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Ten reasons the Spanish property prices remain depressed
Despite all I can see the pain continues property in Spain, do more to read the suggestions that now is the time to grab a bargain. In fact, in all stages of the accident has not been a shortage of inside information glamorizing property market:
"We have again increased demand, we have an oversupply.. Those who buy now are deemed to have been the smartest buyers. "[Viva Farms April 2007]
"It's an exciting time in Spain, is a buyer's market and with all frankly, has never been better. "[Mediterranean Real Estate February 2008]
"It is now a good time to buy Spain "[Beatriz Corredor, the Housing Minister in June 2008 Spanish]
"Now is a very favorable time to buy in Spain "[spanishpropertyclub.org.uk September 2008]
"Experts say this is a good time to buy in Spain because home prices have fallen by an average of 20 percent "[Sunday Mail January 2009]
"Now is the time to buy in Spain . . . I predict that the global market in Spain and in its coastal provinces will recover in due course these higher values, even unimaginable to the height of the boom earlier. [Almanzora, developer May 2009]
So after years of false optimism and dangerous now is the time to buy? Here are my 10 reasons to doubt it.
1. The backlog of unsold homes in Spain or unfinished
UK house prices saw an incipient recovery, but strict UK planning laws have kept supplies tight for the new property while in Spain the opposite is true. It is estimated that there are 900,000 unsold houses weighed on the market complete with many more buildings unfinished. The problem is increase: in the first half of the year twice as new buildings were made were sold.
2. Recoveries
As in the United Kingdom recovered properties are adding to the problems of drag on the market and prices are getting worse. Spanish paper Expansion recently reported that "one in five households have a high risk of default" and that banks are "preparing for a second one wave of defaults in autumn "because of unemployment. adjudicated properties are often sold cheaply at auction or use of websites owned banks as of www.procam Caixa Catalunya-inmobiliaria.com.
3. Unemployment
High unemployment is likely to weigh on the market both Spanish and United Kingdom housing for a while. It is difficult to see that the Spanish property market for the increase in "unexpected" levels of unemployment is approaching 20%. Spain unemployed are paying the price of an economy excessively geared to the construction and many jobs lost in construction and real estate agent will not return. It difficult to see the fall in unemployment to suffer heavily on tourism and social security system that actively discourages job creation.
4. The "Credit crisis" is nothing
As in the UK mortgages remain difficult to obtain as banks rebuild their balance sheets and remain wary of lending to all but those with perfect credit. It is difficult to see a sustained recovery without the return of "normal" Buyers who do not have 30% deposit to put down. Would-be buyers often conflict very conservative valuations by banks. Entitled "Tricks and Mortar" The Economist described how the Bank of Spain has allowed banks to hide € 22 billion of bad loans which indicates that are not about to return to full health in the short term.
5.'s Reputation tarnished
Even in normal conditions Credit there are other reasons to doubt that Spain can avoid the clash of property at least in coastal areas popular with foreign buyers. The perception that owning a property in Spain is a dream full of sunshine has been buried by:
hype> Realtors "before the accident (see above). Who will believe that the property in the Spanish language is a sound investment again?
> Illegal building scandals in Andalusia and Murcia can be solved without all the affected households are to be demolished but the reputational damage has been done.
"> Valencia's Land Grab" laws that have tainted all Costs by association.
> Bankruptcy promoters have left a trail of broken promises to those who bought Offplan, not to mention half-built and poorly maintained developments
6. The weaker pound
At the time of writing € British pound is 1.17, much better than its low point of which € 1.03 in January, but one is far from the range of € 1.40 to € 1.50 used to make Spanish property seems so attractive. Can you recover more a pound? I do not know but I do not bet on it while the British government loans is spiraling out of control.
7. Prices have fallen everywhere
Many industry boosters say because prices Spanish have now fallen to be business. This is not necessarily true because the prices on most of the countries that attract British buyers also have fallen. For example, in Dubai investment bank EFG-Hermes recently said they expect a fall of 50-60% from the peak of 2008. As for prices in Florida have been steadily declining for 3 years; Irish actor Jack French has 2 bedroom condos in Orlando from 50,000 €, 75% discount. The price points access old Eastern Europe as Bulgaria are described as being in crisis.
8. Murky figures
You can help us see the light at the end the tunnel if we could rely on the statistics, but the old cliché "Lies, damn lies. .." It sounds very true in the property world Spanish. The central government (INE) and private (TINs), price indices are down 7.10% from the peak but the property writer Mark Stucklin says that " Indeed, the index should be taken with a pinch of salt. "Another problem is the developers and other vendors have not announced prices to reduce the burden on buyers to negotiate "Discounts" that does little market transparency or trust.
9. Buyers returning?
Some agents have reported an increasing number of inquiries, but ultimately these claims should be treated with caution for several reasons:
> When they are made by Realtors! Is it really true that, as everyone DREAMHOME claim on its website that "there is definitely no shortage of customers looking for properties in the Costa del Sol?
> The accident has forced many business operators to survive agents should be getting more requests, if the other equal
> The number of "buyers" are really only looking for? Completed transactions are the real test, and these continue to show double digit the year the year falls in most areas.
10. The end of a super boom
The industry is able to get away with propaganda about "bargains" and "undreamed of" price increases in the future, because the mentality of the housing boom is deeply rooted in the collective psyche British and Spanish. We have become accustomed to a cyclical pattern with peaks higher and higher after apparent periodic busts inevitability. There are many reasons to believe that this time will be different and we've reached the end of a super boom in property and asset values in general.
To understand why you have to look at the reason previous busts have recovered to start new booms. The pattern has always been the same – governments have cut interest rates to boost consumer demand, reflate asset prices and ending the recession. The problem is that this policy has left households increasingly indebted to the point where you can not afford to take on more debt, even with very low interest rates. I think we've reached the limit of debt-fueled growth in Spain, Britain and most Western economies. The recovery that we see this year will be artificial or false, built on the back of the public sector debt is not a sustainable source of growth or likely to trigger a revival of the private sector.
CONCLUSION
If you are being tempted by all the talk of recovery and I would advise caution bargains. No rush. Take time to observe the market ensuring you're reading unbiased opinion and facts not propaganda manipulative industry experts posing as experts. A good place to look is spanishpropertyinsight.com I've found to be a rare source of independent information on the Spanish property market. My site focuses more on the Spanish law and property law in Spain that prices of property as such.
About the Author
James Baker is a UK-qualified Chartered Accountant with over 20 years experience in London and Spain. He is Senior partner of Advoco, provider of Spanish law, tax, accounting & administrative services to the English-speaking community of Southern Spain.
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