"House Prices Will Bottom Out Early Next Year"

The global credit rating agency, Fitch Ratings, has predicted that the price of housing in Spain will finally bottom out at the beginning of 2015, in a real estate market marked by high rates of unemployment and difficulties in obtaining financing.

The agency highlighted the fact that the Spanish economy is growing once again and that unemployment is falling, which in the long run will help the prices.

However, they emphasised that the market still has a “large surplus” of housing and that the demand is limited by the “high unemployment and the cost of credit” as well as “reduced real incomes”.

Fitch also added that the fall in mortgage transactions, of 80% compared to their 2007 levels, means that these limitations have not yet been fully reflected in the prices, although the latest data from the National Statistics Institute for March points to a small increase year-on-year, of 2%, in residential mortgages, their first rise in nearly four years.

In this regard, Fitch believes that when house prices reach their lowest point, which they do not expect will happen before the end of the year, it is likely that they will have fallen by 40% in nominal terms since their peaks. In their report, the agency emphasise that housing prices in the most affected peripheral countries of the eurozone are starting to recover, albeit at different rates.

Thus, according to the agency, in the Irish market housing prices have reached their lowest point, in the Portuguese market they have stabilised but remain fragile, and in the Spanish market prices are likely to reach their nadir at the start of next year. Meanwhile, in the Italian and Greek markets, whose economic situation was not so directly linked to real estate, prices continue to fall but their economies are starting to show signs of recovery, and the housing markets are likely to follow.

A few points of interest here. 

Firstly so called experts (often estate agents) and a few property websites have been calling the bottom of the market for 5 years or more and still got it wrong, those who believed their hype would have seriously lost money by now.

The Irish and Portuguese property markets are so much smaller than Spain's so not good comparisons really.

Spain is reputed to still have 1.7 million properties for sale according to R R Acuna and Associates in Madrid and they claim it will be the year 2022 when this surplus is absorbed keeping the market in the doldrums further. Then of course there are 1000's of people trapped in negative equity who cannot even market their homes yet and these will enter the market if prices pick up, the upshot of which will delay any real recovery.

Spain still has exorbitant transaction costs which it needs to lower, for example anyone wishing to buy and sell later would need to see approx. 20% increase just to break even, when will Spanish property prices rise 20%, probably a long way off?

So Buyer Beware especially with websites who constantly mislead the unwary, and agents who say similar!!!

"House Prices Will Bottom Out Early Next Year”

Haven’t I heard that before?

Oh yes in was in 2007, and again in 2008 and ........  

I guess some year they will eventually get it right.

John, perhaps you missed it, but the message came from Fitch, who are a highly respected organisation.  The previous messages I saw were of a decidely lower calibre - largely those with a vested interest.

No-one really knows and of course there are other factors that might still change matters, but it seems like a good call to me, so much so that I'm currently buying an investment property.

Good to know it’s you. Congratulations,  I had heard someone was buying a property in Spain !!

(Acer this is meant as 'tongue-in-cheek')

Thanks for your congratulations - but be careful with your tongue in cheek, vulnerable to being bitten in error!

In truth I'm probably not best equipped to give good advice on investments as the funds for the purchase come from selling my Tesco shares.

But you've gotta reckon that property prices cannot go down much further and when sales starting happening the best properties will undoubtedly go first.  So fingers crossed.

Good luck Acer, as you say prices cannot go much lower.  Those who had to sell have either done so or walked away, so those that are left can probably wait.

My son tried to sell a ‘holiday home’ a couple of years ago. He gave up and for the past two years a friend has been living in the property rent free,  to help him as he has an extremely low income, and also he is care taking.

Good luck to anyone buying in Spain now, for lifestyle I can understand it but not for investment surely? As I said before, a 20% increase is needed just to break even on most properties other than niche developments. What if R R Acuna are right and prices bottom out in 2022 where's the investment there? To live in Spain as a long term project it's ok. Good luck Acer with your investment.

I'm willing to bet that having halved already, Tesco shares will double in price long before Spanish property does. Tesco the largest UK supermarket chain having current problems will have to sort it's problems out starting this year, at their current price there's little risk.

Ummm...Tesco shares up 2.46% so far this morning, perhaps another mistake in the making...

Have you sold your Tesco shares yet Acer? If not, I'm sure there will be volatility in them for some while, but pretty sure they will beat Spanish property as an investment. Example, stamp duty on shares is half a percent on purchase, transaction costs are nothing like Spanish property costs. So, unless you are in profit I'd be inclined to hang on for a while, rent in Spain if necessary, the market is not going to take off anytime soon if at all.

Wish you luck whatever your decision.

Scambuster - although I had earmarked them for sale I have not actually given instructions yet as I was waiting agreement of the date to visit the notary etc. But this afternoon I had a rambling email in Spanish from the vendor, the gist is that I've been gazumped!!!  Extremely annoying as it was a cracking deal and I have no recourse.  A lot of time wasted.

I thought I would share this - if there was any proof required that the property market is stirring, it's when gazumping occurs.  Those who have a rigid perception that the market will not improve until 2022, or something similarly daft, will say this is a "one off incident".  But I reckon there may be some value in Fitch's predictions.

Normally have a lot of time for Fitch, however in this case they wrote the article before the recent IMF prediction that the Eurozone could slip back into recession, world events affect all markets and if this happened it would affect Spanish outlook too.

Sometimes it seems a toss up as to who you believe, but if I recall the IMF were rather a lot off the mark with their dire forecast for the UK economy a couple of years ago.  I reckon they try and err on the doom and gloom side, so they can smirk more if a country has to knock on their door for help.  Whereas Fitch have no ulterior motives.

But it does all seem very shaky right now and perhaps we'll all be wrong if Ebola decimates the planet - they'll be giving property away.

I can't speak for other nationalities, but brits buy propery in the UK with great care and attention placed on both legalities and surveyors reports. However many 'cash' purchases made in Spain appear to have been made in a 'San Miguel' moment, ruthless developers have discovered that they can sell anything to anyone who has the intentention of 'living the dream'.

Model 20 has put paid to any possibility of us buying in Spain, greed and fear have become one in relation to extorting taxes from gullible brits, Spain's economy was doing very well from the money spent in it by the brits, now they intend to chase us beyond our deaths, I suppose that some are stupid enough to let them, but many that I meet are now doing the six months thing, which costs Spain millions of euros in lost revenue.

Spain's recession may very well 'bottom' shortly, however it's bottom is situated closer to it's ankles than many other nation's economies.     

Very funny analogy crookesy especially of Spanish bottom near it's ankles, and very apt description of 'San Miguel' moments, Spain was full of scammers in the heady boom days much to the regret of 1000's of Brits. I lost count of sharp gelled hair wide boys and girls who took innocent victims round to view properties in the sun, bought them lunch, told them 'you cannot lose', 'you can flip your properties before completion' etc then when they signed them up for not one property but managed to talk them into two or more, the wide sales people were celebrating with bubbly in the bars of Puerto Banus as if it would ever end.

As for the recession bottoming out soon, over 25 million unemployed, some 1.72 million  properties for sale still, over 3 million empty properties we're told all over Spain, 1000's in negative equity, bad banks' portfolios yet offering high LTV mortgages having hiked the prices to obtain the loans, world events like Eurozone recession worries, Ebola, Isis also moving into North Africa, even their own Catalonia unrest, poor sterling/euro exchange rate for Brits compared to what once was, speeding tickets (I jest there) Spain's money worries are far from over.

The good thing is that most people are wised up to the scams in Spain now and hopefully it will be harder to dupe people into panic buys.

Is property a better investment than shares?

Now if we could actually see the future, we wouldn't be speculating abouit it here. So let everybody entertain their own pet theory. In the short term, the stock market often out-performs the property market by huge margins. I've both made and lost big sums on the stock market so maybe not the right person to give advice, although I do think I've learnt from my worst mistakes and have change my approach accordingly. In my view one advantage of stocks is their granularity. You can sell some stocks when you need money but you can't sell part of your house. You can also sell and buy stocks at any moment whereas selling or buying a property means waiting until a suitable buyer or seller turns up.

And in the long term? Well, past performance is no guarantee of future gains. So basically anything is possible.

In my area I can see an influx of Russian property buyers and the latest trend is also Chinese buyers. So these may be causing a nadir in prices, without that meaning there is any real economic recovery behind it. Many of these investors are not just buying properties for their own use but buying by the dozen. Are they onto something, or are they fools? Only time will tell.

I think the market could have bottomed out as people can't/won't go any lower. The properties just don't sell in any significant number. The stats are twisted because a lot listed as sales are banks moving them around to investment companies, often subsidiaries of their own business.

i note that sales were very low in July/August, the worst figures for five years. Says it all. Of course it could just be a blip, we shall see. Not seen any of the Agent websites reporting this. I think the Russians, Chinese, Belgians are coming are myths put about by Agents. They have been talking the talk about the Russians for 10 years.

Saw there was one of those Place in the Sun events in the UK last week. Had a look at the list of Agents plying their wares. Some dubious ones listed!

Scambuster, I never gave ebola a thought, but do recall a North African Dhow type boad being crushed in a Tenerife harbour a few years ago, apparently some of the guys were drowned during their trip. I wager that the survivors were already kitted out with a plethora of bags, sunglasseses etc, had any of them had the ebola virus it could have spread through the island like wildfire.  

On a different tact, a business collegue was in the process of negotiating the purchase of land and build of a luxury villa in La Fustera many years ago. I suggested that he place it within the wrapper of a UK Ltd company, many brain dead UK Spanish property owners tell me that this is impossible, illegal and a stupid idea, strange how well it works for someone with property and investment income in the UK. 

The Chinese are very real. They've picked up plenty of places in my area over the last months.