SPANISH PROPERTY MARKET 2011
The Spanish property crash, sadly, continues – as shown by the huge drop in Spanish property valuations over the past year. These valuations (tasaciones) are required if someone needs a mortgage and therefore are the necessary prelude to most property purchases.
Needless to say, valuations during the Spanish property boom were notorious for being often wildly over-optimistic and many times I was astonished at the bank valuations of properties I knew well where a mortgage was being sought. To the delight of buyers, many properties were valued significantly over their selling prices which, no doubt, encouraged some people to take out loans greater than those absolutely necessary. Either way, the lenders were endangering themselves the moment they lent their money on the basis of these defective valuations.
Of course, no-one minded at the time! The sellers were happy, the buyers pleased, the real estate agents ‘tickled pink’ and those earning commissions on the mortgages arranged – perfectly content. The figures within lending departments must have looked terrific and wonderful promotions and bonuses will have followed, yet again pleasing all concerned…
In any event, recent Spanish government figures show that in the first quarter of this year there were 65,855 property valuations – which was a massive 52% down on the last quarter of 2010. Meanwhile, the 65,855 valuations are 46% down on the same (January to March) quarter of last year.
If you go to this article from Idealista then you will see the full impact of the Spanish property crash when measured by the number of valuations of properties less than two years old in municipalities of more than 25,000 people. The drops for 2011 are in the far right column and some of the drops are simply incredible – with some places recording no valuations at all (a 100% drop from the previous year)!
In reality, of course, the Spanish property market in 2011 is facing twin evils – the banks are not lending (or only doing so on a very restrictive basis) and the number of people able to borrow money is less, given the staggeringly high rate of unemployment in Spain (currently at 21.3%). It hardly needs me to add that any vital ‘feel-good’ factor is largely absent in Spain – with most Spaniards I speak to talking about the coming year (2012) being even harder (economically) than this one.
Certainly, my own belief (since last year) has been that Spanish property prices during 2010 will fall a further 10% before stabalising. It was therefore interesting for me to read a couple of excellent articles by Mark Stucklin in one of which which Credit Agricole make the claim that the Spanish property market in 2011 will drop further – with the American investment bank Morgan Stanley forecasting a fall of 10pc.
However, as I have written countless times, the Spanish property market is actually very complicated and the figures above must be read with some care by foreign buyers of Spanish property. There is a wealth of difference between different types of property in Spain with some types of properties practically valueless and others that will be continue to be ‘soft’ (pricewise). Meanwhile, there are other types of Spanish property that are spectacularly good buys – on anyone’s basis – that will hold their value and be sound investments.
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What exactly IS the right price of any property in Spain,no one knows , Vendors tell Agents what they want and then Agents add on what THEY want so price is iffy to begin with!
Looking at a Spanish Townhouse in Tormos say ,on market for 195000 Euros , Agent says was on originally for 295000 , the original price was crazy , the `new` price` almost there but having looked at many properties and compared them this house is worth 160000 Euros, otherwise one is in Villa price area , Agent said Vendor needs to sell but needs the price, less 5% Agent fees no doubt ,because he owes the Bank as its on a Mortgage !
Its incredible that a Vendor getting into deep do do dismisses a cash buyer simply because he feels any buyer should get him out of his financial mess , no wonder no one buying in Spain, the Vendors are nearly all greedy or stupid ,they want buyers to fill up their Pension Pots or pay off their debts by asking unrealistic prices , talk about having your heads in the sand ! We have decided to sit and wait, we are not looking to screw anyone, or seeking that `bargain` that never exists , we just want to buy a home for our future , after all who else is going to pay over the odds for a property in a continually falling market ! We are looking long term, not an `investment`, they don`t exist in Spain , not for a good few years hence , someone please try to get it over to Vendors that the days of silly prices and gullible buyers are well and truly over !!
As I said, we shall sit it out, in no rush , who knows, the Vendor may even see sense himself EVENTUALLY which by then we may have found something else and / or Vendor will find his property falling even more in price than we were offering this September ! Heard of one Vendor in Marbella , turned down an offer of his Villa of 800000 priced at 950000Euros , he is sick at heart now, wishes he had accepted , cant sell at all and now dropped price to 400000, still no buyers , so you silly greedy Vendors , let this be a lesson to you all !!! October 2011