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2012 May 21 |
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http://www.theatlanticright.com/2008/12/31/economic-and-housing-crisis-hits-spain/
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Via The Moderate Voice comes this tidbit at Barcepundit (English edition): the economic financial crisis has now also hit Spain. Spain’s property market is “dropping fast”: ‘ Property fairs tout discounts of as much as 60% on new-built homes, or even “buy one, get one free” offers. “All the statistics show a fall,” concedes the housing minister, Beatriz Corredor. Yet pinning down just how big a fall is tricky. Tax-shy Spaniards do not always declare the true selling prices. The government’s main index, based on valuers’ estimates, shows a 1.3% nominal fall in the third quarter. Most think the true figure is far bigger. The IESE business school talks of prices of existing homes falling by 8%.’

‘Private sellers cannot believe that their homes are losing value, according to Fernando Encinar, communications director at idealista.com, a property website. But developers know the game is up. Some deals are being struck at 20% below advertised prices, he says, a fact few developers are keen to broadcast. They do not want people writing off deposits on half-built homes and shopping around for something cheaper.’

Although the above may sound familiar to Americans, who saw their own housing market fall apart due to excessive mortgages owned by households, Spain’s problems are caused by ‘loans to builders and developers. More than 40% of property loans go to them, not to householders. And the numbers considered “doubtful” by the Bank of Spain rose by 60% in the second quarter, to reach 2% of all such loans. They now account for more bad loans than do household mortgages. Worse is to come. “Let no one hope for a price fall of 30-40% because, before that, I’ll be giving it all to the bank,” the head of the Spanish developers’ association, Guillermo Chicote, said recently.’

The good news? Those of us living in the northern (and northwestern) part of Europe enjoy visiting Spain during the summer: the weather is awesome, the surroundings are awesome; in short, it’s heaven. Many want to buy a summerhome in Spain, but prices rose significantly in recent years, making it unaffortable for most households. Now that the Spanish housing market is crumbling, however, more of us will be able to buy a second home in one of Europe’s most beautiful countries.

In addition to the above, a housing crisis should make it easier for so-called starters (young professionals who never owned a home before) to buy a home a move into it; once the crisis ends they will be able to get a mortgage again while it will take years before prices will be back at the level they were, say, in January 2008.

  1. Posted by David
    | Quote | Trackback | Link #81425 ›
    David The downside is that lots of things are interconnected in the market. Who knows where the knock on effects will come? In the UK one of the biggest banks (Abbey) is Spanish owned (Santender group). Will it be affected? Who knows. Perhaps one of the most fascinating things about watching the banking crisis back in October was the fact that it was obvious that the governments of the world just did not know what to do to remedy the situation. There was a pause of a few days when nobody knew how to get out of the situation, then Gordon Brown tried a recapitalisation/share purchase scheme, it seemed to work and everyone else followed. Looking at the way the world works, the credit crunch is bringing us into entirely uncharted waters. The interconnectedness of the globalised economy makes the end effects of virtually everything unpredictable. Who would have thought, for example, that a bank collapse at Lehman Brothers would lead indirectly to the bankruptcy of all of the banks in Iceland, and by extension of the country itself when previously it was one of the world's wealthiest countries?
  2. Posted by VCB
    | Quote | Trackback | Link #82237 ›
    VCB Let's not forget that even though you are correct that the real estate market now is in the middle of a major correction, it is also a fact that the failing British Pound as opposed to the Euro is causing a true Exodus amongst the British Ex-Pats here on the coasts of Spain. If you look further into the economics of those northern european countries as mentioned you will find that unemployment rates are rising exponentially, hence making it more likely that the entire Spanish RA market will suffer much longer than expected. Peronally I think we are on the verge of a major global depression which will be identified at first in the U.S., and spread to the U.K. and the rest of the world. Spain will be hardest hit because of tourism income dropping sharply, as well as the two other economic pillars failing being real estate * construction.
  3. Posted by finance_future
    | Quote | Trackback | Link #112216 ›
    finance_future Strangely enough, the government is building new homes when there are already newly-built homes on the market in search of a buyer. Spain does not need more new homes, it just needs prices to fall for the existing homes, and a more efficient rental market.
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