Upturn in Spanish property sales?

This was a good thread but seems to have descended into something between Grange Hill and The Bash Street Kids.

True, but often creates a smile in the process.  No mean feat given UK weather and darkness, although I see from the media that Spain has had some heavy weather recently.

I've also been learning a lot about the perceptions - and statistical data - surrounding the current state and projections of Spanish property sales.

Most importantly, the overwhelming feedback to rent not buy.  As it seems to me.  Having said that, those that choose a better way of life and are living in Spain full-time are liberated from the economics of all this, as a home is a home primarily, not an investment.  ¡Salud!

What I'd really find interesting is how much does one of these €40K repo sales actually cost to run per annum as a holiday home, and if the repo purchase price will be used if you were to sell it, or would a previous higher valuation be used? You would have had to pay the normal exhorbitant purchase costs and can look forward to even higher costs if/when you sell. What with Spanish inheritance tax being payable on first death, if the property is in joint names, and a further charge being due on second death, is it all worth the trouble, just for a holiday home?

We recieve a modest £10K per annum net from our investments, however that would fund 20 weeks off peak rental in a luxury 2 bed, beach front duplex in our favoured resort, inclusive of all expenses. Now I may be missing the point here, but if we were to do this we would still retain our capital and only have to pay for our food, drink and transport costs when in Spain, as we would in the UK, why would we wish to buy and have all the hassle involved in ownership? 

It really depends on your view of future property prices.  The first property I bought in the uk was £265k.  That property is now (25 years later) on sale for £1.6m.  The fact is that over your lifetime you will pay for a property whether you buy or rent.  Investing in a second property can be either for capital appreciation or rental income or both or personal pleasure.  In a flat or declining market renting is the obvious choice.  In a rising market buying will be better. So what part of the cycle is the current Spanish market in? Falling?  Flat? Rising?

Purchase/Sales costs in Spain for non residents are higher than the UK.  Inheritance can be largely planned out of the equation.  Second home annual costs are LOWER in Spain than in the UK.

As with any investment timing plays a big factor as is the period of time you hold the investment and the timing of your exit.  On a relative basis the Spanish prpoperty market is cheap.  It went down too slowly so will take some time to rise.  But.  The flat period is probably ending in many areas and a rising market is more likely than any other scenario.  

Totally agree Perrypower, including the fact you need to decide your reasons for making the purchase.  I was interested to see your "personal pleasure" comment, but some seek to do so without having done the prior hard graft, to really justify self indulgence.

The prices of buying and running a place in Spain are generally far less than Spain.  You pay 8% of the property price as a purchase tax, but that's the only serious, perhaps unexpected, financial hit.  The solcitors and notary costs are quite modest.  If you buy "second hand" the house/flat contents are generally included within the sale as a freebie and saving a lot of hassle in making the move.  The equivalent of our Council tax is a fraction of the cost - mine is only 20% of the UK cost and living costs are a lot cheaper.

There's been a lot of people repeating the advice that it's good to rent first in Spain, before you buy.  That may have been good advice a few years ago, but IMHO I'm not so convinced now.  It depends.  If you know the area, what you want and find a property that fits you may be better off taking the plunge.  Good property is slowly moving and if you take a 6 or 12 month lease you may pay more later and have less choice.

Members of the "doom and gloom" club will say this is nonsense as there is an absolute glut of properties, but a high proportion of these are boring boxes in locations that may not suit your needs.

Also renting has it's hassles - there is little meaningful regulation in Spain and a wildly different culture - the Spanish don't share our inherent need to see fair play.  The letting agent will invariably side with the landlord as it's in his best interests to do so.  Living in rented accomodation may be more restricted than you expect and obtaining the return of your deposit when you vacate the flat may a lot more difficult than you expect.  You are relying on purely on trust which can be misplaced.

Just a couple of points:-

Irrespective of none qualified opinions of the price we would have to pay for a beach front luxury duplex in our favoured resort, the cost would be circa €250K, there would be a service charge of circa €2K p'a to include care of the landscaped gardens and lawns, use of the three pools (2 heated, one indoor), the sauna, steam room, hot tub, gymnasium, snooker room and tennis courts. I think that the local rate payable is circa €500 p/a and exterior painting every 2 years would be circa €1K. As I can rent an identical property for £500 p/w with all the goodies thrown in, I can't see the point in buying.

Agree with Hep.

I think it very much depends on the price of the property and location. Recently we spent close on a year living in Sotogrande whilst the Co I worked for relocated the research lab from the South of France (where I had lived and worked for 30-years) back to Switzerland. We took the opportunity to take a long service break. I don't know what the 6-bed villa would have cost to buy, guess seven figures, but the cost of rental direct from the owner was not a lot. The property is still on Savilles site for sale.

Contrast that with our experience of the UK market. I have the good fortune to be able to continue research work and am working closely with a number of teams in Oxford. To make life easier we purchased a 6-bed house in North Oxford about 12-months ago. On a recent valuation we are led to believe that it has inceased in value by some 10%. Who knows what it's really worth as it's not on the market, but in contrast to the market we know in La Manga and Soto the market in Oxford continues to rise.

In Spain I would recommend rent using the income you can generate from a property in the UK.

Rossetti

I cannot argue with Hep or Rossetti, but my experience is different.  Sotgrande is arguably the most exclusive development in Spain and no doubt has costs to match. 

I pay €70 per month for the community charge - about £650 pa - this includes maintemce of immaculate gardens, swimming pools and a tennis court as well as cleaning of all the communal areas etc. 

The amount has been unchanged for several years and to me is money well spent.  I have enjoyed gardening in Spain, but after a while the novelty wears off - as does all the other cleaning.  Now I'll happily pay €70 a month.

It also depends on the actual building and the community.  Obviously if you buy an older building that needs external and internal redecoration the communal costs will be higher.  Equally, if it's run by an external management company there are more chances to get rooked!  But this happens big time in the UK also where corruption is also rife.  However if the development is run by the community it is very different.  You get value for money.

At the risk of injecting speculation rather than the expertise previously outlined: I simply don't believe that the global economy has seen the last big shock, and believe that another one is likely. Next time around, there are far less levers that governments can pull, given interest rates are rock bottom and quantative easing has been maxed out.  If so, then all markets - including property - would be adversely affected.  Therefore, it's impossible to determine the medium term trend.

Emphasing that it's my perception only, based on my reading of the financial columns, and that others have extremely interesting data showing trends in the here and now.

I'd love to own a bolt hole in Spain, but given my perception, will rent.

AND...if you decide to buy in Spain and you want/need to rent it out during the winter months to pay for the running costs (or even make a small profit?)...know your market.  A winter let is more likely to be required by a retired single person or couple who, for obvious reasons, can remain in Spain for up to six months at a stretch.  Ask yourself, is my place equipped for this?  We have been looking for just such a rental, spending 10 to 28 days in various properties in different locations during our research.  We are now residing in our third property since the end of September (not including the two nights spent in Hotels) and not one of them will be on our list as a place to return to for any length of time.  Why?  We have yet to spend a night in a comfortable bed.  Each place we have spent time in has either very cheap or very old mattresses and pillows on the beds and, as retirees in our 60s, our backs are not as good as they were in our 20s/30s/40s. Why spend thousands on a second property you want to rent out and then equip it with cheap, uncomfortable mattresses and pillows or, worse stil, keep the old ones that have been in the place since it was built?  Further...looking to spend several months in Spain over the winter period, we won't be eating out every day, as folks on a short holiday might, and we like to cook for ourselves.  So far, we have bought a grater, a small pan, a tea towel, a cafetier, a bread knife, egg cups and some glasses.  The place we're in at the moment has only one set of sheets per bed and we have to wash and dry them in one go so we can put them back on the bed for the night.  What is the cost of an extra set of sheets for a couple of beds?  If you can afford to buy a second home in Spain...surely you can afford to equip it properly for the prospective renters you are hoping to attract?

if another global financial shock is on the way. I'd rather have my money in bricks and mortar than in a bank where it's not even paper these days but numbers on an electronic print out.

None of the "better to rent" advocates have given any meaningful reply to the pitfalls of renting in Spain. 

There is no standard rental agreement - in the UK we have the "AST" Assured Shorthold Tenancy.  The wording can vary slightly but it's fair and readable - what is there in Spain?!

The deposit has by law to be held by an acreditted independent body in the UK - in Spain it goes to the landlord!

In the UK there are tough requirements on landlords to behave reasonably, ensure the property is safe (electric & boiler check), comfortable (EPC's) and comply with lease requirements (in Spain there is a pretence of EPC's which tend only to be enforced against non-Spanish nationals who want to sell).

There is good legislation and a robust legal system to enforce this in the UK - in Spain you are on your own!

When the tenancy ceases in the UK the deposit is given back to the tenant unless the landlord can show good ireason that this should not happen.  The onus is on the landlord to prove their case within a tight timeframe - in Spain you are reliant on the landlord being honest and fair!  A lot see the deposit as a "bonus".

Is it wise to blissfully ignore all these differences?

We've not see the last of boom or bust, that's just the way of things, as for bricks and mortar, this is a very British attitude to safety, how would you think about the safety of say a $500K house bought in Florida in 2007 that is now struggling to sell at $200K? You would do far better with classic cars and motor cycles, I recall looking at a Brough Superior in the 1960's valued at just a few hundred pounds, you'd have to reach for circa £200K if you wanted the same bike today. The £70K individual UK bank guarantees will do for me, if I ever have more money than can be covered by all of the UK banks then I wouldn't worry one bit.  

Hep, for every poor property investment there are many many many times that number of good ones. 

Of course there will be other price corrections sometime in the future, that's the nature of the beast, but as a generalism property is a great investment.  I know some people who own big portfolios of shares, but they are no more secure and not like you can actually obtain any benefit in looking at some share certificates.  Whereas with a nice flat/building...

Is no-one going to reply to the pitfalls of renting in Spain?

Acer

When the tenancy ceases in the UK the deposit is given back to the tenant unless the landlord can show good ireason that this should not happen.  The onus is on the landlord to prove their case within a tight timeframe - in Spain you are reliant on the landlord being honest and fair!  A lot see the deposit as a "bonus".

That's why you should never pay the last month's rent in Spain (or however many months deposit you paid) because you're unlikely to ever get it back as you say.  My Spanish friends told me this is the way things are done in Spain so I was happy to follow their advice when I was renting

Nice one, Sanchez1.  When in Spain...  

bank guarentees are worth nothing if the finanacial system collapses. There isn't enough actual money to cover what people hold in bank accounts at the moment. Capitalism is a house of cards. Another meltdown will risk you losing what are only numbers in an account.

Well Chris,

I wonder what the average Spaniard make of this, there is a new tax concession that would favour us, I attempted to find the form on line but failed, I then decided to drive several miles to our closest HMRC office only to be confronted by a uniformed commissionaire who informed me that members of the public were not allowed inside the premises without an appointment. On returning home I attempted to phone them only to be informed by a recorded message that they didn't accept phone calls from members of the public and never gave me the opportunity of leaving a message.

When in the UK. 

Well john, if everyone's money suddenly disappeared, how would owning properties benefit us?

MFraser, I take your point about old mattresses and lack of spare bed sheets. However, I don't think it is unreasonable for a tenant to buy the odd small item (carrot peeler, wine opener, etc.) when, unbeknown to the landlord, perhaps, these have gone missing. Personally, I always offer to refund my tenants for any expenditure of this kind, although so far only one or two have taken up the offer. Considering the going rate for a two-bed villa for long-term winter lets (600 to 650 Euros per month inclusive of bills in my case), I don't think this is too much to ask. My son pays £550 for a week for a room in the UK, which is furnished with dated second hand furniture and carpets years out of their replace-by date.

I once had a complaint from a lady because there wasn't a sangria jug in the villa. Another one complained about not having jelly pots. What I've learnt from experience is that it is best sometimes to have the house empty in the winter, as the mid./high season rentals are enough to cover  expenses.