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The president of the Spanish consultancy RR de Acuña, Fernando Rodríguez Acuña, has been interviewed in cotizalia.com about the  Spanish property market. It is a good interview with frank and honest answers to understand in brief what has happened and when the property crash will end.

There are surprising revelations and controversial points.

His point of view about the present market situation is clear: 2011/Q1 has been a disaster in terms of property transaction.

The end of the tax exemption for property buyers in 2011 meant that November and December 2010 had larger numbers of transactions. Also, according to Fernando Acuña, the lack of credit, the rise of the euribor (interest rate) and the increase of second-hand houses in the market and the large stock (1,5m according to Acuña – who seems to The Spanish Brick to be very conservative at this point) are points to be bear in mind in 2011.

The main problem is credit to acquire land

According to Fernando Acuña, the main problem of the banks with regard the property market is not the large credit conceded to buy properties but the credit granted to developers in order to acquire land. “We are talking about 130,000 million Euros invested in land that was overvalued. According to our calculations, urban land is devalued now by 65% whereas outside urban areas, land price depreciation is above 90%”.

The problem is that, during the property boom, speculation on land value became an easy way to generate money by developers. So, credit was given to developers in order to speculate with land rather than to develop, said Fernando Acuña during the interview.

“If the demand of properties in this decade is going to be one million and we have land to build up three million units, what is the value of land?” comments Fernando Acuña. “it is worth nothing… in many cases the land price is just symbolic”.

subprime property portfolio

Apart from land, the president of RR Acuña states that the biggest problem of Banks is the subprime property portfolio: “50% of the second-hand property portfolio of Banks is subprime… but there are prime properties in badly located areas”. It is taking too long to sell this sort of product even with 50% discounts.

During the interview, Acuña mentioned that the second-hand offer increased by 20% in the second half of 2010. In other words: “the stock is not being reduced”. Also, the pace of transactions is too slow; especially because of the credit shortage.

When will the activity improve?: “We will see an improvement in the property market and sales during the 2012/2^nd half but it will be from 2015 when the market will become healthy as long as Banks’ stock is reduced. To reduce Banks’ stock involves lower prices”.

The logic process of recovery

During the interview, Fernando Acuña explains the logic process of recovery should be as follow:

1) Reduce the stock

2) Less stock will enlarge credit because the banks have eased their stock

3) More credit will allow new developments to be undertaken

4) The GDP will improve

5) The national demand will be normalised

Acuña added an extra factor that will help the market: “to bring back Tax exemption for property buyers”. The Spanish Brick strongly disagrees at this point with Acuña because to bring back tax exemption means to bring the property market to the front line of the economy when Spain needs alternative markets to rely on. Also, it will go against the natural growth of the rental market, which works very well in other countries and Spain needs to back.

What went wrong during the property boom?

Acuña says that the problem was, unlike the 80s and 90s crisis, the credit expansion and property over-evaluation during the boom. Property evaluation agencies were valuing properties at an average of €230k whilst the real value was €180k on average. What is the reason for that margin of €50k? According to Acuña: Black money, VAT tax evasion and asset transmission tax evasion. “Nobody wanted to see it and nothing has been done”.

Acuña consultancy is one of the leading and more relevant property consultants in Spain, having published for 25 years now an annual review of the property market which has always been a reference in the market.

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The Association of Property Developers in Madrid (asociación de promotores inmobiliarios de madrid – Asprima) recently informed us that about one fifth of 500,000 houses that need to be built up into new developments still remain as just plans; in many cases, the building work has not even begun, according to the portal idealista.com. Nearly 234 urban sectors in Madrid are affected by leaving more than 50 councils with  ‘ghost’ boroughs.

Developments in the areas of Valdebebas, Montecarmelo, Arroyo del Fresno and Cañaveral are still not going forward which means that the home buyers are still waiting for the development to be started in some cases.

The worst scenario is for the home buyers in Berrocales or los Ahijones; some of which have waited for 14 years to get the key to their new apartments, according to idealista.com.

CONCLUSIONS

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Our legal adviser, Andrés Díez Bronzini, has prepare an article to explain the different options that a lanlord can take in Spain when tenants do not pay the rent. These are the three cases that Andrés has prepared. If you are interested in reading the article in full please click the link: Spanish legal advice

CASE ONE: John has rented his apartment to Ángel who has stopped paying the rent. John wants to recover the unpaid rent amounting to € 3,000 and get Ángel out of his apartment. How can John proceed?

CASE TWO: Imagine JOHN MANAGES TO EVICT ÁNGEL. JOHN FINDS A NEW TENANT, BUT THIS TIME JOHN INSISTS ON signing a special arbitration clause which means that any dispute between the landlord and the tenant must be resolved in a special arbitration process. MIGUEL, THE NEW TENANT, defaults on his first payment. how can get JOHN rid off MIGUEL THIS TIME?

CASE THREE: Imagine John manages to evict miguel and finds a new tenant. this time, before signing the renting contract with the new tenant, john signs an insurance policy which will pay for the default payments of the tenant. THE NEW TENANT DEFAULTS AFTER MONTH NO. 6. HOW CAN JOHN GET RID OFF THE NEW TENANT, JOSÉ?

mortgage advice for Spanish property

This articles is a bit long but quite handful and the author, Mark Mountney, organises well the tips that  he wants to share.

You may be surprised at how many folk make assumptions and act without any research into the mechanisms of financial life here, and then wonder why things go pear-shaped.

Spain is not the UK, and that applies to most elements of life, whether it is financial or otherwise!

A rather obvious statement you might say, but then you may be surprised at how many folk make assumptions and act without any research into the mechanisms of financial life here, and then wonder why things go pear-shaped.

Whether your involvement in Spain is comprehensive (you have moved here as a permanent resident) or partial (perhaps owning a holiday or investment home), we have seen developments over the last year or so that would have likely impacted your wallet hard! But what to do to ease the pain, if that is possible?

Whilst not all things are, or can ever be, under your control, certain elements to your financial make up are, and it is these key elements that we need to focus on. Any improvement can remove or, at least, ease the position you are in and, not least, the anguish and stress that invariably come with financial pressures!

There’s an old saying that says ‘sometimes you cannot see the wood for the trees’. Translated into financial terms today it can be interpreted as the stress of dealing with everyday worries needs to be stepped back from. You can do but you certainly need to think differently than perhaps you have ever done before. Or get someone to help you!

So here are the areas to look at with the view to reducing costs and/or increasing income!

Please read the full article

1) Existing Mortgages – Payments high or hurting?

2) Bank Assurances

3) Savings gone – Eaten away due to reduced income?

4) Deposit rates through the floor and investment markets down … along with your income?

5) ‘Paid Up’ UK Pension funds

6) Spanish Tax

Hello everybody,

Our legal adviser, Andrés Díez Bronzini, has prepared what I consider an exceptional document about the total costs of purchasing a house in Spain. He has done a good job.  This is a 16-page document which is very useful for both professionals and home buyers, with cases to study and full cost breakdowns in rigorous detail.

The intention of the guide is to describe two cases (firstly, purchase of a new apartment; secondly, purchase of a second- hand apartment) is to describe the different cost items.

We have set it up in our website to be received by email. If you are interested just visit the link: Free legal guide Spanish Property

Ps: we are not spammers so do not worry about leaving your email if you are interested in the PDF.

Cheers,
Daniel

Well, 2011 starts at least with an exercise of honesty and transparency in the Spanish property market – we hope so. After January with banks and saving banks (Cajas de Ahorros) having disclosed their property balance and exposure to risks, the final figure of distressed assets and exposure to risk in financial entities stock is €217,000 million, updated to January 2011.

The final figures, one by one

Banco Financiero y de Ahorros is the financial entity with a higher volume of property repossessions (€ 11,048), followed by Banco de Santander (€ 7,509 mill), Catalunya Caixa (€5,435 mill), BBVA (€ 4,793 m ) , La Caixa ( € 4,651 m), Banco base (€ 4,208 m), Banco Popular( €3,689 m), Novacaixagalicia (€ 3,525 m), Mare Nostrum (€ 2,949 m), Banco Sabadell (€ 2,880m ) Unnim (€1,985 m), Caja España Duero (€1,083m ), Unicaja (€ 985m) as the most relevant.

The reform needs to clear the balance of the savings banks. According to analysts at Evolution Securities (20^th Jan report), savings banks need €50bill to back their assets and operations. It is time to raise money and to negotiate with foreign property  investors. We heard that Barclays is interested in the Spanish savings banks stake: Welcome!

A foreign bank may come with a large property investment group.

CONCLUSIONS

• Week after week the property business becomes a bigger burden for a banking system that needs to move on. The figure is always bigger and the economic climate seems worse: unemployment, rising interest rates, less lending …

• 46% of the property business in which Banks are involved is high risk according to the Bank of Spain. From our modest understanding (I mean TheSpanishBrick.com), high risk only will be eased by releasing burden: selling assets even if losses are higher than expected.

Read the full article about Spanish banks repossessions and property bargains