So today they announced that the official unemployment rate in Spain has exceeded 20% for the first quarter of the year, adding another 300,000 people to the jobless total
That makes 4.6m in total - is 5m the next milestone for this figure, or will things improve ?
Certainly the Spanish Government has plenty of other things to worry about, particularly with the credit rating cut and the potential circling of the bond market vultures.
The problem with the unemployment is that much of it has come from the construction and property related sectors, and those jobs are just not coming back, because until much of the unsold stock has been absorbed by the market, there just isn't going to be that much construction going on.
In terms of the property and mortgage market, another 300k unemployed puts more pressure on the banks that hold the mortgages of these people
I fear for Spain at the moment
Friday, April 30, 2010
Thursday, April 29, 2010
Eurozone House of cards looks shaky
So on the back of the Greek tragedy comes the credit rating downgrades for Spain and Portugal, amid concerns for the remaining PIIGS of Ireland and Italy.
The thing is, you just get the feeling that once these things start, it just carries on and on and will cause a huge problem in the eurozone.
With any luck the UK won't get dragged into it as we are outside the euro zone, but there is a lot of debt, and if the markets decide to focus on the UK we may find ourselves in the shit.
Although coming out of recession there are good indicators of things imrpoving in the UK, so after the election is sorted we may see some benefits to sterling, as the UK may be seen as a safe haven for currency investors, rather than the euro.
The strength of the eurozone is clearly that it is made up a a number of nations and a variety of economies. The problem is that all these countries are still governed independently so there is a lot of politics involved when northern economies like Germany have to bail out perceived lazy "Club Med" Europeans in Greece, Spain, Italy and Portugal etc.
From a Brit perspective I think the Euribor has to remain low in the eurozone, and surely the Spanish banks can't start charging huge margins on their mortgages. For any Brits with mortgages overseas, particularly in euros, then a rise in the strength of the pound might be a silver lining in terms of mortgage costs, and also may help the Spanish property market as property that has fallen in value may seem even cheaper to British buyers
Thanks for reading
The thing is, you just get the feeling that once these things start, it just carries on and on and will cause a huge problem in the eurozone.
With any luck the UK won't get dragged into it as we are outside the euro zone, but there is a lot of debt, and if the markets decide to focus on the UK we may find ourselves in the shit.
Although coming out of recession there are good indicators of things imrpoving in the UK, so after the election is sorted we may see some benefits to sterling, as the UK may be seen as a safe haven for currency investors, rather than the euro.
The strength of the eurozone is clearly that it is made up a a number of nations and a variety of economies. The problem is that all these countries are still governed independently so there is a lot of politics involved when northern economies like Germany have to bail out perceived lazy "Club Med" Europeans in Greece, Spain, Italy and Portugal etc.
From a Brit perspective I think the Euribor has to remain low in the eurozone, and surely the Spanish banks can't start charging huge margins on their mortgages. For any Brits with mortgages overseas, particularly in euros, then a rise in the strength of the pound might be a silver lining in terms of mortgage costs, and also may help the Spanish property market as property that has fallen in value may seem even cheaper to British buyers
Thanks for reading
Wednesday, April 28, 2010
Green Light for Marina D'Or expansion
The Valencia government has agreed to the expanision of the Marina D'Or development by 30,000 homes, which will make it the biggest holiday resort development in Europe.
There are to be 3 new golf courses, which they plan to build first, leaving the property construction until the property market recovers.
I guess that their rationale will be that there will be a market for more "off-plan" sales, and that the size and status of the existing development will attract buyers to a safe investment.
It will be interesting when they try and get the funding for it.
Size and reputation hasn't helped La Manga and Polaris much recently.......
There are to be 3 new golf courses, which they plan to build first, leaving the property construction until the property market recovers.
I guess that their rationale will be that there will be a market for more "off-plan" sales, and that the size and status of the existing development will attract buyers to a safe investment.
It will be interesting when they try and get the funding for it.
Size and reputation hasn't helped La Manga and Polaris much recently.......
Tuesday, April 27, 2010
Sales and lending on the up......
Recent reports that sales in the Spanish property market had finally turned, year on year, were followed up today by the news that mortgage lending has increased in February, year on year, for the first time in 3 years.
No indication as to the breakdown of the type of lending that is involved, all I know is that we aren't seeing much of an unfreeze in the non-residents and holiday home market.
I guess that should be expected really, that the Spanish banks will return to lending to the Spanish Nationals first, as they can find out more information about them, and understand more about their employment and lifestyles.
But, surely the unemployment rate, that is expected to tip over the 20% level soon, is going to have a big impact on the population's ability to borrow and repay home loans ?
As the signs of improvement continue in the UK, albeit slowly, then the Spanish banks will be aware of this, and hopefully they will again make it easier for UK borrowers to get mortgages and refinance in Spain.
Nobody wants a return to the bad old days of dodgy lending practices, with little paperwork and over inflated valuations, all designed to help bank managers to meet their targets and bonuses.
Let's hope the upturn allows us to return to offering a sensible level of lending to fundamentally sound clients.
Thanks for reading
No indication as to the breakdown of the type of lending that is involved, all I know is that we aren't seeing much of an unfreeze in the non-residents and holiday home market.
I guess that should be expected really, that the Spanish banks will return to lending to the Spanish Nationals first, as they can find out more information about them, and understand more about their employment and lifestyles.
But, surely the unemployment rate, that is expected to tip over the 20% level soon, is going to have a big impact on the population's ability to borrow and repay home loans ?
As the signs of improvement continue in the UK, albeit slowly, then the Spanish banks will be aware of this, and hopefully they will again make it easier for UK borrowers to get mortgages and refinance in Spain.
Nobody wants a return to the bad old days of dodgy lending practices, with little paperwork and over inflated valuations, all designed to help bank managers to meet their targets and bonuses.
Let's hope the upturn allows us to return to offering a sensible level of lending to fundamentally sound clients.
Thanks for reading
Thursday, April 22, 2010
IMF warns Spain over economic future
The International Monetary Fund (IMF) has said today that Spanish banks will need 22 billion euros to cover the loss of value of assets if the crisis worsens, and predicts that bad debt will continue to rise. In a study conducted in collaboration with the Bank of Spain, the IMF predicted that non-performing loans and the recovery of property for nonpayment will continue to rise, which will weigh heavily on the balance sheets.
According to the IMF, savings banks are especially vulnerable, and it called for a comprehensive restructuring of the sector before June, when the Banking Ordinance Restructuring Fund (BORF) is due to expire.
Since the fall in house prices and the recession have been more dramatic in Spain than in the rest of the Euro zone, some analysts have questioned whether the financial sector has sufficient reserves to withstand the blow, despite the fact that Spanish banks entered the crisis with higher reserves than in other countries.
The IMF has tried to provide an answer in its "Global Financial Stability Report, released today, which devoted a section to Spain. The IMF first analysed the situation of Spanish banks, assuming that economic forecasts are met and the crisis slows down.
In this case, 6.3% of bank loans will be in arrears in the third quarter of this year (6% in the case of savings banks), but from there the situation will improve and by the end 2011, the bad debt will have fallen to 5.1% and 5% respectively.
If this is the case, the loss of asset value would be 1 billion in the case of banks, whilst savings banks would lose 6 billion, because their incomes are lower and they have a larger portfolio of properties owing to defaulting on mortgage payments, according to the IMF. The IMF said that the income and provisions of the financial sector would allow for these losses to be fully absorbed.
However, the IMF also submitted the financial system to a tougher hypothetical test, using a more pessimistic scenario in which unemployment exceeds 24% in 2011, as occurred in 1994, with housing prices falling 15% this year. In this case, bad debt would jump to 7.8% for banks and 7.1% for savings banks in 2011. After taking depreciation into account, the banks would lose 5 billion euros in capital and the savings banks 17 billion.
Nevertheless, the possible losses "are relatively small compared to the overall capital of the banking system," according to the IMF.
According to the IMF, savings banks are especially vulnerable, and it called for a comprehensive restructuring of the sector before June, when the Banking Ordinance Restructuring Fund (BORF) is due to expire.
Since the fall in house prices and the recession have been more dramatic in Spain than in the rest of the Euro zone, some analysts have questioned whether the financial sector has sufficient reserves to withstand the blow, despite the fact that Spanish banks entered the crisis with higher reserves than in other countries.
The IMF has tried to provide an answer in its "Global Financial Stability Report, released today, which devoted a section to Spain. The IMF first analysed the situation of Spanish banks, assuming that economic forecasts are met and the crisis slows down.
In this case, 6.3% of bank loans will be in arrears in the third quarter of this year (6% in the case of savings banks), but from there the situation will improve and by the end 2011, the bad debt will have fallen to 5.1% and 5% respectively.
If this is the case, the loss of asset value would be 1 billion in the case of banks, whilst savings banks would lose 6 billion, because their incomes are lower and they have a larger portfolio of properties owing to defaulting on mortgage payments, according to the IMF. The IMF said that the income and provisions of the financial sector would allow for these losses to be fully absorbed.
However, the IMF also submitted the financial system to a tougher hypothetical test, using a more pessimistic scenario in which unemployment exceeds 24% in 2011, as occurred in 1994, with housing prices falling 15% this year. In this case, bad debt would jump to 7.8% for banks and 7.1% for savings banks in 2011. After taking depreciation into account, the banks would lose 5 billion euros in capital and the savings banks 17 billion.
Nevertheless, the possible losses "are relatively small compared to the overall capital of the banking system," according to the IMF.
Exchange rates - I just don't know anymore
So the sterling to euro exchange rate has begun to creep up again, to around the 1.15 mark, which I think is something to do with the news that Greece has gone cap in hand to the IMF, despite saying for ages that they wouldn't need help. so it looks, I suppose to the markets that the eurozone may suffer for longer than the UK, because of having to drag the PIIGS out of the proverbial shit.
But, at the same time, it now looks increasingly like we may have a hung Parliament in the UK, which would supposedly be bad for sterling as there will be no clear economic policy or agreement, and hence uncertainty, which the markets hate.
So which one is it, and can we rely on anything affecting the markets in the way we expect, any more ?
But, at the same time, it now looks increasingly like we may have a hung Parliament in the UK, which would supposedly be bad for sterling as there will be no clear economic policy or agreement, and hence uncertainty, which the markets hate.
So which one is it, and can we rely on anything affecting the markets in the way we expect, any more ?
Wednesday, April 21, 2010
Capitalism - a love story
I have been watching the latest Michael Moore movie, which is highly recommended.
Two things in the first half of the movie that are quite shocking :-
Certain big US companies take out life policies on their employees, with the company as the beneficiary in the event of death. These are sold to the companies as a kind of investment - take out a policy on all of your employees, and if more than expected die, then the company will profit from the situation. This isn't for key employees that would cause the company to lose money or be disrupted if the employee died. Rather they are policies on the ordinary Joe's that stack the shelves at Wal-Mart etc. Astounding.
The second item was some interviews with young US airline pilots. I would have expected all qualified airline pilots to make a decent salary. Hell, I want my airline pilot to earn enough so that he doesn't worry about paying the rent or putting food on his table. One pilot earns €17,000 a year, and the other was on about $20,000. They tend to have enormous student loans to repay, and have to take second jobs to make ends meet. Indeed, the movie points out how baffling it is that a pilot can earn less than a supervisor in Taco Bell !!!!!!
There's plenty in there about banks and housing that I will comment on in more detail when I have watched the rest of the film
Two things in the first half of the movie that are quite shocking :-
Certain big US companies take out life policies on their employees, with the company as the beneficiary in the event of death. These are sold to the companies as a kind of investment - take out a policy on all of your employees, and if more than expected die, then the company will profit from the situation. This isn't for key employees that would cause the company to lose money or be disrupted if the employee died. Rather they are policies on the ordinary Joe's that stack the shelves at Wal-Mart etc. Astounding.
The second item was some interviews with young US airline pilots. I would have expected all qualified airline pilots to make a decent salary. Hell, I want my airline pilot to earn enough so that he doesn't worry about paying the rent or putting food on his table. One pilot earns €17,000 a year, and the other was on about $20,000. They tend to have enormous student loans to repay, and have to take second jobs to make ends meet. Indeed, the movie points out how baffling it is that a pilot can earn less than a supervisor in Taco Bell !!!!!!
There's plenty in there about banks and housing that I will comment on in more detail when I have watched the rest of the film
Planes back in the skies
Last night in bed (we live near Gatwick) we heard the roar of a plane coming into land, after several days of blessed silence
Although this morning, driving past the airport on the way to work there still were no planes to be seen in the skies
Debate now rages about whether the security measure were necessary, and various estimates are being bounded about of the cost to the airline industry etc
What is clear is how we have come to take it for granted that we can fly off at short notice to France, Spain, Italy, Portugal and further afield.
Hopefully the big sister volcano isn't going to kick off and cause a much bigger problem. Although it is kind of comforting that despite all our technology, we are still at the mercy of this big old planet. Mother nature is still the boss!
Although this morning, driving past the airport on the way to work there still were no planes to be seen in the skies
Debate now rages about whether the security measure were necessary, and various estimates are being bounded about of the cost to the airline industry etc
What is clear is how we have come to take it for granted that we can fly off at short notice to France, Spain, Italy, Portugal and further afield.
Hopefully the big sister volcano isn't going to kick off and cause a much bigger problem. Although it is kind of comforting that despite all our technology, we are still at the mercy of this big old planet. Mother nature is still the boss!
Tuesday, April 20, 2010
Holiday Home bargains
I read a report which quoted heavily from our mortgage competitors, Conti Financial. I couldn't tell if it was a genuine news story or simply a bit of propoganda put out like a press release. Anyhow, it was a load of wishy washy non-information about prices and them having more mortgage applications than any time in the past year.
No real figures or stats, and no mortgage information to speak of, as we know that the Spanish mortgage market is still very much in lockdown. There are still so many fears about the economy and valuations that LTV's are still being held down, and the criteria for borrowing, is still incredibly tight. Things will improve at some point, but until they do I think it is rather dangerous to start "talking up" a market that just isn't there.
The article had room for comments below, and they were getting quite a kicking from people that had read the article and clearly aren't that stupid.
No real figures or stats, and no mortgage information to speak of, as we know that the Spanish mortgage market is still very much in lockdown. There are still so many fears about the economy and valuations that LTV's are still being held down, and the criteria for borrowing, is still incredibly tight. Things will improve at some point, but until they do I think it is rather dangerous to start "talking up" a market that just isn't there.
The article had room for comments below, and they were getting quite a kicking from people that had read the article and clearly aren't that stupid.
Counting the cost of the volcanic ash
As the news is now filled with horror stories of passengers stranded thousands of miles from home, we wonder what the impact of this disruption will be on the tourism and property markets in Spain and elsewhere ?
Sure, anybody stranded is being forced into staying and spending (the airlines) money in bars and restaurants, but that is out of necessity rather than the same as a more free-spending holiday.
But as for all of those that haven't been able to travel yet - will they be able to fit their bookings in again or simply take a refund and give up ?
Airlines may have to put their prices up, to compensate for lost revenue, which may further deter UK based travellers from flying to the eurozone, and possibly investing in property.
The economies of countries, airlines, and property markets were all in a pretty shaky situation anyway, without this latest setback.
Sure, anybody stranded is being forced into staying and spending (the airlines) money in bars and restaurants, but that is out of necessity rather than the same as a more free-spending holiday.
But as for all of those that haven't been able to travel yet - will they be able to fit their bookings in again or simply take a refund and give up ?
Airlines may have to put their prices up, to compensate for lost revenue, which may further deter UK based travellers from flying to the eurozone, and possibly investing in property.
The economies of countries, airlines, and property markets were all in a pretty shaky situation anyway, without this latest setback.
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