Euribor still going up, mortgages getting dearer Euribor - the rate used to calculate interest payments for most mortgages in Spain – has finished
Euribor still going up, mortgages getting dearer Euribor - the rate used to calculate interest payments for most mortgages in Spain – has finished the month at 3.313%, down fractionally from 3.318% at the start of May. However, the monthly average – the rate used to calculate mortgage repayments – rose from 3.221% in April to 3.308% in May (to be confirmed by the Bank of Spain). This implies that borrowers with variable-rate mortgages will be facing higher mortgage payments. Meanwhile the National Institute of Statistics has released figures showing that the average Spanish mortgage value granted in February was 134,612 Euros, up 11.66% in a year. The most expensive mortgages are sold in Madrid, Catalonia and the Basque Country, whilst the cheapest are found in Extremadura, Asturias and Galicia. Also in May the European Central Bank (ECB) released figures showing that the average interest rate paid on mortgages in the Euro Zone rose from 4.16% in February to 4.23% in March (mortgage of 5 years or more). President of Andalusia announces demolition of illegal hotel
Manual Chaves – President of the Regional Government of Andalusia – has announced that a hotel built illegally in the natural park of Cabo de Gata, Carboneras, will be demolished and the land returned to its original state. Also in May, the administrators of Marbella’s local government sealed off another illegal new development of 181 properties and garages in the area of Elviria Sur, developed by the company Moleón. The courts ordered the developer to stop building as far back as 2004.
One third of tourist prefer private accommodation over hotels
The Spanish daily ‘El País’ reports that almost one third of the 50 million tourists who visited Spain in 2005 stayed in private accommodation such as holiday homes or rented properties rather than hotels. This represents an increase of almost double on a decade ago. Of the 770,000 properties started last year, 110,000, or 20%, are expected to become holiday homes, rising to 150,000 by the year 2010, half of which are expected to be bought by foreigners, principally British and Irish buyers. Foreigners buy 70% of properties on the Spanish coast
A new study by property consultants Aguirre Newman finds that foreigners now account for 70% of demand for properties on the Costa del Sol, with the remainder bought by Spaniards. The report also identifies increasing competition from ‘emerging’ Spanish regions such as Almeria and Murcia, not to mention other countries such as Bulgaria and Croatia, which enjoy significant price advantages over to the Costa del Sol. The report reveals that, whilst the growth in the number of new properties on the Costa del Sol has fallen to the lowest level in 5 years, sales have also stagnated, especially in Marbella and its surroundings, where high prices and corruption scandals are driving buyers away. Spain’s real estate boom leading the pack
The Spanish financial daily “Expansión” reports that Spain’s real estate boom is now the most intense in Europe, and higher than even in the US. A new report from the Bank of Spain reveals that Spanish property prices have increased by 150% since Spain’s property boom started in 1998, fuelled by low interest rates, demographic forces and rapid growth in Spanish household incomes. British property buyers making an impact in Teruel
The Spanish daily “El Mundo” reports that English property buyers are having an inflationary impact on the price of property in the Spanish province of Teruel, in the region of Aragon. For decades Teruel’s economy has been in decline, as the young deserted this rural region for better opportunities in cities like Madrid, Barcelona and Valencia. The situation got so bad that the provincial government recently launched a publicity campaign with the slogan ‘Teruel exists’ (Teruel existe), to try and get economic support from the central government. Now, however, foreign property buyers led by the British are bringing a new source of wealth to Teruel as relocation and holiday homebuyers. Britons are buying up holiday cottages, masías and old mills, attracted to Teruel by the stunning countryside, tranquillity, proximity to the sea (1 hour in some places) and pleasant summer climate. British buyers are also attracted by Teruel’s relatively low property prices, where rural properties sell for around 6,000 Euros per hectare, according to sources in the town hall of Fuentespada. Demand from British buyers is starting to push up the price of property in Teruel. “Fincas are already beginning to sell for 24,000 Euros” a town hall source is quoted as saying. No real estate bubble in Alicante
A new report from KPMG – an international consultancy and auditing firm – argues that the real estate market in the province of Alicante is in rude health, has a good future, and is not suffering from a bubble. These positive conclusions are based largely on expected robust demand from foreign and local buyers for holiday homes in the province. The local Spanish daily ‘La Verdad de Alicante’ quotes a spokesperson from KPMG as saying “Foreigners don’t mind buying property an hour away from the coast as that is the time it takes them to commute to work in their own countries, so developers are increasing moving inland as building land gets scarcer on the coast”. Governor of Bank of Spain warns Spaniards to prepare for tougher economic conditions
Jaime Caruana – Governor of the Bank of Spain – has urged Spanish companies and households to bolster their finances to avoid being caught out by potentially tougher economic conditions in future. Caruana sees growing volatility in the international economy and higher interest rates as increasing the risk of a sudden correction to world economic imbalances. Caruana recommends that Spanish business and households exercise greater caution before taking on any more debt. Rising interest rates risk property market shock, says OECD
The latest quarterly economic forecast from the OECD warns that countries like the US, France, Sweden and Spain are at risk from stalling real estate markets if property prices continue to rise as they have been whilst interest rates go up by another 1% to 2%. “Property prices could fall,” warns Jean Phillippe Cotis – chief economist of the OECD. Spanish households now spending 39% of gross income on property
The latest bulletin from the Bank of Spain reveals that Spanish households are now spending 39% of gross household income on housing, the highest level since June 1996, when the financial burden of housing on families peaked at 41%. The twin engines of higher property prices and interest rates are driving the increasing financial burden of housing in Spain. Property in Madrid up 89% in 4 years, salaries up 14.8%
CC.OO – one of Spain’s largest trade unions – has released figures contrasting the rise of property prices in Madrid with the much slower growth in earnings. Property prices in Madrid rose by 89% in the period 2001 – 2004, whilst salaries only rose by 14.8% in the same period. According to Magdalena Macías of CC.OO, the result is “families getting into ever more debt whilst living under the threat of unemployment, precarious jobs, and increasing interest rates”. Spain’s Department for Environment and College of Architects discus new environmentally-friendly building guidelines
The Minister for Environment – Cristina Narbona – and the President of Spain’s College of Architects – Carlos Hernández Pezzi – are discussing a new technical building code to reduce environmental damage and waste in Spain. Spain is one of the largest and least efficient consumers of energy in the EU, and according to Hernández Pezzi Spain is “like the nouveau riche who squander energy and water resources”. 80% of Spanish property buyers suffer legal problems
A new report from the legal firm Letra2 finds that 80% of Spaniards endure legal problems after buying their homes. Only 5% of buyers get adequate legal advice when buying property, which means that 95% of buyers are risks signing contracts that are against their interests. This law firm concludes that Spaniards would suffer fewer legal problems when buying property if the Spaniards started spending more money on lawyers. strong>Spaniards take longer than any other Europeans to fly the nest
A new report from the Spanish Youth Institute (Injuve) reveals that Spaniards live with their parents longer than any other Europeans. The figures show that 51% of Spaniards aged between 18 and 35 years continue to live with their parents, though 8 out of 10 of them declare they would prefer to live independently. 2% of 18 to 24 year olds own their home, compared to 42% of 25 to 29 year olds, and 59% of 30 to 34 year olds. Comment Travel around Spain today and it’s obvious that there’s a construction boom in full swing, and the rate at which Spain is turning out new properties is alarming. The ratio of properties per 1,000 people is already the highest in Europe, so it’s not as if Spain needs to beef up its housing stock to converge with the European average. But despite having the highest number of properties per capita in Europe, Spain is building more new properties than any other European country, around 800,000 housing starts per year, equivalent to the combined number of housing starts in Germany, France and the UK. I don’t know what happens to all these properties once they are built, but I doubt that they all get sold. For stability, and the much desired ’soft landing’, one can only hope that the number of housing starts in Spain slows down dramatically, and soon. For the time being, though, there isn’t much evidence of that happening. |
