General index orange line, new build red line, resale grey line

Spanish property prices fell 7.6% in the first quarter of the year compared to the same period last year, according to the official property price index published by National Institute of Statistics (INE). This is the biggest fall on record since the index started in 2007.

Broken down type of property, new build property prices dropped by just 2%, whilst resale prices fell a chunky 12.5%. This is the first time that new build prices have fallen since the index began.

In reality, the index has to be taken with a pinch of salt. Nobody in the business believes for one moment that new build prices are only down by 2% in a year. 20% would be a more accurate figure for both new build and resale prices.

Quarter to quarter, prices fell 2.7%, a slight improvement on the 3.1% fall clocked up in the previous quarter. This suggests that the rate of decline in prices might be slowing, having peaked at the end of 2008.

By region, prices fell the most in Catalonia (-13.7%), Madrid (-11.2%) and the Basque Country (-10.8%), all of them regions with the highest property prices in Spain. Prices fell the least in Galicia (-0.5%), Murcia (-1.6%), and Asturias (-1.8%), three regions with some of the lowest prices in Spain.

Year on Year % price change per region

Summary table of index per region

The INE compiles its index using data provided by notaries who witness most property sales in Spain. However, despite being present at the exchange of deeds, notaries do not, as a rule, witness undeclared cash payments, still a common feature of buying property in Spain. This distorts the data provided by notaries.

La Gaviota, Marbella

Life is often easier for the rich and famous, but sometimes they just have to put up with life’s misfortunes like the rest of us. So it is for Hollywood A-list couple Antonio Banderas and Melanie Griffiths, who appear to have lost their long-running battle against planning officials in the town hall of Marbella. As a result, a large slice of their garden, running from the sea front up to the edge of their pool, will be made accessible to the public. That will make it impossible for the couple to enjoy their pool with any privacy.

Bandera’s has been fighting to keep his property intact almost since he bought it. The Mask of Zorro star, 48, and his actress wife Melanie bought the six-bedroom villa, called La Gaviota, near Marbella, in 1997 for £5million, only to discover that it had been built with an ‘illegal’ building licence, that the Andalusian High Court ruled in 2003 should never have been granted.

Giving up part of the property to public access may be a concession that Banderas has to make to get the property legalised. Last year he was ordered to knock down an entire wing of his mansion, a decision that he has appealed.

Spanish media baron has problems too

Bandera’s isn’t the only big cheese with pool problems in Spain. Spanish media baron Pedro J. Ramírez, owner of the Spanish daily El Mundo, also recently lost a court case to keep his pool private. A court ruled that Ramírez’s pool, at his waterside house in the Costa de los Pinos (Son Servera) urbanisation, Mallorca, was built on public land. But unlike Bandera’s, it looks as if Ramírez can pull strings. The Ministry of the Environment, which usually pounces on property near the coast with alacrity, is doing all it can to ensure that Ramírez’s pool stays private. The Spanish press reports that instructions to look after Ramírez come straight from La Moncloa, Spain’s equivalent to No. 10.

As well as owning one of Spain biggest newspapers, Pedro J. Ramírez is also famous for marrying clothes designer Agatha Ruiz de la Prada, and being caught on film in a Max Mosley style setup with a prostitute.

Barcelona property in the Eixample

Rental prices in Barcelona have started to go the way of property prices, falling an average of 2% in the first quarter of the year, from 1,081 Euros/m2 at the end of 2008 to 1,060 Euros/m2 at the end of March, according to a report from Barcelona’s Chamber of Residential Property (Cambra de la Propietat Urbana de Barcelona).

The fall in rental prices comes after a year in which Barcelona’s rental yields rose strongly. Whilst property prices fell by double digits in 2008, rental prices rose by around 16% in the year, driving up rental yields significantly. With rental prices now falling, yields will start to stagnate or fall, depending upon what happens to property prices in the city.

Rental prices fell the most in the upmarket district of Les Corts (-6.3%), followed by the Ciutat Vella-Old Town (-5.1%), Sarria-Sant Gervasi (-4%), Gracia (-3.7%), and Sants-Montjuic (-2.9%). Rents actually rose a fraction in the central district of the Eixample (+0.6%), and by +1.8% in the beachfront district of Sant Marti.

The only growth area for residential construction was social housing, which rose 50% to 15,823. The rise in social housing construction has not been enough to compensate for the collapse in the private market, having started from a very low base. Nobody wanted to build social housing during the boom, when much higher profits could be made building private homes. In the last quarter social housing made 34% of all new housing starts, a level unheard of since the last property crash in 1992.

Taking a longer view, housing starts were down 46.5% to 297,300 over 12 months to the end of March. Just looking at private housing, there were 201,506 housing starts, a fall of 58.4% on the previous 12 month period.

Looking at the number of new homes which were finished in the period, construction completions in the first quarter were 13,902 social housing (-9%), and 102,975 private housing (-38%). Over 12 months overall completions fell 15.7% to 568,109. Taking just private housing, completions fell 18% to 500,908.

Housing stock keeps growing

Despite the dramatic collapse in housing starts, and the steady decline in completions (soon to turn to a dramatic decline), the overall stock of housing in Spain is still growing. At the end of last year there were 25,129,207 residential properties in Spain, an increase of 2.6% on the previous year, all according to figures from the Ministry of Housing. 89% of these properties were in the private market, compared to just 11% used as social housing.

66.6% of Spain’s housing stock, or 16,747,294 properties, are classified as primary residencies. The remaining 8,382,000 homes are second homes or empty.

After Spain come Ireland and Malta (77%), then Portugal and Greece (73%). At the other end of the scale are Germany (46%), Austria (52%), and The Netherlands (56%).

As to be expected, Spain one of the countries with smallest proportion of people paying rent at market rates, at just 8%. Families renting without housing benefits were 46% in Germany, 43% in Holland, and 42% in Denmark.

By type of housing, Spain is the Eurozone country with the highest percentage of people living in flats (66%), followed by Germany (62%) and Greece (55%), compared to a Eurozone average of 46%. Just 16% of Spanish families live in detached homes, and 19% in semis.

Alanda Tee 5

Save 125,000 Euros on a stunning 2-bed, 2-bath contemporary design apartment of 130m2 plus a generous terrace, in the award winning Alanda Tee 5 Development near Marbella. Blue chip developer Alanda Homes have just reduced the price by 20%, from 500,000 Euros to only 375,000 Euros, to help sell the last remaining unit of the development.

Unlikely to hang around, this is an unbeatable opportunity to purchase a stylish, top quality home in this remarkable development, located within the spectacular Los Flamingos Golf resort on the New Golden mile just 9kms from Puerto Banus and close to Marbella.

Alanda Tee 5 has an incomparable setting overlooking the fifth tee of the golf course of Los Flamingos, boasting views to the magnificent Villa Padierna Hotel & Spa, natural lake and Mediterranean Sea.

Designed with a fusion of Mediterranean and contemporary style, all the apartments are constructed using only the best quality materials - a signature of all Alanda developments – incorporating contemporary “open” architecture, with generous outdoor living spaces that are ideal for al fresco dining - a luxury that residents can enjoy throughout the year, thanks to southern Spain’s mild climate.

Two inviting swimming pools with decked areas, surrounded by aromatic, landscaped gardens, provide the perfect haven for relaxation.

The surrounding Flamingos Golf Resort also includes:

- Villa Padierna Five star superior Hotel & Spa, managed by the prestigious Ritz-Carlton hotel chain.

- Three golf courses, one of which plays host to the PGA Championship: Los Flamingos Golf, Grand Flamingos Golf and Flamingos Executive Golf.

- A golf Clubhouse with restaurant and pro-shop.

Get in touch before someone else beats you to it. For more information on this extraordinary opportunity visit www.alandahomes.com or call 0034 952 667 290 in Spain or UK and IRE freephone 00800 25 26 32 32.

On a month to month basis the picture is no better. New lending fell 4.1% between March and April, and year to date, new mortgages are down 37.6% compared to same period last year.

To make matter worse, the average value of new residential mortgages is also down 18.4% to 115,442 Euros. Fewer, smaller mortgages means that the overall value of new mortgage lending is down 52.6% year on year, and 7% month on month. Mortgage credit has now fallen for 22 consecutive months.

Mortgage interest rates

The average mortgage interest rate agreed in April was 4.7%, a percentage fall of 8.2% in a year, and 7.7% in a month, thanks to falling Euribor base rates. However, whilst Euribor has fallen 63% in a year, from 4.82% in April 2008 to 1,771% now, mortgage interest rates have barely fallen at all. The difference is the result of lenders using higher margins to increase their profitability and rebuild their balance sheets.

Spain’s savings banks, known as cajas, lent for an average of 22 years with a rate of 4.82%, whilst banks lent for 20 years at 4.66%.

95.7% of new mortgages in Spain are still variable rate.

Roan recently ran a property bazaar – the first of its kind - to sell discounted primary homes in Spanish cities, principally Madrid. The event was a big success, claim Roan, who noticed that 12% of the 5,000 enquiries were for holiday homes, inspiring the idea for a market dedicated exclusively to second homes on the coast.

The properties on offer at the next event will have an average discount of 38%, claim Roan, with a maximum discount of 60%. Prices will range from 54,900 Euros to 330,000 Euros, with an average price of 118,000 Euros.

The cheapest property for sale will be a 53m2 flat in Torrevieja, on the South Costa Blanca, on offer at 54,900 Euros.

Most of the properties for sale will be from developers, from Spain’s alarming glut of new properties that have not yet sold. These will be offered key in hand, ready to occupy this summer. Some 20% of the properties will be bank repossessions.

The areas best represented in the market will be Valencia, Alicante (Costa Blanca), Murcia, Almeria, Huelva & Cadiz (Costa de la Luz), and Malaga (Costa del Sol). In particular Gandia, Denia, San Juan, Torrevieja, Benidorm, Roquetas del Mar, Vera and La Manga.

Advantageous financing options will be available, but only for the duration of the market, claim Roan.

Take an example in Madrid, as described in a recent article in the Spanish daily El Pais. A flat in the city centre is on the market for 210,000 Euros. The tax authorities, on the other hand, believe it has a market value of 344,520 Euros. If the vendor is lucky enough to get the asking price, then the tax to pay based on the inflated value used by the tax authorities will be 24,000 Euros, compared to 14,700 Euros based on the real value. The vendor will have to pay more than 9,000 Euros tax too much, says the article.

However, it seems the author of the article was mistaken. In reality it is the buyer who has to pay the 7% transfer tax, based on a taxable value determined by the autonomous region. The vendor only has to pay capital gains at 18% in their annual tax declaration. So it is really buyers getting slammed. In some cases, where buyers find a real bargain, they may even be fined just on suspicion of under declaring the true sale value.

It may seem strange that the tax authorities don’t use declared values for calculating taxes, but there is a good reason for it. In Spain, the practise of under-declaring sales prices to avoid tax is widespread, which means that tax authorities have to come up with ways to estimate values to try and get their pound of flesh. That works well enough in rising real estate markets, but when prices start falling, the authorities are curiously slow to start revising down values.

Inside the Ses Salines natural park at dusk, looking towards Ibiza

World famous party island Ibiza has been demolishing illegal properties with alacrity recently. The other day the island’s authorities demolished a minor-music celeb’s multi-million Euro villa, now they have turned their attention to 14 beach huts mainly used to store boat. They were all knocked down earlier this month.

The huts were built decades ago on the beach in the Ses Salines natural park of Ibiza and Formentera, one of the few coastal parts of Spain that has not yet been blighted by mindless development. They were built without any planning permission on the beach of Es Codola, and in Spain all beaches are public property, so they also fell foul of Spain’s ley de costas, or coastal law.

The huts are reported to have been built with dangerous materials that needed special treatment for disposal, which is the excuse given by the coastal department to explain why it has taken decades to get around to demolishing them.