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Unfortunately, in Spain property rent is not as flexible and popular as it is in the UK. But it is picking up and it will be interesting to have some basic advice if you are renting your property to tenants or if you are a tenant who wants to rent bedroom or to rent a property in Spain.

Advice for landlords and owners

1. MAKE READY THE PLACE-Make your place as best as possible for your new tenants
2. SHORT PERIOD CONTRACT- If you are renting your place for a few weeks or for a few months, get paid in advance as much as possible plus the deposit, if possible. If it is for three months get payment in full. Arrange a “Contrato de temporada” –it means an agreement for a certain period up to eleven months.
3. LONG PERIOD CONTRACT- If you are renting your place for a long period, beware that it should be from one to five years. If the tenant pay and meet the terms of the contract they can stay up to five years regardless your will.
4. THE DEPOSIT- Get always one month deposit… it is compulsory by law and also it will cover you from any damage in the flat. You cannot miss it.

Advice for tenants

1. LEAVING- Leave the place as it was… no more, no less.
2. LEAVING- You must give a 30 days notice before leaving the place. Nevertheless, if you have a certain term contract –ie. 1 year contract, and you want to leave earlier, you have to allege a reason of force. A job reason is the most popular. Otherwise, you will be breaking the contract.
3. THE DEPOSIT- Whenever you check out make sure that you work out with the landlord the deposit back. He is entitled to spend as much time as need to check it. Get receipt of any payment…. This is a must!!!
4. PETS-

read the article in full in spanishproperty-newsandviews

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The Bank of International Settlements (BIS) has recently released the conclusions of an investigation about how ageing affects the future of house prices in 22 developed countries including Spain. And the conclusion was… What a forecast!!!! … By 2050 Spanish property market prices will drop by 75%.

One of the key data for the BIS forecast  is that the Spanish population will be the oldest in the EU in 2050: 36,5% will be above 65 years old age, according to Eurostat.

This is the conclusion of the BIS’ paper work explained in a very simple way:

• if property prices have risen by 230% during the last 30 years (after the baby boom of the 70s), from now on the house prices in the lovely Spain will shrink by 75% in the next 40 years given a no growth population that is getting older.

Economic theory suggests that ageing affects asset prices negatively, which is widely accepted. But apart from the ageing effect in the property market in Spain, there is a huge over supply -more than 700,000 unsold brand new units, and a few more factors.

That is why the BIS analysis needs to be implemented with market facts.

The key factors that have boosted the market

But there are four factors in the last 15 years period that boosted the market of property in Spain beyond the potential demand that demography could generate:

• expansion of credit since 1999
• low interest rate
• Property assets become an easy and profitable market where to invest for no-professional investors
• a tricky legal framework that encouraged to build new property developments like “mushrooms growing in the forest”

These factors are, from my point of view, the reason why between 2005 and 2009 a total of 2,753,600 properties were built up in Spain according to the Ministry of Housing.

Do not rely on immigration

So, Spain is getting old, which mean less and less people will be able to buy the large stock of 700,000 new and unsold units because they are more dependent on active population.

In the case ten years ago authorities had any hope that immigration could slow down the ageing rhythm of Spain, now such expectation have been ruined by the economic climate. Foreigners who moved to Spain by economic reasons are moving back to their countries. In a quarter of year there are less than 100,000 immigrants in the country.

Migration trends and city markets

Cities are still a reliable market for residential. Spanish urban population has grown since 1970 until 2000 from 66% to 78% and currently the rate is slightly above 80%. It means that property in cities will always offer a good exit strategy to the investor in Spain. Nevertheless, second residence, top end investment and luxury will have a good market but it needs different networks and different marketing strategy for investors.

Prices

Demography, migration flows, offers, demand, location, bla, bla, bla… all together comes to the main point: price.

It is known that prices have dropped an average of 12% in the cities and certainly a further fall will come. Prices performance not only varies depending on rural and urban area, but also depending on the region.

So far, the highest prices fall per region (-16%) have been in the provinces where the new property developments was higher during the property bubble, increasing the stock by 30%: Guadalajara, Toledo, Huesca, Alicante, Málaga,  Las Palmas y Murcia (according to the Dr in Economies Julio Rodríguez López).

CONCLUSIONS

On the bases of demography, stock and trends, the Spanish property needs new inputs from market players and regulators. Here we have a list of six conclusions

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When decision taking comes, Spain will always be one of the favourite destinations for Britons who wants to emigrate or just want to invest in property. According to research from the property website Primelocation, the rate of Britons looking for a property abroad were 151 per cent higher in June 2010 than in June 2009. A total of 1,500 Britons were questioned in the research.

The favourite destination is Spain, informs The Daily Telegragh.

It is very interesting the fact that despite the economic climate in the country and the bad press that the Spanish property market has in the UK, investors still have Spain in the viewfinder.

One point to be cleared at this point: Bad press has been merely earned because “property cowboys” in Spain have ruined the market –I will explain in another post the definition and profile of “property cowboy”.

In the article of The Daily Telegraph, Ann Wright, International Development Manager of Primelocation International, said: “While the market in Spain has suffered from some bad publicity recently, there has been no significant drop in the number of people searching for property in the country on Primelocation International”.

“The fact remains that there are many reasons why the country remains attractive to British buyers. Spain’s main attractions are still the warm climate, great beaches and unique culture all just a short flight from the UK; these factors will still draw in international buyers whatever the economic situation.”

He added that “It is also worth remembering that, while most of the problems experienced in recent years have centred on the Costas, there is far more to the Spain than just the southern coast.”

In the ranking, after Spain came France, the U.S, Portugal and Italy.

A breakdown of the survey reveals that 33 per cent considered emigrate, 23.7 per cent were looking for an overseas holiday home and 12.4 per cent were searching for an investment property. 15.3 per cent were foreign buyers looking to purchase a UK property.

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The aftermath of the credit crunch for Banks in Spain is that they have become a major player in the property business because of repossessions.

At the pick of the crisis, mid 2009, Banks had a portfolio of 100,000 units in Spain. According to Idealista.com, 40 different Banks offer currently more than 17,000 properties in their corporate websites. Also, Banks are organizing their own corporative Property show in an attempt to get rid of property assets.

This is a bad moment to have a large property portfolio if you are a bank given that from October 2010 Banks must have a provision of 30% of the value of the property assets, which currently are already valued in € 60 billion. That is why they put hands on selling the properties that they had to repossess.

Is positive for property investors in Spain that Banks are holding a large portfolio of properties and willing to sell them as soon as possible? I would say: Not really!

Given that there is an oversupply of around 800,000 units in the Spanish market, it is likely that there are plenty of low quality properties in Bank portfolios that have been already launched to the market. The portfolio has been generated from repossessions and if the property price is 40% to 70% off it is because they are extremely difficult to sell.

During the expansion of the property bubble, unprofessional developers were building in remote places enlarging the property stock with really poor products that nowadays are unsalable. Those products are today the repossessed by banks.

I mean unprofessional developers because out of the blue hundreds of new developers wanted to take a stake of the property pie and develop for speculative purposes. They built up developments without any market guidelines such as location, quality and cost efficiency. There are many professionals in Spain but during the bubble the market become a significant mess.

Unfortunately, there is not a proper inventory of these “junk properties”. That may be a good task to do: a list of junk property developments !!!!

The main cities never fail
Properties in main cities are still the best investment in Spain. Forget the coast and second residences if you are an investor. Prices have dropped in cities by 12% since the crisis started and the demand slows down. Banks and professionals shared the viewpoint that the property price in cities will not drop furthermore, in a recent Property Forum held in Madrid three weeks ago.

CONCLUSSION: It is potentially a good time to invest in Spain but do not get caught by attractive banks offers. Probably it will take a while to find the right bargain but it is there. Get advice and the service of an agent with a good history. Do not trust the bank… they are not agents and cannot lead your investment

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It looks like the Spanish property market touched bottom during the first half of 2010 and now it is starting to show signs of improvement in terms of property trading and prices.

Not only official and no-official figures show a slight improvement in property trading but also the academic institution IPE (Instituto de Prácticas Empresariales) dares to forecast that from January 2011 prices will start picking up at a 4% yearly rate.

It was a brave statement… God bless IPE if they are right.

The rise of the internal demand is very acceptable but the demand from foreign investors is still punishing a market that once upon a time was a reference of business and money making in the sun.

The internal demand rose in May and June by 11% and 7% related to the same months in 2009. Far away from this improvement, the figures are quite poor regarding foreign buyers: during the first half of 2010 just a bit more that 500 units were sold out to private foreign investors.

The market will never be as it was before -offering spectacular ROIs. But it has probably reached a point of stability, which is a good re-starting point.

May be it is an illusion and we need to wait few more months to see the evolution of the market performance. Or, potentially, it may be a good time to buy. Euribor is still low, the rental market is getting stronger (buy-to-let investors keep an eye) and prices seem to be stable with little more room to improve.

ADVICE: If you are ready to invest now, get a reputable agent to help you. The crisis has slapped “property cowboys” out of the market, but you will still need the right help to buy in a good location. Otherwise you are going to fail in Spain.