IS THE BOTTOM IN SIGHT FOR SPAIN'S PROPERTY MARKET?

The last housing bubble burst in 1989 and prices did not begin their upturn until 1995. Thats 6 years. Todays bubble burst in 2007, so using the same figure would bring us to 2013, BUT, this is a worldwide recession and goes much deeper than just housing. I predict that house prices worldwide, not just spain, will continue to fall and we will not see an upturn until the begining of the next decade.

The boom is well and truely  over, and only property agents still believe we are anywhere near a bottom. Spains housing is vastly overpriced and will fall much deeper than current prices before an upturn occurs.

I am a FTSE trader and going by all previous downturns, the stock market will lead us out of the recession, BUT, the "bottom" will only be defined as we leave it behind. You cannot call it before hand.

Depressing sod aren't I ?

Eva2008,

Your post reflects the conversation that my husband and I had this morning over our morning cuppa!  Having seen and survived two previous recessions, we concluded that this one is cutting so deep and globally, that in our opinion, it is going to take a very, very long time to pick up. Indeed we do not think it will ever return to "normal" as we have been used to of the latter years. Depressing? VERY!  Especially as we are coming to retirement years. Our saving grace is we have no young family to support or a mortgage.

Eva/Tish

I think you are both right. 

Agents have to be positive as it's their living, but despite trying to talk things up, it all rings a bit hollow to most I feel.  In the meantime, Spain has a chance to put it's house in order while everywhere is being hit hard by the downturn. When things do turn around the 'hot' countries that people feel confident with when it comes to buying, will probably fair better than those who have a reputation of poor regulation/justice etc.  Will Spain act on it's failing reputation, or will it just carry on ignoring critisism, and blaming the victims?

IMO, Spain will take much longer than the UK to see an upturn in the property sector. The UK is a small island with not enough housing to supply demand. Spain on the other hand has a glut of empty property, overpriced because developers have mortgages on them at inflated prices and they cannot afford to sell for a lot less....and  very very few buyers.

As you say Goodstich, until  Spain can put it's house in order re justice and implementing their own laws, who is going to trust the system?

Edited for typo errors!
 

This message was last edited by Tish on 3/28/2009.

Tish

yes, only this morning on the news, they said due to the slowdown of building in the UK, there will be a large shortfall in a couple of years.  As for the situation with Spains developer mortgages, what the hell's going to happen?  Hard to see property prices going up at all, that alone enough for developers to sell off stock to pay back the banks, but if they don't, I guess more will go bust, but where does that leave the banks?  Looks to me like sooner or later massive losses must be accepted, but 'till then there's just a 'head in the sand' denial going on?.......or is it all part of a bigger plan i'm missing?

where's TJ been, I thought this would have been right up his alley. For interested in reading the tea leaves I highly recommend Edward Hugh's Spain Economy watch, while the coast is a bit of a different beast due to the fact that it's a vacation area, it still gives you a good idea where economy is heading. Needless to say it's usually bad news.

Anyways here's a relevant quote

The average interest rate charged by Spanish banks for new mortgages in January 2009 was 5.64%, meaning that the average cost of a new mortgage had gone up by 10.2% over January 2008 (when the rate was 5.1%), and by 1.1% when compared with December 2008. Meanwhile the Euribor reference rate looks set to close this month at all time record lows of 1.91%. In January - the last month for which we have data on mortgage lending - the Euribor rate was 2.27%.

The reasons lying behind this upward movement in Spanish mortgages are twofold. On the one hand the Spanish banks are having increasing difficulty raising finance due to their perceived risk level, and on the other they themselves have have been forced to raise the risk premium they charge to clients due to the rising levels of non performing mortgages they have on their books.

Basically what this means is that the ECB policy isn't working in Spain, and that despite the massive quantities of liquidity provided, the monetary conditions continue to tighten, and doubly so give that the real value of the rates charged (ie the inflation adjusted value) keeps rising automatically as inflation falls.


Mortgage lending in Spain more than halved in January while the number of homes started in the fourth quarter dropped an annualy 62 percent. The 51.7 percent year on year fall in mortgage lending for urban dwellings was the steepest in 12 straight months of decline.

He also has a nice chart showing how mortgage rates have hit record highs inspite of the fact the eurobar has hit lifetime lows.

link here

Two Graphs that say it all

http://spaineconomy.blogspot.com/2009/03/two-graphs-that-tell-it-all-on-spain.html

So in other words, you're screwed if you want to borrow, and you're screwed if you want to save? Terrific. What a mess!

Roberto

what a mess indeed, though not suprising as they will do anything i guess to try and claw money back, though almost certain to backfire I would think?

Eh?

You've lost me too,  Irene!

roberto has put a post on this site and a new motor home was on show and if you watch it  all out under the motor home there is a sports car check it out he put it on today or can roberto re put the post on again please thanks irene

hi go down to 27 march and watch the video irene

hopefully these house prices will soon be edging up as we all hope i think

No chance of edging up in 2009..I think that is the general view

Will they drop, who knows but  I suspect that those who have to sell have by now come to terms with the price they have to ask in 2009

But distressed sales do not reflect the market  and in the main are aimed at clearing the mortgage debt and most certainly produce the best deals-eg- 2 bed duplex in Almeria owner paid circa 185.000 € needs to get 130.000 € to clear debt, facing the right way and in a small gated compex

And there are many more!    

If you are bringing the money back to UK then just now you have a very favourable exchange rate [ for most people]..so can accept less in € and if buying again in UK ....you are in a buyers market.....but with limited stock

If you do not have to sell, then wait...perhaps if you do not use it all year ,work hard at letting 

If you are a life syle buyer, again this may be a good oportunity to find what you want...search for a general view then go to Spain.....sellers of all kinds are more flexible if they can see the white of your eyes!!!.....and you are a serious buyers!

All agents have discounted properties and if that is not shown on the web site...you should take the view that ' offers are the norm today'!!!...if you see an example of what you like

A web search is just a starter......it's on the ground that you find the best buys

Trying to sell on your own is just as difficult as in UK  but no reason not to give it a go......but do face up to reality

How long will you have to wait for the market to get back to a bit of normality?

Nothing is going to happen in 2009

2010 odds in favour of ' standing still'

Sometime 2011 spring shoots perhaps

Next boom/ bust circa 10 years but in the meantime the property market will move at varying rates and all types of buyers will find what they are looking for at a price they can afford

But at times like this it is, I'm afraid ,  the urgent seller who suffers and those who are able to buy benefit

I agree 2011 may be the turnaround year, who knows though it may turn around sooner than we think.

www.directpropertysalesinternational.co.uk/

I don't think a huge crash can be ruled out at this stage. There is a huge amount of money tied up in a huge amount of property. With the exchange rate, the recession and all the now known nightmares many have had with buying in Spain, I think much of it would have to be virtually given away. Who knows?

lol at tish.  i was confused as well

In Spain, the fallout from the country’s property bubble is really starting to hurt. The government has had to bail out regional lender Caja Castilla, to the tune of £2.8bn. It also had to guarantee nearly £9bn-worth of loans.

Spanish banks have stood up pretty well so far because tough regulations meant they didn’t get involved in sub-prime. But with the economy collapsing around them, there’s only so much pain even the strongest lenders can take.

Homes are still massively overvalued at 7.2 times family earnings, according to Credit Suisse. Unemployment is already nearly 15%, and is expected to rise to nearly 20% next year. This won’t be the last Spanish bank to be bailed out.

(source: MoneyMorning)

Yes Roberto that is only the start  for the spanish banks, as europe was lagging behind us (as we lagged behind america)the domino effect will now hit spain for the next 12-18 months. will spain without the construction industry and falling tourist income have suffient funds to bail them all out? l dont think so.Pat.