Mortgages and return to the peseta

 Are't we all playing nice. What you all fail to take into account is that they don't give a f...k about us. We burn while Rome fiddles.

 Call me cynical, but I wouldn't put it past Spanish banks to invoke some bullshit "house rule" and say something like " euro mortgages contracted by non-residents remain payable in Euros" or "Euro mortgages granted on basis of external remittances remain redeemable only in Euros". That'd keep the lawyers and courts busy for a few years.

One might have said that Spanish banks were all laughably corrupt but this weeks revelations regarding Barclays corruption and the libor scandal makes the Spanish seem amateurs when it comes to scamming. Whatever, I'd be on the qui vive, especially if taking out a new mortgage. God knows what clauses they might slip in with a view to trapping you if events overtake us.

Peakmark......I'm inclined to think that an underlying theme all the way through this thread is that those in power whether it be government or coprorate place very little store in considering Joe Public.

As to the bullshit house rule differentiating between non residents and residents....Spain has already had to back down on applying different laws and conditions between the two demographics ...... I'm a fully paid up long standing member of the cynical party.... not a prayer of getting away with that one. 

 All this chit chat is great fun, but at the end of the day what does it matter. We reach our allotted time and fall of the edge. Anything that happens in between is a dalliance. The them, is the people who seek money and power for it's own good and their egos. There aren't many that want it for the greater good nowadays. As has been said somewhere ,the bankers and industrialists of times past were often philanthropists.The " us " is the rest of us, who fill forums with hand wringing debates, Where does that get us?  Until the people who " earn " vast amounts of money, whether bankers, footballers, popstars, Tony Blair et al. realise that it doesn't make them any happier. Until the people who crave power for it's own sake start to help the masses.That we are all part of the whole. Then we don't stand a chance.We have to attend to everyones' needs and by that I don't mean doling people money for doing nothing. Until the mindset something for nothing is dispelled . I raelise that there are a lot of people in the world who help others, but until they can lead then the money/power model will always win. Evil happens when good men do nothing, I think the saying goes And so to bed

My own personal opinion is that al the banks are up Sh*t Creek, and because of them, all of us (or at least most of us) are up it with them - and all the hand-wringing in the world isn't going to help us.

All the mafiosi (the Developers, Agents, camp followers and the banks) made a killing out of all the misguided, albeit innocent, foreigners who fell in to the honey trap of believing that Spain could offer what they wanted, and they would have at least "some" legal protection against crooks - not too much to hope for?

The banks fell over themselves to finance dodgy Developers, and in their greed and lust for money, they too threw all cautious business pacttices in the waste bin.

They (pure 100% factual example) fiinanced Developers to the extent of tens of €Millions: they demanded in return every mortgage on properties sold where they'd financed:: they mortgaged hundreds of plots of land, and even golf Courses - expecting colossal returns: .   

I know of one development where the hundreds of mortgaged plots of land have not, and in all probability, will never now be developed: where the Golf makes colossal losses, and is now stagnating: where promised (& mortgaged) business ventures have sunk without trace: where at least 10% of properties mortgaged in the halcyon days have now either been re-po'd, or the keys surrendered:: where some 30+% of the properties mortgaged by the bank have been built, but not sold.                We're speaking in this one particular case in one development of some minimum €200 Million.  

The properties are now being offered at 25% of their original asking price (and 50% of the mortgage lent to the Developer) and that is but one Development.                  Extend that across all the Developments in Spain, and one can understand why the various banks are in need of a €100 Billion bailout.

It would appear that the EU will now put the money forward, but unless this is going to be a generous gesture which will not have to be repaid???, then all it's done is to grant a temporary extension to borrowing the Life Support Machine.- it's not going to solve the problem.      

This message was last edited by finkies on 02/07/2012.

Let's face it we all know that all the measures taken to date to resolve all the Euro issues, be it the banking aspect or the overall economic problems, they're only treating the symptons and not resolving the basic problems at the root of it all.  It's like treating pneumonia with Beechams powders.  All we can do is sit back and watch until the first country is declared bankrupt and some bright politician says "Well, I never thought that would happen"!!

 I'm looking forward to my upcoming purchase (where and how much tbd), I'm coming to Murcia to look at Villas that they tried to sell for 250k euro a few years ago. Not now....

The bank, stuffed with euro funds is lending 100%, bless 'em! I look at it as a way to get my hands on euro bailout funds. (Berlin lends t Spain, Spain lends to the banks, the banks lend to me, I buy assets at 100%) This is a normal market clearing operation.

My only issue (and lets go back to the thread topic) was that Spain may introduce the peseta, but that somehow, the mortgage may remain in Euro's. 

The bottom line is the apartments are so cheap that even if this happens I think the effects would be temporary. Look at Iceland, several years after the default and devaluation they're coming out of recession, brushing themselves down and getting on with it. Because they DIDN'T stand behind their banks. The Irish stood behaind their banks, and now are on their knees, the Spanish have just received a loan so that they can stand behind their banks, and are currently going down to their knees. Can you spot the pattern?

Anyhooo.... Friday 13th(!) and I'll be in Murcia, (Mazarron) trolling round Estate Agents visiting apartments, townhouses and villas. 

The bad news for owners is that I'm a pure bargain hunter. The more distress the better. Hard maybe, but its the only way to think when the world is like it is. Mrs Merkel is making it possible for me to get a cheap, cheap loan on a once-in-a-generation investment bargain. (it could be 2020, 2025 before prices rise past their pre-bubble peaks). 

Finkies, you point the finger of blame at the Southern Spain mafiosi vs the innocent misguided foreigner. While this is not true in every case much of the mafiosi's power was driven by the greed of the misguided foreign buyer (and let me assure you that there was much Spanish greed as well). When I first arrived in 2003 I worked for a company offering mortgage advice to the clients of the major real estate companies. They had a contract with them to "service" the various agents clients and the advisors were in effect a "closing tool" for the agent.....80% of those clients seen would never arrange a mortgage through the company as 95% of the clients were off planners whereby the strong likelihood was that the buyer would subrogate the developers mortgage.

I left the company within 6 months over an internal dispute between the company and one of the firms major introducers as I am UK professionally qualified and have an ethos based on best advice rather than simply close the deal.

Going back to the greed of the foreigner (and also the native) - in the six months or so that I worked for the firm I either saw or spoke to by phone an average of ten "clients" a day - usually 5 days a week but sometimes 6. In my time there somewhere between 1000 and 1300 mostly British but sometimes Irish and other European nationalities. Not all those potential clients had signed on the dotted line of course BUT the vast majority had no intention of ever completing on their purchase ......... they were mostly flippers intending to make a profit from sellling on. Of those that did intend to complete at least 75% were discussing multiple purchase whereby they could sell the 3 units they didnt need to fund purchase of the one they wanted to keep.

One of the reasons I had problems with the role I was supposed to fill is that I am a touchy feely person - I dont buy into artists impressions and I remembered well two colleagues taking a very serious bath buying off plan in London Docklands in the late 80s. On the occasions where I met people face to face I would frequently ask them why they were buying off plan and mutliple units? While nobody was ever direct enough to state "to make money", profit was the underlying motive. It was a cheaper entry (and longer term before having to "pay for the goods") and instead of the one dream home they thought they could afford they were able to buy 3!!!! I spoke to one group of guys operating a very successful UK buy to let portfolio alongside their jobs who were buying 8 - when I questioned them on their intentions of the portfolio and whether it would be viable for their portfolio the response was that they were selling 7 before completion to keep one for personal use bought from the sale proceeds of the 7. This is merely one illustration (and to be fair the worst) but I could quote hundreds of examples where suddenly the dental receptionist or the playgroup assistant had overnight become a property magnate. Buyers were blind to what was going on around them - aircraft full of off planners arriving at Malaga airport to go on development tours, where they were wined and dined by such nice real estate sales people. I recall one such buyer telling me it was money for old rope...........funnily enough that was the same view held by the agents.  

I have no issues with the desire to make money or to profit.....its what makes the world go round. God knows, with the way that government abuses its position and the tax revenues it raises, I am a firm believer that ones future is in ones own hands and no point relying on the State for a reasonable retirement.

The local mafiosi were certainly motivated by greed but their greed was being fuelled by a huge driving force that based on personal experience didnt want to, or was blind to any common sense or reason. I might add that it wasn't only Jonny Foreigner ..... many Spanish themselves have been victims of the plot.

Focus  - Mortgages and return to the peseta.... puhleeze...

Jono - back on thread. Quite by chance I met a Professor of Economics at Bilbao University (probably Spains equivalent to Harvard when it comes to economics and business) last night - she aint just a lecturer but she also writes papers on behalf of the government blah, blah, blah.

I put the question to her as to what she thought about the possibility of leaving the mortgages in Euros. She believes there is no existing contingency for this as nobody envisaged the failure of a single currency......although back in the 90s she herself was warning that without political and fiscal union how can there be currency union. She feels that the government (left and right) is more driven by the men behind the money than by doing good by the people!!! But she was also very quick to point out that there are probably significantly more mortgages within Spain that have been issued by the savings banks and so the debt that has been securitized overseas is relatively minor if you consider the original principal. Whether the BOS would let the likes of Santander, Barclays, Deutsche, Lloyds, BBVA etc go to the wall is an obviously an unknown but she said "dont be surprised if they do". But her final comment was (and I think we know this already) is that Spain is set for extremely LONG TERM austerity and possible poverty. She is planning that her 2 children (13 and 15) will leave Spain as soon as possible once educated as there will be nothing here for them. She would not be surprised if it could be the next century before we see any type of recovery.

And to leave this with a smile ........ never ask a Professor of Economics a question like that during half time of the Euro finals if you want to watch the second half.

Sorry for straying Jono but I dont think I started it

Smiley, the bottom line for all offplan purchase in Spain was that BY LAW there were supposed to be legal Bank Guarantees in place for all monies deposited, to act as protection in the case of developer breach of contract. No matter what the motive for purchase was, it has to be stated that all those within the real estate industry were using this safety net  to vigourously market their products, and many within the industry chose to conveniently turn their backs on the lack of adherence to this law when the market started to falter and developers were breaching contracts like flies! As everyone now knows this is the law that is being legally challenged and after major stress, abusive timescales, and much cost, cases are gradually being won.

But it needs to be stressed that adherence to the law in Spain is a strong pre-requisite to re-establishing trust, and until such time as the law is consistently enforced in Spain, within reasonable timeframes, then there will be many who will look upon these issues and consider the risks prohibitive. Actions speak louder than words, so all eyes are now on the Spanish Justice system to make the Banks adhere to Spanish Law.

Ads - I dont disagree with you one iota. They were also all being marketed with guaranteed mortgages (no mention of the fact that if one didnt meet a lenders requirements in terms of ability to pay then the buyer wouldnt qualify) and many were marketed with other such crap as guaranteed rental (no mention of the fact that the buyer was probably paying an additional 50 grand over what the then market price would/should be (I didnt say value) and also had to purchase the agents/secondary sellers furniture pack at five times its true cost in order to avail oneself of the rental guarantee. I do not disagree with anything you say.

I merely comment that so many had pound signs rolling in their eyes as they stepped off the plane that all manner of common sense seemed in many instances to be left behind. People doing things that they would never ever consider doing in their own country....... thus why do it in a foreign one. I would never trust a real estate agent to introduce me to a lawyer who was going to give ME best advice ........ yet the large majority did. One such lawyer threatened me with court action for advising the client that she should insist on seeing a copy of her BG back in 2005 and subsequently First Licence of Occupation ....... when she forwarded my e mail to her suggesting that her lawyer wasnt acting in her best interests, the lawyer was straight on the dog and bone to me threatening to close us down because "of course he was acting in her interests." Ultimately she shifted law firms away from the long established Marbella practice with chrome and glass and ensured she got excellent representation and advice.........and a Bank Guarantee.

Sorry once again Jono

I might add Jono that during the conversation with the Prof she confirmed that Spain would fight tooth and nail to remain in the Euro as the single currency and European dream has overall been very good for Spain and the standards of living. While she could not discount a return to the Peseta (completely uncharted waters for us all) her view is that as corporations have become so intertwined cross border the German discontent with perpetual PIIGS bailouts will for the time being be counter-balanced by the fact that Germany is so dependent on the other European economies for its trade purposes and the fact they themselves have huge debt exposure to Spain. My response was that if Europe hasn’t got the money to buy German goods how strong will the motivation be and how easy will it be to convince the average German worker to continue propping up the less industrious nations in the south. Again it’s a “what if” scenario. Crystal ball gazing time as well for her.

Long and short is that there is no clear answer to your question......nobody knows how deep is the power of control over govt by external forces, nobody knows if Spain will exit the Euro or if said exit will result in an external currency mortgage within Spain.

Only person that can decide whether the risk is worth taking is you. However you proceed, I wish you much luck and that the outcome means you get to enjoy your day in the sun.

 jono: "Mrs Merkel is making it possible for me to get a cheap, cheap loan on a once-in-a-generation investment bargain."

investment.  Investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time

speculation. Putting money into something with an expectation of gain with thorough analysis, without security of principal, and without security of return is speculation.

gambling. putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is gambling.

There is no security of principal or return as prices may well halve again over the next 5 years. So, depending of the depth of your analysis, a property purchase in Murcia is either a speculation, or a gamble. But not an investment.

HI smiley,

Regarding how dependent Germany is on, and how much Germany is swayed by,  the rest of Europe, if you cast your mind back to the 1960's Germany had to "go it alone then".   At that time (I was a squadie in BAOR) the Army fixed its exchange rate once per year - it was lovely, us Soviet cannonfodder were getting 9 Dm for each £1, and the international rate had dropped to lss than 5.   Eventually even the mighty BAOR had to eat Humble Kuchen and transfer to calculating a monthyly rate.

The pundits were forecasting that no-one would ever buy a Beetle, least of all a Merc, ever again - and perhaps for a few months, sales did decline somewhat.       But if there is a demand, then people will pay whatever they need to.  Germany did what was best for them then, and if it comes to the crunch, they'll do it again.

And on your other point, of course there were "flippers" & opportunists: when there's money to be made, the sharks will circle.

But I've lived in Spain for 8+ years now, and of all the many dozens of people that I've met and spoken to, only one had admitted to trying to make some shekels out of the opportunity.      W ithout exception, all of the others either bought to live here at some stage, or broke open their piggy bank to enjoy a holiday home for them & their kids. Most of them were like myself - childlike in our naivete, and now sadder and wiser.

And to jono2000,  who on earth, irrespective of the current price, and having read all the sob-stories that is published here, would want to buy a holiday home in Spain?        Precies may well decrease even more: the uncertainty is mega: there's no tenants around,: the fees structure, not to mention maintenance costs, are astronomic, and the banks (as most of us know) operate a 17th century code of practice.

But jono's right, we have strayed off the point - but everything is both pertinent and relative.   All information is useful..

Dear All,

many thanks for all the information and I have now watched "Inside Job" twice - hard to believe....incredible corruption.

not my field at all, but I now think I know why Obhama has not gone the same way as Kennedy, which is something I have wondered about since learning how much the natives, including some UK ex-pats hate him. Perhaps it is the "mode" to hate him.

They have certainly got him by the "short and curlies" and the rest of us as well.

There doesn't seem much hope for the world as we have known it and certainly no bail-out money or loan to assist the hard-pressed mortgage payer.

You have certainly got your work cut out Ads, Keith and Maria plus.

Regards

Norman

Hi Finkies at risk of rebuke from Jono for veering from the straight and narrow......

I can only speak as I found in 2003 when I moved to Spain. The company I initially worked for had six advisors all working at a similar rate to me in terms of the people they spoke to. I can only speak from personal experience but whilst not every day it was fairly frequent that one of my colleagues would speak about "clients" who were contemplating buying or had already paid deposits on double digit units. This was probably fairly soon after the circling sharks had moved up to Murcia and the Costa Blanca and even the first knockings of Costa de la Luz to replicate their programme that had proved such a money spinner on the Costa del Sol.

Having left the company the number of clients I assisted latterly to complete on off plan purchases in 07 through 2011 there were also many that had purchased units (single or multiple) that they had never intended to physically buy. You have only met one that stated they had the intention of making money. There are a massive number all the way along the coast of Spain that sit empty because of "investors/speculators" that either couldnt or wouldnt complete because it wasnt their original intention. I lost count of the number of people that I spoke to in 07-11 that had never bothered to get mortgage advice previously because they were never going to want one....mis-sold and bought into the dream hook, line and sinker.

Somewhere in the dark archives of EOS there will be posts that I made warning about the perils of off plan purchase - some heated debate with buyers too for dampening their enthusiasm - I was known locally as the harbinger of doom and hated by local realtors with a passion and on two occasions threatening behaviour - although I must say that I consider myself to have been naive when the full extent of the problem became apparent.

I concur fully with the analogy about 1960s Germany - similar things were said about German decline when the wall came down, but as they had demonstrated twice before they are extremely self sufficient when it comes to recovery (post war US funding notwithstanding). I am a huge admirer of German focus on pragmatism over desire and I made the point to the Prof last night that if they have to they will find other markets to sell their wares. If they decide they are no longer willing to support an ailing south of Europe then they will withdraw completely and develop relationships elsewhere. 

But the point of this thread is whether mortgages will be accounted in an overseas currency and while none of us knows I believe that Spain will do what is best for Spain and its people which will be for a full return to the Peseta in the event that it happens.

One interesting snippet to come out of the conversation is that unlike most countries Spains constitution stipulates that the State supercedes the law in terms of priority. We all know that to be the reality of the situation but I had never realised it was written in the constitution. Thus the State has carte blanche to do whatever it wishes.

Sorry Jono!!

GuyT:

the question is what degree of security of the asset qualifies it as an "investment" as against speculation.

I was using the term "investment" as opposed to the common use as holiday home. I'm not even slightly concerned about using the place for a solid decade.

It will be rented out until I retire, then I'll check its value, and decide whether I want to spend a few months every year in the sun....

if its made money, good, if not then hopefully the demon inflation will have whittled away the liability I tend towards the Keynes viewpoint "in the long run.... we're dead".

"who on earth.... would want a holiday home in Spain?"

Someone who didn't pay 2007 prices, that's who.....

Someone who takes the long view, who can take advantage of dumb-ass 100% mortgage offers. (ie that's my currency risk ameliorated, except for the euro-peseta thing that we're all baffled by). Anyway the banks dumping the properites on the market at any price WILL clear the market.... Yes, there's an element of speculation, as in everything from crossing the road to buying shares!

Is it an "investment" same as a building-society nope, is it the same as Shares etc, well yes, its comparable in many ways except the CajaMurcia will be fronting me. (Thanks guys, remember to thank Mrs Merkel for keeping you afloat through your previous c**k-ups, and providing you with fresh cash to push at me.)

The villa I'm looking at was (allegedly and with kites-flying) on the market for just over 250k euros 2008. Now they looking hungrily at my offers of around 90k euro, and I reckon I can turn the screw a bit more .

 "who on earth.... would want a holiday home in Spain?"