Tuesday, January 20, 2009

Spanish banks on another planet

I had another row with one of my lenders in Spain today. In fact, it was the same discussion, with similar responses, as I have had with several Spanish banks recently.

None of them are lending money, and if they do it is on useless terms and rates, despite the falling Euribor, and they all seem to be desperate for my clients to be depositing large amounts of savings with them !

They don't seem to understand or appreciate that most people, especially Brits these days, just don't have cash swilling around.

And they all trot out the same brainwashed shit about the situation of their banks :-

We are in a strong position
We don't have much bad debt
We won't need to merge with other banks

Bollocks, frankly.

I have been saying for years that there are too many banks and cajas in Spain, with too many branches, that sit empty all day with three or four staff scratching their backsides doing nothing.

Now that the foreign mortgage money has gone (forever?) they will soon have to realise that their overheads far outweigh the business that each branch can bring in.

And as a lot of the mortgages do turn into loans that aren't being serviced, and they can't recover all of the debt on repossession, they will find out just how deep they are in the mire.

With Spanish unemployment at 16% and possibly heading for 20%, how do the banks think that all these Spanish people are going to pay their own mortgages?

I'm sorry to say that Spain has it's head up it's own arse, and has for a long time now. They initially claimed to be unaffected by the credit-crunch, when in fact it seems we could be looking at the longest and deepest recession in Europe, right here in sunny Spain.

At least the weather's good and the beaches and sunshine are free !

Saturday, January 17, 2009

This article in the Times today. The reality of oversupply in Spain is not a new concept, just one that was overlooked when people were still buying and prices seemed to still be rising. There are many developers that are knocking 40-50% off there remaining stock, but these will eventually sell. If UK owners of Spanish property, have not joined the growing unemployment lines, then presumably they should be seeing savings in both their UK and Spanish mortgage costs. If that is the case then why would they want to try and sell their properties for a huge loss, particularly if they put 30-40% of equity into the purchase. If nothing else, Spain is still not a bad place to own a holiday home, even if the investment doesn't look so great at the moment. My advice is to switch to interest-only, lower your cost base and tough it out.

How bad is the Spanish property market?
Clouds may be gathering on the Costas but there is still smart money to be made
Ten years ago a new-build apartment near Puerto Banús would have sold in a heartbeat. Now agents struggle to shift them even after hefty reductions, such is the level of suspicion among Britons that the Spanish Costas have become property no-go areas, where your investment will fade faster than your tan. Meanwhile, buyers who bought off-plan are losing property and money as developers go bust and Spanish banks fail to honour guarantees. But where one person sees disaster another spies opportunity; which is it to be for Spain?
How bad is the property crash?
The Spanish housing market really hit the buffers in 2008, with prices falling by 8.8 per cent from their peak, in December 2007, according to Tinsa, one of the biggest appraisal companies in Spain. The slump brought values back to their June 2006 level. Homes on the Mediterranean coast suffered the biggest drop in prices, with a fall of 12.8 per cent over the 12 months to November 2008. Properties in the largest cities were also hit hard, with price falls of 8.5 per cent over the same period.
Yet the statistics look conservative compared with anecdotal evidence. Agents speak of sellers slashing prices by up to 40 per cent. Taylor Wimpey has reduced its prices by between 25per cent and 35 per cent on the Costas and in Majorca since the summer. Other developers on the Costa del Sol are even more desperate - some are accepting offers of half their original asking price as hundreds of thousands of newly built flats stand empty and unsold.
Why are house prices falling?
The property market has been struck by a double whammy of the global credit crunch and an oversupply of new homes for sale.
On the one hand, prices are falling for much the same reasons as they are in Britain: the drying-up of credit, distressed sellers failing to keep up their mortgage payments and falling consumer confidence. Barbara Wood, an agent in Spain, says that property prices have fallen faster and more sharply in this slump than in the last Spanish housing crash, of 1990-94. “In the last recession most people had bought in cash,” she says. “This time we are seeing the most unbelievable discounts in about six months because many sellers have big debts and are staring repossession in the face.”
The other factor pushing down prices is a glut of developments along the Costas and in the city suburbs.
Can it get any worse?
Andrew Hawkins, head of the international department at Chesterton, believes that the Spanish market has farther to fall. “By the end of 2009 we might see some levelling off in prices and there may be some good news in 2010.” The property consultant Aguirre Newman reports that prices need to fall by at least another 20 per cent to return to affordable levels. As for the glut, property experts quoted in the Spanish press say that oversupply could take 5-15 years to clear.
Developers and property companies are going bust. Martinsa-Fadesa and King Sturge España have gone into administration. Others are mothballing their biggest projects while renegotiating their debts.
Is there any good news?
One person's misfortune is another's good luck. While many of the unsold properties on the market are high-density cookie-cutter-type flats in out-of-the way areas with no infrastructure, some of the reductions for good properties in sought-after locations are eye-watering even given the feeble rate of sterling. Discerning buyers may find great discounts as long as they take into account that the market could fall farther still. That said, most observers believe that the Spanish property market will recover.
The weather is still good and the country is still one of the most popular holiday and retirement destinations. Get the pricing right and you could be looking at handsome returns in the medium to long term.
So where are the best bargains?
The biggest reductions are to be found along the coast. New-build is more likely to be discounted than run-down farm buildings to do up in the countryside. The latter are likely to be owned by Spanish families with no need to sell. Barbara Wood says: “I can find well-located apartments near Puerto Banús and Marbella for under €250,000 (£223,750) and would expect to be able to negotiate farther. At the other end of the market, I have seen €1 million come off the asking price of a brand-new house in La Zagaleta and a €2.2 million reduction on a seven-bedroom house, with heated pool and home cinema, near the beach at Los Monteros.”
Meanwhile, Chesterton is offering properties with hefty discounts. A two-bedroom flat at Las Encinas de los Arqueros, a development near Marbella, is for sale for €196,000, down 20 per cent from €245,000.
But is it safe to buy?
Horror stories abound of British buyers being left in the lurch. Many buyers who purchased properties off-plan are being left out of pocket because banks in Spain are refusing to honour guarantees. For the past 40 years developers have been required by law to provide a bank guarantee to enable buyers to recoup their money should the development fail to materialise. Many buyers now fear that such guarantees are worthless.
In this climate Taylor Woodrow de España has teamed up with the accreditation scheme Safe Buying Experience (SBE) on two of its developments - Cala Magrana II in Majorca and El Bosque de la Mairena on the Costa del Sol (see “bargains” above). The idea is to reassure nervous buyers that the development is being built in accordance with planning rules and regulations and that their contracts are solid. However, the scheme does not cover you should the developer go bust.

If you have a mortgage on a Spanish property and are struggling to keep up with repayments, send us an enquiry at http://www.europamortgages.com and we can help remortgage to interest only. Thanks for reading. Europa Mortgages, your best value in Spain.

Thursday, January 15, 2009

ECB meeting today

We wait with baited breath. OK, maybe not baited breath, but the ECB meet today and are widely expected to knock another half a percent off the base rate. The Euribor inter-bank rates have been falling for about 65 straight days, and is finally getting down to a more reasonable level.
"Hurrah - good news for Spanish mortgages" I hear you cry. Well, actually the Spanish banks Sdon't seem to be paying much attention to any encouragement to resume anything like normal lending. At the moment we seem to have things like :-

Quoting old or strange Euribor rates or averages, so that new customers end up paying a rate of more than 6% in the first year

Increasing margins so that +1.25 or +1.5% are common

Increasing opening fees to the customer, and cutting broker commissions

Not working with brokers at all

Considering it was their slipshod lending practices that got them into the crap in the first place, and also fuelled the housing market, it seems ironic that they are now strangling the markets themselves. At some point they are going to have to start lending again (for that is how they make their money)

So perhaps they will want some mortgage business from me in the future. They had just better hope that I can still afford luxuries like food and shoes in the meantime........................