What can be bought these days for less than 150,000 Euro?

 

 

This is a question that I have asked myself in several occasions. I am obviously talking about Spain, the main subject of this blog.

Some experts state that the market is full of bargains. Lets see if it is true.

150,000 Euro is a relevant amount of money. This amount can buy you a very decent house in certain parts of Spain. However, this may not prove sufficient for the main cities. For instance, in accordance to our research this amount would prove insufficient in cities such as Guipuzcoa or Vizcaya. The picture is different in cities such as Alicante or Almeria and their surrounding areas where the stock of properties is larger. In those areas, 150,000 Euro could buy you a very decent house in a good area. However, punters need to be aware that most experts think that property prices will continue to fall for at least another 1 or 2 years. If you are buying the property as an investment you may see that the value of your property falls down, although it should not be as accute as for those who bought from 2005 to 2007.

Statistics show that there is a better demand for properties that are worth less than 150,000 Euro as these are the type of  properties that Spaniards can afford these days. These properties can also be let for an affordable rent that will hopefully cover the investor’s mortgage. As many know by now, committ to a very high mortgage and the rent will never cover the monthly instalments. On the other hand, if your mortgage is affordable, within the 400 to 800 euro range, you may have a chance to cover the mortgage with the rent.

The last trend in Spain is to buy from banks as they have a good portfolio of repossesed properties and in many occasions will die to give you a mortgage (and therefore get rid of a property that is affecting its balances account wise). However, not all banks have been realistic with their pricing and a good amount of their properties are still overpriced for the current times.

As Manuel Luque used to say in a very famous tv advert in 80’s Spain: Search, compare and if you find something better..buy it. 30 years down the line and still a very wise saying.

Here we go again

 

 

 

I am a usual reader of the news bulletin from Idealista.com. I like it because it comes every Friday with a summary of the most relevants news in respect of the property market. The interesting thing about this news bulletin is that it does not have any alliances and you can easily see a story talking about the improvement of the property market in Spain together with another story which is less optimistic about the same point.

This week I have noted with interest that Santander Bank has decided to get rid of all its stock of properties by the end of the year, even if it implies making some losses. It appears that Santander has organised a bid and is planning to give the properties for sale to one of the major players in the Real Estate market. Companies such as Knight Frank, Aguirre Newman and Richard Ellis will probably bid for getting the portfolio.

I am interested to see the prices of the properties. The current trend is that properties put for sale by banks are usually more expensive than those sold by developers. However, it must be said that at the same time they usually come with better mortgage offers. If Santander wants to get rid of the around 29,000 properties it has, then it better start crashing the prices because it is very quiet out there. Furthermore, it also better start softening its current mortgage criteria. Otherwise, with the current mortgage criteria which is tough across most of the Spanish banks, most of the interested purchasers will fail to get a mortgage.

Hopefully, other banks will follow this trend and this will help to reduce the current stock of properties which is affecting the recovery of the market. For those who are considering to buy a property from a bank do not forget to instruct an independent lawyer to check the legals. The fact that the property belongs to a bank does not necessarily mean that it has all the papers in place.

To summarise, great idea. This is exactly what Spain needs: bold initiatives to awake a dormant market from its letargy. But, will it work?

 

Spanish property market feels the pain

 

As a Spanish property lawyer based in Manchester, the first thing I am asked when I am introduced to people is: How is the Spanish property market doing?

The words “Spanish” and “property lawyer” appear to have a sudden effect on the other person and they start to interrogate me on the subject. This is something I now accept just as anyone from New Zealand is used to being asked if he has had a relative appear in Lord of the Rings! However, at the same time it has made me an avid follower of the Spanish property market, not only because of my profession but also because I want to be able to brief anyone who asks me the same question.

As many know, the situation in Spain is far from ideal. Experts reckon that there are approximately 1.5 million properties for sale including re-sale, off-plan, new build and bank repossessions. Bearing in mind that annual demand is around 220,000, it is clear that the market will require six or seven years to recover. This is one of the conclusions of a report from property analysts RR de Acuña & Asociados, which in my opinion reflects pretty well the current state of the market.

Beatriz Corredor, the Spanish housing minister, recently stated that property prices will continue to fall although she believes they are close to the bottom. She has recommended developers rent their properties until the market recovers, especially since Spain has one of the lowest ratios of rentals in Europe as the Spanish believe renting is a waste of money.

The oversupply is bad news for sellers but more positive for those fortunate cash-rich buyers who are looking for bargains as there are clearly a lot of opportunities, with both developers and banks offering up to 40 per cent discounts.

Banesto bank, for instance, recently launched 1,200 properties with discounts of as much as 40 per cent and with up to 90 per cent finance on loan values for up to 40 years. Other banks are following this example.

Whether these prices are still inflated or not is another question. Some claim banks have been holding back their star properties and what has been released so far is only the unwanted stock. Regardless of whether this is true, there is no doubt that some properties come with very attractive finance deals which would be almost impossible to get if buying directly from a developer or the seller.

At the same time, the future looks grim for developers. Many of these, including big names such as Martinsa-Fadesa, Aifos and Tremon, are in administration and more will bite the dust in the next two years when construction activity, which is still at very high levels, takes a nosedive. As for property prices, opinions are divided. The majority think prices will continue to fall although there are optimists – usually politicians or developers – who reckon that the worst is over.

I would conclude with the predictions by RR de Acuña & Asociados, which is that prices will drop by over 9 per cent in 2010 and over 4 per cent in 2011, representing a total fall of 25 per cent since 2007. Not a promising picture for developers, but it will offer opportunities for patient investors as bargains will flood the market.

This article was published in The Manchester Law Society Messenger in December 2009.