Monday, July 27, 2009

Lanzarote Property Market Becalmed

This week we are bringing you a guest posting from Nick at Lanzarote Guidebook. You can check-out their site at

The Spanish owned holiday island of Lanzarote has long been a hot favourite with overseas investors. Thanks to a stable tourist industry and a clement year round climate. Which has, until recently, ensured a full 12 month rental calendar and a steady stream of income for thousands of holiday property owners.

But just like elsewhere in Spain the property and tourism sectors appear to be slowly grinding to a halt. As visitor numbers fall away and mortgage finance vanishes.

The latest arrival figures from AENA, the Spanish airport operators, certainly make grim reading for the many thousands of owners of apartments and villas in Lanzarote. As visitor numbers slumped once again last month, by over 24%. Whilst the island has now welcomed 18% fewer tourists during the first six months of this year than in the same period in 2008.

Traditionally the UK has been the engine room of both the island’s property and tourist markets for well over 20 years. Last year for example British tourists accounted for over 50% of the 1.5 million foreign holidaymakers who visited Lanzarote. Whilst British buyers have been, by some distance, the largest group of overseas property investors by nationality.

However arrivals from the UK have slumped alarmingly this year. Falling by nearly 27% last month and by just over 20% for the year to date. As 85,508 fewer British tourists touched down on the island during the first six months of 2009. Thanks to the depreciation of sterling against the euro combining with the impact of the credit crunch to erode consumer spending on European holidays.

The weak pound has also contributed to a decline in property transactions and enquires from UK buyers. As any gain made from falling property prices on the island has been more than offset and undermined by the exchange rate.

Local estate agents all report a growing number of reduced price properties on their books. But with few buyers around to take advantage. With many pointing the finger at local banks – which have tightened lending criteria to such a degree that it has become extremely difficult for overseas investors to secure finance.

As a result, the Lanzarote property market is now largely becalmed. Whilst the island’s tourist industry struggles to adjust to a sharp reduction in arrivals and occupancy levels.

Thursday, July 9, 2009

25% of UK loans unsuccessful

News from the UK yesterday that 25% of mortgage applications are currently turned down for one reason or another.
That seems like quite a lot, until you compare it with our experience in Spain in the past few months, where I suspect that only 1 in 10 mortgage applications have been successful.

We have had to deal with :-
Spanish banks not wanting to lend to non-residents
Spanish banks not dealing with brokers
UK based banks withdrawing products and moving the goalposts
LTV's being slashed to 60% if we're lucky
Valuations being either a pleasant surprise or a complete disaster - the touble is there's no bloody consistency
Poor quality journalism and publicity about the Spanish property market, focussing on "tabloid" type disasters
Exchange rates to make you weep
Rentals being hit because less Brits are going on holiday
Plus all of the woes in the UK have been affecting those owning or wanting to buy holiday homes in Spain - UK unemployment, recession doom and gloom, lack of lending in the UK so less equity can be released, housing market uncertainty etc etc

Considering that in about 2005 almost anyone that could produce a bit of paper with some numbers on it could get a mortgage in Spain, the turnaround is remarkable

Thanks for reading

Tuesday, July 7, 2009

Lending reluctance

A brief extract from the Wall Street Journal

"Policymakers at the European Central Bank are expressing concerns that some nations' rescue efforts for the banking sector are not helping to revive lending. ECB and other eurozone officials are worried that lending reluctance could hinder the region's economic recovery or even worsen the downturn. ECB President Jean-Claude Trichet said banks need to be "up to their responsibilities, namely to ship to the real economy the extraordinary efforts that we are making."

At the moment we have a great disparity between the eurozone countries, in terms of what we can get for our non-resident clients

Spanish mortgages are now 70% if you are lucky, 60% if you want interest only
In France, 85% is still available
In Italy, it was difficult and now impossible
In Portugal, 70% with interest only is still available

Not in the eurozone but things are very difficult in Cyprus and damn near impossible in Dubai, where the main problem seems to be that the mortgage market never really got off the ground before the crash, after years of inflated flipping, and the perceived wisdom is that values are falling further.

If the differences are the same for their own residents, then things are likely to improve at different speeds depending on where you are. We know that getting a Spanish mortgage is very difficult at the moment even if you are a Spanish national. Considering that Spain is considered to be suffering more than most, it seems that the recovery may be slower.

What we need is for the first Spanish bank to put their head up out of the tranches and say "yes please we would like some non-resident clients and we can do this....."

Preferably Spanish mortgages for 70% of valuation (not unreasonable) with a choice of interest-only periods, and long terms available.

What the Spanish banks have always failed to realise is that if people have a house in the UK, the they don't need a repayment mortgage in Spain because they can just pay the interest for ever! This is clearly the most profitable business for the banks to be in, as the capital is not repaid, and defaults will be low as the payments will be the lowest possible

If I had a few billion and a banking licence I could clear up in Spain - decent clients and properties, at reasonable LTV's and on interest-only. A margin of 0.5% and I would make a fortune

All it needs is a bank to say yes, then the others would have to follow

No idea when this is going to happen though

Monday, July 6, 2009

Spain to legalise 40,000 homes

Well, what else were they gonna do?

The Spanish property and mortgage market has been hit hard enough recently without having to worry about your apartment being knocked down

In fact, many people that had bought illegal properties had bought from developers that had honestly expected their licenses would be approved, or that had greased the way by way of back handers to dodgy Mayors and town hall officials

This was how things happened, and had been going on for years - build the develepment and sort the licence out later

Some people have mortgages at place like Reserva de Marbella, where the properties are illegal and they haven't been able to remortgage because no other bank will take on the risk

If they do sort this out and legalise a lot of properties, then it may help galvanise the mortgage market, as some clients will be able to remortgage or release equity - at least if there are any bloody banks still lending

If nothing else, once it is sorted then it will help give the impression that Spain has sorted out the problems, and it may be seen as a safe place to buy in again

Whether they will sort out the campo (country properties inland) remains to be seen.......

Spanish Property Valuations

Figures are out from the Spanish office of statistics that Spanish property prices have, on average, fallen 7.6% in the past year, and new-build propertuies have only fallen 2% !

Why do they do this ? What is the point ?

Anyone working in the Spanish market, or indeed any owners or prospective purchasers, know full well that prices/valuations are down somewhere between 20 and 30%, if not more

Empty new-builds - well they can't give them away - discounts of 40-50% seem commonplace

The article I read mentioned the "black money" (cash) part of the purchase, that still goes on and is unobserved by the Notary, which can distort the figures

This means that the declared prices that are recorded are actually lower than the actual selling price. But this has always happened so it is all relative

Although perhaps the cash element is sneaking back into the equation as people try to save taxes, and who can blame them in the present climate, to be fair.