Spain Property: Who To Believe?

Back in December 2008 I was interviewed on Sky TV, about the effect of the Euro on Pensioners. At the time the reports were that they would be flocking back to the UK from Spain and other popular expatriate countries as the exchange rate devastated their pensions, and Sky wanted to know if that was the case, and if I thought it would be the case in the future.

Over the subsequent months you couldn’t pick up a paper without reading how the ‘Pensioners Dreams’ had turned into Nightmares, and they were ‘trapped’, desperate to get home.

I wasn’t sure then, and I am even less sure now. I have watched a lot of expats head back to the UK during the recession, but not many of them have been pensioners. Maybe that generation is far better equipped to ‘tighten the belt’?

I mention this now, because I read recently that more than half the Brits with holiday homes in the euro zone were planning to sell their property this year.

“Quite frankly, the golden period of emigration and buying property abroad is over,” says Tim Finch of the Institute for Public Policy Research in London.”

In theory then we should be seeing an increase in Spanish house sales as the expat pensioners sell up and head back home.

Looking back over some recent reports Spanish house sales fell in November 2010, “for the third straight month”. House prices in Spain dropped 5% ‘year on year’ in January 2011, a sharper drop than in the previous two months, but earlier this month the National Statistics Institute reported that the number of house sales in Spain rose by 6.8% throughout 2010, reversing successive years of decline since 2006.

The trend would appear to be that prices are coming down and volume is going up, which is what you would expect ……… but are they?

Talking to friends involved in Spanish property sales the picture varies, further up the coast around Javea they are seeing signs of recovery, more inquiries and even a few sales. Locally in Almerimar an estate agents told me that it was worse than ever at the moment.

On our site www.almerimarlife.com we have a survey about Purchasing A Property In Spain asking “If the opportunity arose would you be confident in Purchasing a Property In Spain this year?” The current result shows that 54% of people would be, but the most frequent comments left are “prices don’t reflect the wider market”, “prices still too high”, “over priced market with a glut of unsaleable houses”, and “still awaiting a further downside in property prices”

The mixed messages continue: Taylor Wimpey de Espana has revealed it saw an increase in sales of 50 per cent in 2010 despite the ongoing recession, although it should probably be noted that Mallorca contributed significantly to the figures.

Elsewhere the Spanish government admitted recently in the Financial Times that it would be at least 5 years before there would be any positive development in Spain’s housing market.

It is no secret that there are around 1.3 million new homes unsold and 630€ billion of toxic non performing property loans in Spain at the moment. The Spanish government has recently launched a direct appeal to Britons to try and kick start the property market promising new planning laws to end the confusion which has led to some British home owners being ordered to knock down their properties deemed to have been illegally built.

With British purchases accounting for a third of all Spanish property sold to foreigners in Spain over the years, the significant slump is causing major concerns still, as evidenced by the fact that the Spanish Association of Town Planning Lawyers, AEA, have suggested that the Ministry for Development sells off the stock of completed housing in Spain as holiday homes for foreign buyers

The theory is that the current Ley de Suelo needs to be changed as it is acting as a blockage to recovery because banks are currently not in a position to grant mortgages.

Under the plan the banks would receive liquidity and could increase the amount of credit they offer. The properties would be sold to the foreign market as a one-time offer at a ‘very interesting’ price.That of course assumes that the Brits are ready, willing and able to purchase in Spain!

Which takes us full circle: on the one hand we are being told that the majority of expat property owners in Spain want to sell up and move back home, while on the other hand Spain seems to be banking on selling a large amount of it’s unsold property to future British overseas property buyers.

So where does that leave us? It isn’t that I think anybody is wrong per se, but I am struggling to understand who is right!

Property Matters by Chris Marshall is sponsored by (www.piagi.com) The Currency Specialists offering the best foreign exchange rates and currency prices

You can hear Chris each month on the weekly Property Matters show on Bay Radio Costa Almería 91.5FM and 95.5FM (www.bayradio.fm) with Bob James Monday’s at 4pm