Funcas calculate that the value of Spain’s housing stock rose by a factor of 3.6 during Spain’s decade long property boom, from 1996 to 2006, driven by “an increase of about 25% in the area of built land and a tripling in prices.”

As a result, household wealth is now double disposable income, the difference being made up by an “enormous” level of household debt that will cause problems with bad debts and defaults for a long time to come.

Too much rubbish property on the market

Interestingly, Funcas also argues there is a stock of housing and land that is “too big and of poor quality” that will take “years to digest and use properly.” This hints at separate question that I will explore in greater detail in another article. Namely, that the Spanish property market is clearly segmenting into different grades of quality, with the best starting to sell now at reasonable prices, whilst the worst may never sell at any price.

Propitious conditions say developers

Meanwhile, Spain’s G-14 developers’ association has claimed that the conditions are now right for the property market to come back to life. “Low interest rates, the correction in property prices, and the reopening of financial markets are creating the conditions for demand to start waking up,” argues the latest report from the G-14.

Getting the market going again is the key to dealing with the glut of unsold new homes, which the developers now estimate at around 732,000.

But despite the increasingly propitious conditions the developers claim to see, there will be no rebound without help from the government, they argue. So far the Spanish government has resisted the developers’ calls for a bailout.

Property in Andalucia - a needy cause?

The government of Andalucia, or Junta, announced yesterday a subsidy of 1 billion Euros to help liquidate the region’s property glut estimated at around 70,000 newly-built homes.

Like the ‘cash-for-clunkers’ programme used to subsidise car sales, public money will now be showered on house-hunters in Andalucia. But second home buyers can stay in their seats as the scheme only applies to local residents buying main homes. Even so, it could benefit foreigners living in Andalucia, and help lift the market out of its slump, which might lift prices for all types of property.

How it works?

The way it works is developers participating in the scheme have to offer their property for sale at mortgage cost, wiping out their margins and giving a discount of 20%. Participating banks, for their part, will loan 100% interest only for the first 3 years. Starting in the fourth year the Junta will offer loans to subsidise mortgage payments for up to 5 years and a maximum of 15,000 Euros. As a result, buyers will save as much as 40% over 8 years, according to calculations by the Junta.

More conditions: The offer stands until the end of 2010, the properties must be newly- built, and the mortgage no greater than 245,000 Euros, the price limit for social housing. Mortgages must be 100% LTV, up to 30 years, charging an interest rate of Euribor +1%

Read the fine print, though, and the Junta isn’t being so generous. In year 9 mortgage lenders have to reimburse the subsidy to the Junta and add it onto the outstanding mortgage, so the borrower pays in the end. Nevertheless, thanks to inflation, buyers will probably have to pay back less, in real terms, than they borrow. Many people expect inflation to take off in the next few years.

Criticisms?

You could argue that it is morally questionable for the government to be spending 1 billion Euros subsidising home buyers when there are so many other more needy causes. And isn’t this is just a wheeze to get buyers to pay inflated prices for homes today whilst transferring the burden of payment onto tax payers in the future? Wouldn’t it be cheaper, and cause less economic distortion, just to drop prices today to a level that people can afford without crucifying themselves on a 30 year mortgage subsidised by the government?

Buyers of new properties like these in south-east Spain could save thousands of pounds

Publicity

News of a link forged between the Cheltenham-based Spanish property firm The Almanzora Group and leading foreign currency and international payment specialist Axia FX of London means that the buyers of new properties in resort, village and beach locations in south-east Spain could save thousands of pounds.

The Almanzora Group – which acts exclusively as the principal agent in northern Europe for the development companies comprising the Almanzora Bay Group which is building in the Almeria region of Spain – says that its new partnership with Axia FX will give potential buyers a fast-track link to currency exchange rates which could save them significant sums on the cost of buying their properties. They are at Desert Springs, Europe’s only international award-winning luxury family resort and championship desert golf course, the traditional fishing village Villaricos and nearby Playa Marques, known for its seven kilometre long Great Sandy Beach, El Playazo.

Simon Coaker, The Almanzora Group’s sales and marketing manager, says: “We are selling properties ranging from apartments, townhouses and cottages to villas, beach houses and country houses at prices from €178,000 to more than €1 million, but with the Euro and Pound Sterling virtually at parity, favourable exchange rates are essential when calculating the total purchase cost.

“With Axia FX having access to interbank rates, they can ensure the prices the client receives are much better than they would have received from their bank, providing him or her with considerable savings. In fact, for Almanzora’s clients, Axia FX will guarantee an improved rate compared with that received from any high street bank. Both companies have agreed to work in partnership with The Almanzora Group, with each referring its clients to the other.”

David White, managing director of Axia FX, said: “We will ensure that clients of The Almanzora Group always receive excellent service and we are able to fix quoted rates for up to one year in advance.”

For more information about the properties call The Almanzora Group on 01242 680299, email tag@almanzora.co.uk, or visit www.almanzora.com

Trampolin Hills, in Campos del Río, has been struggling to survive since the market turned down and the town hall refused to approve its plans to build 2,500 homes and a golf course.

Hundreds of mainly British buyers will now be trapped as ordinary creditors with no property to show for their money. Those without bank guarantees for their stage payments will have to join the queue of creditors trying to get their money back from Trampolin Hills. As unsecured creditors, buyers without bank guarantees are likely to be at the back of the queue.

In may this year a judge warned that buyers at Trampolin Hills could face “massive losses”.

• Euribor (12 months), the interest rate normally used to calculate mortgage payments in Spain, fell 1.4% in October to a record low of 1.243%.
• Euribor has now fallen for 13 consecutive months, and is 76% lower than it was a year ago. The graph above illustrates how dramatic the fall in Euribor has been.
• Monthly repayments on a typical annually-resetting mortgage (150,000 Euros, 25 years) will drop by around 300 Euros a month, or 4,000Euros a year, to 640 Euros/month.
• Significantly lower monthly mortgage repayments have given many borrowers financial breathing space they did not have when Euribor stood at 5.26% in October last year. Estate agents report this is taking some pressure of the property market, by reducing the number of forced sellers. Many more borrowers can now afford to take their homes of the market in the hope of selling when the market recovers.
• The average value of new residential mortgages signed in August fell 19% to 11,753 Euros compared to the same time last year. The number of new mortgages signed by 6.6% to 52,482. Fewer, cheaper mortgages put downward pressure on property prices.
• The average interest rate on new mortgages in August was 4.3%. Interest rates from banks (4.15%) were better than savings banks or cajas (4.46%).
• Many analysts expect Euribor to continue falling until the early part of 2010, further reducing the cost of money to Spanish mortgage borrowers.

Los Robles de los Arqueros, Marbella

Publicity

For many house hunters searching for a place in the sun, the thought of purchasing a home on a golf course may never have occurred to them if they are not an avid golf player. However, with the benefits that these types of developments bring to home owners, it may well be time to think again.

Victor Sague, Marketing Director of Taylor Woodrow de España the only major UK house builder in Spain, explains: “The days of when a property located on a golf development only appealed to keen golfers, has been and gone. More and more house hunters are opting to purchase a home on a golf course as they present the purchasers with a number of advantages.

“One of the major draws is the guaranteed protection of the natural environment surrounding the home as no other properties will be built in the location, thereby alleviating the chance of having views ruined or disturbance caused. Additionally, extra space is provided around the properties, plus the grounds of the golf course will be maintained, ensuring calm and pleasant surroundings for all. Also, many of the golf developments offer private facilities such as swimming pools, spas and club houses, perfect for everyone to relax and unwind.”

The rental opportunities are ripe with this type of home as Victor comments: “Properties located on golf developments tend to rent out well as they offer a dual purpose – they are perfect for devoted golfers to practice their swing but at the same time offer a great location for families and children as they are safe and secluded. For example, if you were to rent out a property at our Los Robles de los Arqueros development in Costa del Sol you can expect to get €1000 a week in high season and €450 in the low season.”

Currently, Taylor Woodrow de España has a couple of developments located in the heart of the prestigious Los Arqueros Golf Club, Benahavis, whose owners can enjoy the view of the well-kept greens and make use of the fully equipped club house. Los Arqueros Golf Club was the first golf course to be designed by Severiano “Seve” Ballesteros*, who describes it as ideal course for players of all kinds – a reasonable challenge for the average golfer and a tough test for professionals. The developments are located just a few minutes from San Pedro Alcántara, Puerto Banús and Marbella, in the Costa del Sol. The developments’ location in Spain makes it ideal for those looking for a long weekend, due to its close proximity to the airport.

Los Arqueros Golf & Country Club

Las Encinas de los Arqueros consists of 30 two and three bedroom apartments in the style of a Mediterranean village with magnificent terraces, swimming pool, gardens and an over-ground parking space. All apartments are southeast facing with magnificent views over the golf course and sea. Prices at this internationally renowned resort now start from a credit crunching €190,000.

Los Robles de los Arqueros boasts 42 two and three bedroom apartments. Located in 7 apartment blocks, all just three-storeys high, all the apartments face south or south-west, with magnificent balconies and gardens with views of the golf course and sea. The homes at Los Robles de los Arqueros have spacious, light-filled rooms and large balconies where you can enjoy some of the finest views of Andalucía’s setting sun. The complex also features a swimming pool for adults and children, communal gardens, an underground garage and storage areas. Prices for an apartment at Los Robles de los Arqueros start from €224,800

Victor concludes: “As always when purchasing a home abroad it is imperative to do your homework. It is always a good idea to speak to people who have bought at the development and find out about their experiences with regards to the home and the golf course. Ensure that you purchase from a reputable house builder who builds to a high standard. So whether you are a golf fan or simply want your own piece of tranquillity, a home on a golf course may very well be the solution.”

All of Taylor Woodrow de España’s quality homes are endorsed by Safe Buying Experience. This partnership with the international accreditation scheme provides a double reassurance to buyers of a Taylor Woodrow de España home as they are guaranteed a quality home complete with independent endorsement as to its ‘integrity, legality and safety’.

With a reputation for trust, Taylor Woodrow de España provides a specialised service and dedicated team within the UK and Spain who can help and advise homebuyers through the entire process of choosing, buying and settling into a new Spanish home.

For more information on the great properties available from Taylor Woodrow de España call (UK) 08000 121 020 , email info@taylorwoodrow.com, or visit www.taylorwoodrow.es

The depressing news for anyone who makes a living building homes in Spain is that in the year to August planning approvals were down 62% to 76,411 compared to the same period last year, and down 0.4% on a monthly basis.

But these figures don’t tell the whole story, now that the Spanish property sector’s slump has lasted longer than a year. The year-on-year decline in the same period last year was over 50%, so compared to 2 years ago, this year’s decline can only be described as a debacle.

It means that Spain’s residential building trade is shrivelling up. All the resources that used to be dedicated to building hundreds of thousands of homes each year are increasingly standing idle. In the boom years the real estate sector, including construction, accounted for close to 20% of Spanish GDP. By some estimates it has now shrunk to 10%, but that is still substantially above the OECD average and way too high for Spain.

It helps explain why unemployment in Spain is heading for 20%. Every point of GDP lost to the housing slump destroys 200,000 jobs. That in turn is bad news for the housing market, as people without jobs can little afford to buy a home or pay the mortgage.

Bank of Spain

The Bank of Spain plans to introduce a new rule forcing banks and savings banks (cajas) to double the amount they write off when they own a repossessed property for a year or longer. This will give banks and cajas a big incentive to reduce their prices to liquidate their growing stock of repossessed properties and developments.

Under the new rule, banks and cajas will have to increase their provisions from 10% to 20% of appraisal values for repossessed properties they have owned for a year or more.

In the past they only had to write of 10% at the time of repossession. Now they must write of an additional 10% in provisions for properties they haven’t sold after a year.

The new measure, which is expected to come into force in a few weeks time, is being interpreted as a warning from the Bank of Spain that banks should stop their practise of disguising bad debts by swapping debt for property. It will also encourage banks to drop their prices to reduce their property holdings.

Banking analysts estimate that banks and cajas have repossessed property valued on their books at 36 billion Euros. This implies they may have to write off 3.6 billion Euros collectively when the new rule comes into force.

Note, however, that BBVA and Santander, Spain’s biggest banks, are unaffected by the new rule. They were already making provisions of 20%.

A growing glut of new properties lies at the heart of the market’s malaise. Though housing starts are falling dramatically, down 45% so far this year, and forecast to reach just 200,000 at year end (compared to 360,000 last year, and 760,000 in 2006), the supply of new properties coming onto the market still outstrips demand. DBK forecast there will be 350,000 new home completions this year, and 200,000 in 2010. A far cry from the 600,000 plus homes finished in 2006 and 2007, but still too much for the market to digest.

Needless to say, developers are taking a pounding from falling sales and falling prices. The report forecasts that a big decline in the number of developers, a process that is already well underway. “A big fall in the number of registered companies will be apparent, as a consequence of the present crisis in the sector,” says the report.

Where does all this lead, in the opinion of DBK? To a “prolongation of the present situation of very low activity in the residential sector, with more price falls for newly built homes, and an increase in the inventory of unsold property.” So more of the same, basically.

In response, developers are expected to continue marketing like hell with discounts and special offers, whilst coming under pressure from increasing competition from banks.

Banks, for their part, are expected to increase their presence in the market, taking over more developers and mortgage repossessions. Banks can offer better financing terms than developers, giving them a competitive advantage about which developers are up in arms.

Front-line charm

Spain has done a poor job of developing its coastline over the last 30 years, most reasonable people would agree. Over-development dominates in many areas, creating a “wall of cement” effect that puts off an increasing number of holiday makers and potential holiday home buyers. You could say that, in many areas, the environment has been sacrificed without mercy to urban development.

Greenpeace has been agitating about this for years, detailing in its annual report (entitled ‘Destruction at all Costs) the damage that years of mindless over-development have wreaked on Spain’s once beautiful coastline.

So it’s hardly news, but it is an important issue, which is why it needs to be kept on the agenda. And a new report from the Observatory of Sustainability in Spain (OSE) does just that.

Just published, the report reveals that between 1987 and 2000 alone, before the construction frenzy of the last decade really got going, Spain’s built land increased by 30%. As a result , Spain’s cultural and environmental heritage is under threat from urban over-development, argue the experts in sustainability behind the report.

It doesn’t have to be that way, say the authors. Other countries, especially in Northern Europe, try to balance urban development with environmental protection, but not Spain. “Town planning is the priority in Spain, in contrast to countries in the North of Europe,” they say. Unfortunately, over-development has already had “disastrous consequences in terms of the environment and landscape that have a negative effect on people’s quality of life.”

Spain’s misguided “urban vision”, coupled with a policy of “protecting pockets of land in nature reserves” amounts to a “short-termist” development model that has resulted in the “massive destruction of our heritage, especially our natural heritage.”

Not all cement

What do they recommend for sustainable development in future? That Spain sees it’s landscape as a “complex, fragile, and non-renewable resource” that needs to be protected by law.

Will anyone pay them any attention?