Downturn in price

And in reply to your last point Roberto with regards to the neighbour who is offering his for sale at 40% more than you paid for yours, this is a problem happening a lot. I have several owners who cannot sell - because bank valuations have lowered, their outstanding mortgage is effectively the valuation. But no one wants to pay that and is offering around 70-80% of bank valuation. This means the property will not sell - unless someone comes along, falls in love with it and doesnt care what they pay.

Unfotunately this will not happen in 99% of cases and so what will happen to many is the bank will reposess and sit on it.

Prices for sales are made up of what people owe and what they want to get - and in a falling market this is not possible as its only worth what someone else is prepared to pay for it!

Last night was a real sight to see. The FED has lost control of the US economy and the dollar fell thru the floor against all major currencies, including the weak pound. Oil hit 103$ a bbl, gold just shy of $1000 dollars an ounce. Food, energy and commodities are sky rocketing. Unemployment has risen to 5 yr highs and governent and personal debt is at all time EVER record highs.

The US is trying to rescue the economy by printing more and more money, but the dollar is just devalueing and the man in the street is paying the price. Houseing continues to fall in the US with no end in sight.

Keep your eyes on gold and oil - they tell the true story.

More

I have wondered this a 1000 times and I have come to the conclusion that people buy or rather are sold not just a property but a dream. The ads are the giveaway, young good looking family, two kids with blonde hair, everyone smileing along the beach. Its as if somehow its an escape from dull reality of life. With resales you get none of that, just a crappy two bed apartment, already starting to lose its shine, with the plaster cracks showing and the cheap interior finishes not quite so shiny.

That and criminal rental guarantee schemes which are just a small discount of cash, but promise a business case that simply is not there.

Anyone seen TJ? I'm missing the economic reports

Anyway, I thought of posting on the Happy Spain Stories thread, but since I posted previously here about the property I had for sale, and the identical one that has come on the market for 40% more than I paid a year ago, I thought it would be more relevant on this thread - some good news amongst all the doom & gloom (for me anyway!). I finally sold .

Admittedly it's been a long time on the market, but at least it proves that some property is still selling. Furthermore, I didn't have to drop the price by 50%! In fact, it sold for about 10% less than the original asking price, but that price included agent's fees of up to 5%, and I actually sold it direct (to Spanish buyers) without an agent involved, so I came out with only 5% less than if I had sold at the full asking price through an agent.

I bought the property to renovate and resell, and had hoped (expected) to turn it around a lot quicker, but even after factoring in purchase costs and renovation expenses etc., I have come out about 15% better off, so all told, a success.

However, having said that, even around here now there's clear signs that prices are falling, and it certainly isn't getting any easier to sell. The problem is, not knowing how far prices will drop. So, TJ, do I look for a bargain property, or should I seek out an oil field or gold mine? One thing's for sure - my bank isn't offering any incentives, and I don't even know if my money is safe there, do I?

Roberto

Well done on your house sale, I think you will realise soon that you had a narrow escape - look at the pound against the euro! Imagine what that is going to do to British buyers, they will soon be rarer than rocking horse poo.

Pls see the credit thread for further updates. I have been rather busy of late, but the credit crunch gets worse by the day. If you look back to the very first post on the thread you will see I mentioned Bear Stearns as a starter of teh crunch. Over the w/e they were sold for 2$ a share to a major rival, having traded a 70$ before. They basically went bust.

I am now beggining to think that property in Spain will fall further than 50% and many will be unable to sell at any price by the ned of the year. I fully expect a major Spanish developer and bank to go bust shortly, now that the election is out the way. Sorry to be so glum, but thats teh way it is. I notice the media is now starting to talk depression not just recession and that 1929 is being used a fair bit.

TJ, good to see you back, even if you depress the h*ll out of me!

Just to reiterate, I sold to Spaniards (in fact, I've never sold to non-Spanish), so the Pound-euro thing is irrelevant in this case.

Any chance of you letting us know which Spanish bank to avoid? And what about HBOS, mentioned in your other post? How worried should we be? (guess what? Yep, I'm with Halifax in the UK! I'm really starting to wish I'd bought more bling on that trip to Dubai).

Roberto

The fact that you sold to Spanish is not irrelevant as everyone has acknowledged it was teh Brits that drove property prices, without Brits, prices will have to go to Spanish wages levels which is a long long way down. For you its ok, but in teh future it will be very relevant.

I don't know which bank is at risk, but HBOS was down 15% today. I'm a HBOS bank customer and I have tonight removed all my money as I don't fancy queing in teh cold outside a branch ala Northern Rock.

The pound will continue to fall against the euro as the BOE is forced to cut rates to save the houseing market, which won't work anyway, but won't stop them trying. The eurozone will also be forced to cut soon as their exports are getting crippled by the high exchange rate.

Do yourself a big favour and stay away from property unless its in asia, say HK or somewhere like that, maybe Singapore.

I understand how the exchange rate will efectively kill off any remaining interest that British buyers may have had in Spanish property. All I meant was, that for Spanish buyers in Spain, the value of the euro against the Pound doesn't figure in their decision making.  I know for certain it was of no concern to my buyers.

I also understand (I think) that the point you are making is that prices became unnaturally inflated primarily as a result of the influx of foreign (in particular British) money, and with that influence gone, prices will inevitably return to more natural levels. But is this really the main reason prices rose so much? Brits were not the only ones buying off-plan by the bucket load. It would be interesting to know exactly what percentage of property buyers over the last, say, 5 years, were foreign (i.e. non-Spanish). I honestly have no idea, but I'd hazard a guess that, as a percentage of property buyers throughout the whole of Spain, foreign buyers probably represented a pretty small amount? I'm quite sure somebody will come up with a quote on this, but I'll prempt it by saying that I'm a statistic-sceptic. I'm well aware that there are members here who have bought on developments where 90% or more of owners are Brits, but, for example, in my community, which is about 5 years old now, less than 2% of owners are non-Spanish. And by the way, only around half the properties are used as main residences, the rest used as holiday or second homes.

The stuff about the exchange rate will be a big worry to those committed to completing on properties here. Makes me wonder, though, should I think about moving my funds back to the UK (not to HBOS, obviously) or will it make no difference in the long run? UK property a no-no, as well, then? What the heck should I do? You're making me feel panicky, and I should be feeling happy tonight.  Gonna pour another J&B now.

Roberto

I'm sorry I have made you feel panicky, I myself have been doing alot of that lately. However I think its better to have your head out of the sand rather than in it, altho its clear many people would not agree.

I'm not being doom amd gloom for fun, I'm trying my best to warn people of what is ahead, altho when I set out here I was not naieve enough to think that it would be received that well. But to be fair to me I have called things since the beginning of the thread about spot on.

I'm sure you are right about the Spanish influence, the fact is that the global property bubble was caught by many countries and many nationalities, the common ingredient however was always the same - cheap and easy credit. Now thats dissapearing faster than a rat down a pipe, prices have to adjust regardless of Brits or no Brits.

However i still think Brits were a big component in the Spain boom, as property originally "seemed" cheap to them, and they were able to bid up property useing the power of money from their own homes - oh how they are going to regret that! But as you say it would have happened anyway, as the Spanish were quite capable to catching the speculation bug themselves, altho maybe it would have taken longer and prices not reached quite the frenzy that they did in coastal and tourist areas.

Roberto - its clear that you are only comfortable with property as an investment, so maybe its right that you stick with this asset class, but if you are not prepared to wait, then you need to be extreemly picky. If for example you could find a flat in the UK that covered its self in terms of rental income and a little spare for maintenance, then as you say even if it declines in value in the short term you still have a relatively safe investment for the long term. But you would need to do your homework and buy very well in terms of rental demand and supply of similar flats. At the moment I think you would be very lucky to find somewhere to fit the bill.

However as prices fall, its good news for professionals as property once again becomes a realistic proposition. The ones who need to fret are the overleveraged BTL brigade who jumped on the bandwagon in the last few years. I think most professionals have been dumping property over the last few years and are eager for prices to adjust as they recognise its good news. The only thing wrong with property in the UK is its overvalued.

In Spain its more difficult as there are other factors to consider, namely massive oversupply and a mirage economy built largely on debt, also little limitations on spacea nd new build potential. Anyone who thinks property will recover in under a decade in Spain is living in dream land.

My advice to you is to sit on your hands and be patient. By trying to do something you have no experience in you are likely to do more harm than good. Get out of debt and take it easy.

Just a couple of observations from someone who claims no knowledge of investments and financial wheeling and dealing.

First I note that the HBOS thing was manufactured by greedy dealers working what can only be described as a digusting scam.

Secondly, as I see it the difference between property in Spain and the UK is that there is a housing shortage in the UK whereas in Spain there is a glut  of houses.

Acapulco, I also checked out the HBoS story, but who knows? And anyway, even if it was just a nasty rumour spread by a fraudulent trader who made £100 million off the back of it (that's the job for me!) it's scary that it can have such a devastating effect on the markets in such jittery times.

I also made that same observation about the housing shortage in the UK a while back (can't find where, this thread is a long one now!) I seem to remember that TJ conceded that, whilst that may be true to some extent, overall the WW credit crunch and global recession means that even UK property is feeling the pinch, and prices will fall regardless. In fact, there's plenty of evidence that this is happening, and TJ also makes a good point here about the rental demand & supply situation. An aquaintance recently rented an apartment in Glasgow city centre, and says he was literally spoilt for choice. £150k apartments could be rented for around £300 pm. I keep an eye on Liverpool property (being Scouse by marriage), and have noticed recently that in certain dockside developments that I was tempted by (but didn't succumb) a year or so ago, you can now have your pick of apartments, mostly for less than the odd one or two that were available last year were going for. Mmmm. Some shortage!

TJ, it's not really a case of property being the only investment I'm comfortable with. But it's fair to say I've learnt from personal experience a fair bit about buying and selling in Spain, and through a bit of good luck and a lot of caution, have been reasonably successful. I don't know much about anything else (investment wise, anyway!), and am not keen to expose myself to risk. I never liked the idea of financing any property based on possible rental income, so was never tempted to buy 5 apartments off-plan etc etc....I am perhaps over cautious, which means whilst I am never going to be Donald Trump, I'm also not up the creek without a paddle!

I like your advice. I'm happy to say I'm not in debt (and never have been) and taking it easy is another thing I'm pretty good at.  . But sitting on my hands being patient is also making me a little nervous, since you have rightly pointed out that all that dosh under my matress is depreciating rapidly, and I can't even trust my bank to look after it for me.

I think I'd like to sell  my home, buy a motorhome, and take off for somewhere with a perfect climate and dirt cheap beer, and then sit on my hands and wait.........

Roberto

"For I am a bear of very little brain, and long words bother me" Winnie the Pooh

I think you are smarter than the average bear.

Thanks for that, TJ, makes me feel better!

I suspect that I am a touch older than you guys!

But, whilst this current credit crunch is not good and there may be some way to go before it is all sorted....it is not in my view as bad as the 70's banking, property crash and 3 day working week .....at the moment

Mainly . I think, because interest rates are relatively low and employment in EU is still OK......inflation also under relative control

Looking back, I would have liked to have bought in Spain then!

If you are not overgeared, and have bought with a touch of common sense in UK and EU then ,,,,,, what is the problem!!!!

Now in UK there have been ' punters' who have gone in to the inner city buy to let flats......if you can afford to stay in then the 'odds' ...[ and you were punters!!]  will eventually move in your favour

But for those who can not stay the pace....there are lots of 'professional dealers' just waiting with funds to ' cherry pick'!!!

Those who say ' everywhere in EU ' is overpriced are not completely wrong....but it is only the poor locations in all EU  which will turn out to be a bad investment

And the bad buys in UK!

I would rather have my money in Spain and other established EU countries, than in the so called ' emerging market'

Imagine how you would feel if you are about to complete a purchase of an apartment in a Bulgaria Ski Resort [ where to be blunt everyone ,except complete beginners , can ski it all in less than a day  ] or Egypt .....and all the others.... and need finance!!! .............equity release perhaps from Halifax!!!

Not a nice Easter!

So even with the poor exchange rate today, there is no reason not to plan a purchase in Spain. provided you are selective and do it for the right reasons

There are still some good buys for full/ part time living and holiday purpose from Polaris World from 119.800  [ or a golf suite 89.000 €] to a nice new development in Almeria from 99.900 € for a 2 bed apartment

Less than the price of a decent caravan in UK but with the sun!