competition’ firstly for valuing properties well under their asking price and secondly for offering better mortgage deals. In an attempt to counter act this situation property developers have decided to launch large discounts over and above the 20% that many have been offering up to now.

In fact last week Metrovacesa completed a campaign in which some flats had been reduced by 55%. Discounts for properties in Madrid went up to 30% and 35% in Barcelona while in the parts of the Valencian Region and Andalucia discounts were between 40% and 55% which resulted in the sale of a third of the 247 properties on offer in just under two weeks. A spokesperson for the company explained that this was not the first time such offers had been launched and said that the flats on offer were the last flats on sale from many of its promotions.

Large companies are not the only ones involved in offering significant discounts. A company called Roan offered a variety of properties on special offer in its Madrid office. Over a period of 4 days around 5,700 people visited the agency in order to find out more information on 500 properties which were in the hands of property developers, private owners and financial institutions on sale in Madrid and the Mediterranean coast. As a result there were 184 sales but Roan believes that this number will rise to 300 and is planning similar events in other cities around Spain.

Spanish property developers are increasingly concentrating their strategies on direct discounts. The Business Group Ternum has reportedly obtained 1000 properties which it is planning to place on the market at discounts of between 35% and 40%. Furthermore, the buyer will not have to pay anything during the first year. Another formula which property developers are using to get rid of surplus stock is to auction them off.

Demolition of houses on Spanish coastline

Illegal homes along the Cantabrian coast to be demolished today

The first illegal houses which had been ordered to be demolished by the courts 15 years ago started to be knocked down today. The buildings which are located in the area La playa de La Arena de Arnuero began to be demolished at 7 am this morning.

The buildings which are being knocked down belong to the second phase of the housing development of la playa de la Arena which has 144 apartments in total all of which have been ordered to be knocked down for being illegal under Spanish law.

Although the demolition work is now underway a small group of protestors has gathered at the site wearing yellow t-shirts with the slogan ‘vicitims’ written on them with banners reading ‘144 families - victims of the building mafia’.

The demolition work on the buildings is taking place 15 years after a judge first ordered them to be knocked down. Following this date around a thousand houses have been declared illegal by courts around Spain.