Sharp fall in real estate share value in Spain

Following sharp rises in property prices over recent years Estate Agents suffered a sudden fall in value on the Spanish stock market yesterday.

This collapse in value brought back memories of the damage suffered by internet companies when the technology bubble finally burst. Many analysts believe that property prices have blown up far out of proportion partly due to property speculation. Yesterday the Valencian Estate Agent, Astroc, suffered a spectacular fall in value on the stock market. However, what is not yet clear is whether this precedes a crisis in the housing market or is just an isolated incident.

The evolution of the small estate agent, Inbesòs, showed how important speculation is. Following a fall of 26% at the opening of the market it then shot up by 37% giving respite to some nervous investors. Infact Inbesòs has risen by 700% in three years and it is not even one of the most profitable in the sector.

The government played down the importance of what happened in yesterday’s stock market saying that some sectors had experienced excessive growth. It considered that people should not talk of a collapse but that it was a mere correction following historic highs in recent years. It also said that the value of Estate Agents continued to be higher than 12 months ago although some companies had grown out of proportion to their value which gave rise to the idea of a crash in this sector of the stock market.

The Governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, denied that the collapse in the value of various companies in the sector could be considered as an indicator of the property bubble bursting. He said that on the stock market rises and falls were never slight.

Fernández Ordóñez repeated that there is a gradual slow down in the property market and that prices were still far from crashing. The Governor of the Bank of Spain reminded the press that property prices grew 7% last year compared to 17% the previous year.

Madrid and the Mediterranean coast most popular with builders

75% of new flats built in Madrid and parts of the Mediterranean

Over 900,000 building licences were granted last year, 11.9% more than in 2005, which resulted in the construction of 818,573 flats or houses according to the Spanish Association of Architects.

Out of this total 830,000 flats were destined for private housing (vivienda libre) which roughly translates into a 13% increase on the previous year and just 75,489 were subsidized state housing (vivenda protegida - VPO) which only signifies a 1% increase.

The majority of new flats and houses were built in Madrid or parts of the Mediterranean. In fact, three quarters of the building licenses were destined for these two areas.

VPO construction accounted for just 8.2% of the total of new construction in 2006. In Madrid just 1 in 4 new flats which is approximately 18,730 flats were destined to be VPO last year. Andalucía came next with 11,498 VPO flats and Catalunya with 7,094 VPO flats. In some autonomous communities less VPO flats were built in 2006 than the previous year. For example in Navarra there was a drop of 31.7%, in Galicia there was a drop of 28.4% and in Castilla y León there was a drop of 24.5% while the most significant advances were made in Cantabria, La Rioja and Baleares in the construction of VPO flats.

Lowest property prices in Spain

Only ten cities left in Spain where one metre squared costs less than 1000 euros
House and flat prices are nearing their peak, however this peak is very high. There are only a few cities left where you can find a house or flat for less than 1000 euros per square metre and this is only in a few neighbourhoods. According to a report by House valuers (Tecnitasa) these cities are Cuenca, Murcia, Jaén, Melilla, Alicante, Badajoz, Las Palmas, Lugo, Zamora and Jerez de la Frontera. The report covered 61 Spanish cities in total.

However, the cheapest cities influence the figures significantly. In the area called La Paz, in Murcia, prices have risen from 650 to 830 euros per square metre in one year. In the cheapest areas in Jaen, prices have risen from 670 to 850 euros per square metre. Both rises are above 25% in just one year.

On the other hand the highest prices have remained static. In the Paseo de Gràcia in Barcelona a square metre costs 11,000 euros and 10,000 euros in la calle Serrano, in Madrid.

There are 10 cities where the price per square metre has risen above 6000 euros. Apart from Madrid and Barcelona. These cities are San Sebastian, Bilbao, Zaragoza, Marbella, Santander, Oviedo, Sevilla and Gerona amongst others.

However Estate agents have confirmed that the drop in property prices is becoming more and more generalized following the boom during the last few years. In fact two reports published yesterday state that property prices dropped in the first trimester of the year. Second hand houses and flats rose less than 1% in Madrid and Barcelona and prices dropped in many areas of both cities. One report by Expocasa goes a step further and states that property prices dropped during the first trimester in 66 of the 91 cities and towns with more than 25,000 inhabitants.

The cities which have experienced significant drops in prices are Coruña (a 6.8% drop), Valladolid (4.5%) and Cáceres (3.7%), according to Expocasa, while Idealista highlighted a drop in prices in San Fernando de Henares (3.5%) and Esplugues de Llobregat (5.2%).

María Antonia Trujillo, the Minister for Housing yesterday said that the housing sector is stabilizing and going back to figures that were normal 16 years ago. Speaking at a conference organized by one of Spain’s largest unions, UGT, in Cáceres, she said that the government’s objective was for the annual rise in house and flat prices to match the rate of inflation.

Spanish housing market

Latest figures released by the Spanish Conveyence Association ST confirm the general trend of of a slower rise in the price of housing in Spain with respect to recent years when the Spanish property bubble was at its peak.

According to the figures published today, house prices rose by 9.8 percent during 2006. The growth in the second term of 2006 at 3.3 percent was markedly lower than the 6.3 percent growth in the first six months of the same year.

The average price of new housing in Spain now stands at 2,763 euros per square metre according to the ST.

House prices rose last year in all Spanish cities, but in some much more than in others. The regions in which consumers experienced the highest rise in house prices were Aragón (16.9 percent), Castilla La Mancha, Valencia and Catalonia. House prices rose the least in Asturias (3.9 percent), the Basque Country (5.8 percent) and, perhaps surpisingly, Madrid, where they rose by just 6.6 percent with respect to the previous year.

Related:
House prices in Spain
Protests over the price of housing in Spain

Most popular areas in Spain

Property buyers in Spain prefer the Regions of Murcia and Valencia

According to figures released this week by the Spanish Housing Ministery, Murcia and Valencia have overtaken the Costa del Sol to become the most popular areas among non-Spanish property buyers.

In the second quarter of 2006, 11.7 percent of all property purchases corresponded to foreign residents in Spain, and 2 percent to non-residents. However the regional breakdown calculated by the Housing Ministry reflects the popularity of the Murcian and Valencian regions where almost 20 percent of all property purchases were carried out by non-Spanish residents (19.5 in Murcia and 19.2 in Valencia including the provinces of Alicante and Castellón). Alicante, where 25 percent property sales went to foreign residents, was the most popular province.

Ranking of the most popular areas in Spain

According to the figures published by the Housing Ministery, the ranking of the most popular regions among foreign property buyers in Spain is as follows:

Murcia (19,5%)
Region of Valencia (12,2%)
Balearic Islands (15,9%)
Madrid (14,4%)
Canary Islands (13,7%)
Catalonia (13,4%)
La Rioja (11,3%)

The overall classification of property purchases per region, including Spanish property buyers is the following:

Valencia: 7.470
Catalonia: 5.768
Madrid 3.834
Murcia 2.108
Canary Islands: 1.535
Balearic Islands: 1.030

Related links:
Spanish property market
Guide to the province of Alicante
Guide to Murcia
Guide to Valencia

Average mortgage rates in Spain

The length, size and number of mortgage loans in Spain continue to rise.

According to figures released by the Spanish Property Registrars Association yesterday, and inspite of the recent rise in interest rates, property-buyers in Spain are opting for longer loans and the average length of a mortgage in Spain has risen to 26 years and 3 months, that is six months longer then the average stood at the end of 2005.

The average monthly mortgage payment has also risen to 789 euros, 40 euros more than during the last three months of 2005.

And more and more people are taking out morgage loans according to the figures released by the Spanish Mortgage Association yesterday which indicate that during the first term of 2006 business in the loans and mortgage sector rose by 26 percent compared to the same period in 2005.

Average price of property in Spain.

Meanwhile house prices continue to rise, although as predicted the rate has not increased with respect to the previous year. According to the Registrars' report released yesterday, house prices in Spain have risen by 15 percent over the past 12 months which is exactly the same as the previous 12 months. The cost of new housing in Spain rose by 11 percent, considerably less than resales where prices rose by over 19 percent.

The average price of property during the first term of this year was 1,916 euros per sq metre.

Related:
Mortgages in Spain
Spanish bank mortgages for non-residents
Spanish banks

Private buying and selling of property in Spain

Euroresidentes has participated in the design and launch of a new site designed to encourage direct sales of property in Spain. The site is called Tu Tipi and contains adverts and photos of property for sale in Spain.

The technology behing Tu Tipi is based on the simple formula of Craiglist which has been so successful in linking sellers and buyers in the USA. But while Craiglist provides the basis for practically any kind of supply-demand transaction between two people (for example the site played a major part in finding emergency accommodation for victims of the Katrina hurricane last year), Tu tipi is limited to connecting people wanting to sell or rent property in Spain with people looking for houses for sale in Spain or for rented accommodation.

Anyone can publish an property advert in Tu tipi after completing the simple register form and verifying registration by clicking on the verification link sent to their email address. Use of this new site is completely free, and will remain so in the future. Property sellers or owners wanting to rent out their property in Spain can publish adverts in English or Spanish and can upload a maximum of 4 photos per advert.

Even at this preliminary stage some people have published adverts on Tu tipi, which we think indicates the extent of the need for a simple, bilingual, no-cost site with property for sale in Spain. Hopefully Tu tipi will fill this need in the coming months and become a useful resource for people looking for their dream house in Spain.

Further information: [email protected]

Slowest rise in housing prices for past 4 years.

This weekend Spain's Director General of Arquitecture and Housing Policy announced that in 2005 prices of property in Spain rose by just 12.8 percent, the slowest rise for the past four years.

The regions to experience the highest rises in (15.1 percent) and Castilla la Mancha (14.6 percent), whereas Cantabria, Castilla y Leon and Catalonia registered the lowest growth in the housing market, with rises and just 6.6, 7.5 and 8.8 percent respectively.

Experts expect prices to continue to rise during 2006, but at a gradually slower rate than in the housing boom of the past few years, as national demand slows down, investors turn away from the property market and look towards other forms of investment. And whereas prices are certainly not expected to freeze or fall in the short term, they are expected to rise least in areas with massive supply of new housing development.

Foreign markets will become more and more important to building developers and promoters from now on, especially since building has not slowed down yet, even though prices seem to be doing so.

So while it is a good moment for foreign buyers to find a possible bargain purchase in Spain, as always they are advised to go carefully, not to jump headfirst into a property purchase and to seek legal advice. If you are considering buying a property in a certain area of Spain and want our opinion on the price you are being offered, let us know.

Dangers of the Spanish property market

The Guardian printed a full-page article yesterday about the Spanish property market with some startling figures that underline what we always advise to the thousands of users who write to us with questions about buying a house in Spain.

Anyone intending to purchase a property in this country is advised to first visit the site or house, then pay for the services of one of the many reputable lawyers in Spain (see lawyers fees in Spain) to check out all the legalities PRIOR TO SIGNING ANY DOCUMENTS REGARDING THE SALE and also, of course, before handing over any money.

According to the Spanish Agency for Holiday Homes quoted by the Guardian, Britons currently buy 50.000 houses in Spain each year and a group of Spanish companies specialising in homes for the elderly estimate that 226,000 British, 135,000 German and 35,000 Scandinavians are living here.

However, more and more stories of people buying properties in Spain do not have a happy ending. The Valencian LRAU law has made many properties vulnerable to possible seizure, as has the illegal construction of thousands of houses up and down the Spanish costas. According to the Guardian, a councillor of Alhama (a Murcian village with just 17,000 inhabitants where property developers plan to build 55,000 new homes and no less than 8 golf courses), has suggested that the area's biggest developer, Polaris World, has a London sales office where it is already selling unbuilt houses belonging to developments which have still not received full planning permission (although, in this case, they are expected to receive permission). And, the paper quotes the case of one British couple who have spent all their savings on a new home in Elche, but now risk having it demolished because the town hall says it was put up illegally by the builder they bought it from.

There are many reasons for living in Spain, but buying a house here is not as straightforward as it may seem and it is essential for buyers to get professional advice to prevent their dream home from going horribly wrong.

British property buyers prefer Spain

According to a study just published by Barclays Bank, the number of UK residents buying property abroad is set to double, and a third of potential property buyers named Spain as their preferred overseas destination.

According to the results of Barclay's study, five percent of UK residents (2.2 million people) already own a property overseas, and another 2 million definitely intend to buy one. And a very high 37 percent of those surveyed for the study said they are considering the possibility of buying a property abroad at some time in the future.

Spain remains the firm favourite among British overseas property buyers, with the US coming second and France third.

Not surprisingly, the main things putting UK citizens off the idea of buying property abroad are legal and tax complications, the possibility of being misled or deceived by local property sellers, and the difficulty of adapting to a new language and culture.

Related:
Reasons for living in Spain
Property taxes in Spain
Spanish lawyers
Advice on buying a house in Spain

Lowest rise in house prices in Spain since 2002

According to the General Director of Arquitecture and Housing Policy, Rafael Pacheco, the rise in the cost property has risen just 13.4 percent in the last 12 months. This represents the lowest rise for 3 years and, according to Pacheco, is the first clear result of the Spanish government's housing policies.

The General Director also indicated the regions in which house prices have risen most. These are Castilla La Mancha (19.8 percent), Aragon (16.4 percent) and the Valencian Region (16.3 percent). In Andalucía, traditionally one of the most popular destination for non-resident house buyers, the rise in house prices at 13.7 percent is only just above the national average.

The most expensive region as far as the cost of housing is concerned is Madrid (2,719 euros per sq. metre), followed by the Basque Country (2,537 euros), Catalonia (2,037 euros) and the Balearic Islands (2,003 euros). The cheapest regions are Extremadura (864.2 euros per sq. metre), Castilla La Mancha (1,255 euros) and Leon (1,297 euros).

Related
Revaluation of property in Spain per region
Investing in property in Spain
Houses for sale in Spain

Spanish-English real estate dictionary

Because of the amount of enquiries we receive from non-Spanish speaking property buyers in Spain about Spanish real estate terms and how the system here works, we are compiling an extensive Spanish-English glossary of real estate terms.

Having completed the glossary, we are now working on full definitions of each term, so that our users can get an idea of how the Spanish property market differs from the property market in the UK. In this sense we want to go beyond a simple bilingual list of property terms.

Send us any words not included. We hope to finish all the definitions in the next few days. Click on each term to get the full definition.

Real estate market in Spain, latest statistics

According to a study carried out by the Pompeu Fabre University (Barcelona) and Tecnocasa, the housing market in Spain has started slowing down and a halt in the massive price increase experienced over the past fews could be near.

The authors have based their opinions and conclusions on the analysis of the sale of over 12,000 second-hand houses and flats and details of mortgages granted to buyers from the first semester of 2004 up to June this year. According to the report, lived-in property (as opposed to brand new) now takes an average of 83 days to sell, which is 15 days longer than a year ago.

Another finding of the report is that property sellers this year are more likely to be prepared to negotiate the price than they were last year, and that on average buyers are able to secure a 5 percent reduction in the original asking price. During the presentation of the report yesterday, executives of Tecnocasa said that this should not be interpreted as an indication that the price of housing in Spain was at last starting to come down, since the reduction was usually agreed on property that was overhoused in the first place. However, in their opinion, the findings of the report do suggest that the conditions necessary for an eventual slowing down in the Spanish real estate market at some time in the near future are starting to appear.

Other findings of the report:

• 30 percent of house-buyers in Spain are foreign.
• 72 percent of all house-buyers come from Spain or another EU country. The rest are non-European, mostly people from South America, Eastern European countries and North Africa who have settled in Spain
• Over 49 percent of second-hand house buyers are between 25 and 35 years old, and 61 percent buy the property together with another person
• The average mortgage in Spain in June was 154.890 euros, a rise of 18.80 percent with respect to the same month last year
• In over 60 percent of all cases, the mortgate loan covers between 75 and 100 percent the total value of the property
• Small flats are proportionally more expensive than larger flats and houses
• The average price of lived in property in Spain per sq. metre is 3,000 euros in the most expensive areas of Spain (Madrid, Barcelona and Vizcaya). dropping to just 1,500 euros per sq. metre in the provinces of Alicante, Cadiz, Seville and Valencia
• The most expensive cities in Spain in terms of housing prices are (in order) Barcelona, Madrid, Bilbao and L'Hospitalet de Llobregat (3.070 euros).

Related links:
Mortages in Spain
Mortgages for non-residents in Spain
The price of housing in Spain
Investing in property in Spain

High-quality Spanish houses to be marketed in the UK

Undaunted by recent data published by the Bank of Spain showing that the number of non-resident house-buyers in Spain fell by 17 percent in the first semester of this year, the international real estate services provider Richard Ellis has just announced the signing of an agreement with Hamptons International. The agreement will enable Richard Ellis to offer Spanish mansions and villas directly to the UK market through Hamptons International.

According to Richard Ellis, the new alliance between these two major real estate companies represents an important added value for Spanish building promotors who work with Richard Ellis, because almost half of all foreign investment in the Spanish housing market comes from British buyers.

The emphasis of the agreement lies with the middle to upper end of the Spanish housing market, such as newly constructed villas or recently-reformed mansions and fincas with special charm.

Major Spanish promoters will now be able to offer their projects to the Spanish and British markets at the same time.

This is the press release as it appears on the website of Hamptons:

Hamptons International and CB Richard Ellis have formed an alliance to market Spanish residential developments. This will combine Hamptons’ experience in marketing overseas property to UK buyers and CB Richard Ellis’ established presence in the country through their offices in Madrid, Barcelona, Valencia, Malaga, Marbella and Palma de Mallorca. The Spanish agreement is a result of the proven success of Hamptons’ joint venture with CB Richard Ellis in the UK.

The Hamptons International and CB Richard Ellis relationship in Spain is part of a new focus for Hamptons’ overseas operations. This will concentrate primarily on new and refurbished residential developments worldwide, as opposed to resales. The company has an experienced team specialising in residential development and investment in the UK whose resources will be used in international markets.

Hamptons and CB Richard Ellis will work together to choose developments which fall within the middle to upper price range and which offer the buyer a second home with a difference whether this be in design, location or the lifestyle it offers.

Jonathan Seal, CEO Hamptons Residential Development and Investment said: “Spain is a natural progression from our residential development activities in the UK as it continues to be the most popular destination for the British buying second homes abroad whether for holiday homes, retirement or investment. We shall continue to look in other countries for similar strategic alliances where we can work with property professionals that are embedded in the national marketplace and which can offer more diverse and interesting development opportunities to our British target market.”

Buying rural property in Spain

Last week we received the following enquiry from someone buying property in Spain:

Question: We have paid a deposit on an ‘old’ property in Almeria. We later found out that the property has no Escritura and our estate agent and Spanish solicitor have both said this is not a problem – that the Escritura can be applied for and will be issued in our names and a Spanish mortgage granted. English banks will not provide a mortgage based on a newly issued Escritura as they say their policy is to wait two years to guarantee ownership and to ensure the property is not claimed back i.e. by a family member or a neighbour. My concern is not necessarily raising the money or getting a mortgage but the possibility of the property being taken away from us after we’ve paid for it, therefore loosing our money and the property.

Answer: Buying a rural house in Spain is a complicated process which can be full of problems if you do not look into all of them. The title deed (escritura) should be signed at the same time as when all the money is paid. The alternative is to pay first a reservation deposit and sign a private purchase/sale contract with the vendors or with the legal representatives (always get your lawyer to check the documentation presented by them to make sure they have legal rights to represent the real owners of the land and property).

Another very important piece of advice. The present owners of the plot of land where the house is must notify the owners of the land adjacent to the boundaries of your plot before selling to you because they actually have preference of purchase over you. By law the vendors should send formal letters to all of them offering them first refusal of the land and property you are going to buy. If within the legal period established, no (affirmative) reply is received, you are free to buy the land without any risk.

If you don't make sure the above is properly carried out, you could become another innocent victim of what can go terribly wrong when buying rural properties in Spain. Furthermore, if, as is often the case in Spain, you have agreed at the vendor's request to pay some of the purchase price in cash (so that the declared price in the deeds differs from the real rice you have paid), and if the owners of the adjacent land have not been notified and given the time established by Spanish law to answer, then they could take advantage of the lower "declared" price as stated on the title deeds, deposit the same amount with the Spanish courts and take over ownership of your property. You will be paid the money deposited with the courts, but you will have lost the cash payment as well as your new property.

Rights of tenants to buy rented property in Spain

We received this email from a Euro-resident in Spain last week:

"We have been living in rented accommodation ever since we moved to Madrid 8 years ago, simply because prices here meant we couldn't possibly afford to buy a flat. We found a lovely top-floor flat, within walking distance of our work, shops, parks, cinemas, belonging to a women who earns a living from renting out several flats she owns in Madrid. She lives in the same building, and we have always had a good relationship with her and, during the past 8 years, we have made the attic into our home, changed the floor, put heating in, decorated, changed the bathroom..... All at our own initiative because we understood that this was going to be our home for a long time. Our 2 girls were both born here. Four years ago we purchased a small house near Cadiz which we use for holidays and rent out to family and friends. We decided to do this rather than buy somewhere in Madrid because we love our flat so much. Last week to our horror, the flat owner told us she had put our atico up for sale and we had 3 months to find somewhere else to live. The original contract we signed states that either party has to give notice of 3 months, but we assumed this was just a formality and she has always said that we could live in the flat for as long as we wanted. Is there anything we can do to stop her from selling the flat, or have we acquired any rights during the 8 years we have lived here?"

The answer to the first question is no, you cannot stop her from selling her property, unless a clause in the contract you signed 8 years ago specifically gives you the right to do so (this is very improbable). If however, as seems likely, the contract makes no reference to any possible ownership rights of the tenants, and simply mentions a 3-month eviction notice, then the owner has complied with her side of the deal.

The answer to the second question is yes, you have acquired a very important right as tenants: the right to buy your home in the event of the owner putting it up for sale.

In Spanish this right is called "el derecho de tanteo y retracto". The first part "tanteo" refers to the fact that a tenant has the right to buy the property he/she is renting and should be given preference over any other potential buyers. The second "retracto" refers to the right of a tenant who discovers that his or her rented home has been sold to a third party, to re-purchase the property from the third party at the same price.

According to Spanish law, all property owners must give their long-term tenants 30 days notice if they decide to put their rented property on the market. In theory this gives tenants time to either find a new home or negotiate a purchase price with the owner and buy the property themselves. If the property owner fails to give the 30-days notice, then tenants can resort to their second right and purchase the property from the new owners (which is one reason why it is very important, if you are a buyer, to find out the exact conditions of any property you decide to purchase in Spain).

In your circumstances we suggest you try to negotiate a deal with the owner of your property based on your right, as long-term tenants, to have preference over other potential buyers. The fact that you have a good relationship with her should work in your favour. And you will have to decide whether you love your home enough to sell the house you have bought in Cadiz and use the money you make on it as a down payment.

Good luck!