In further economic debate primarily related to the Spanish property industry, the adoption of a draft Sustainable Economy Act has been discussed. And perhaps the most repeated comment heard was "things are heading in the right direction", although most with the caveat of "it is not sufficient." The adjustment in the housing sector has also been taken into account in developing some of the measures proposed under the new legislation. Improving the tax allowance for landlords from rental income and allowing the purchase of property to be taken into consideration with regards to income tax are applauded by most experts, who foresee the possibility of renting out much of the current stock of unsold property.
"Given the history of our country, perhaps we will never achieve the rental rates of countries like France or Germany, but we should aim to have a 15% rate and remain at that level," he said Caixa Catalunya’s Eduard Mendiluce. These new incentives will also make lease purchasing more attractive. Furthermore, the creation of a new tax deduction for renovation work to promote energy efficiency and accessibility for the disabled has also been welcomed by the construction sector. The National Construction Confederation (CNC), which comprises of the main industry associations, have been asking for months for action to promote this tax deduction to counteract the residential building slowdown and welcomed the adoption of reduced rate of VAT (7%) for these projects.
Despite the reduction in building, and although all the statistics show a great deal of price cuts, the study says that, even today, 40% of families that would potentially buy a house could not cope with current average prices, they are effectively excluded from the market. So what is the future outlook? Demographics will be crucial for two reasons; the first is that the need for a first home by those born in the baby boom and the second is that an influx of immigrants is not expected. Therefore, the study does not expect a demand for new properties of more than 220,000 annually. With an estimated current surplus of between 640,000 and 1 million homes that would mean at least 3 years before a complete recovery is made in Spain.
Tuesday, 1 December 2009
Recovery in Some Areas of the Spanish Property Market
One of Spain’s leading banks, Caixa Catalunya, has said that its stock of housing, taken on due to the recent financial circumstances, has almost completely been absorbed in some regions. The bank states that "we are very near the end, if not already finished". This has led to an increase between 3% and 5% on the price of some of its developments.
During a presentation giving an update on the housing market, they said that this recovery is also seen in the land market, in which the bank is also beginning to close operations in some regions through "an upturn in demand”.
In addition, Eduard Mendiluce (Director of Caixa’s Property Division) was convinced that Caixa Catalunya is not the only agent that has begun to raise prices. "There are increasing rates of sale and we are convinced that others are doing the same." It was not long ago that the financial institution offered discounts of between 15% and 20% in some of its developments, but he said "now housing prices have bottomed out.”
The study by the director of research at the institution, Josep Oliver, indicated that the adjustment has been "very fast", and in the case of employment in the sector, he considers that "a readjustment is nearly complete”, this is after the loss of around a million jobs.
However, the financial institution believes that there still are some assets to digest. First, although the property stock has almost been depleted in some regions, in others there still remain many that are unsold. In such areas, "the existence of a significant volume of potential demand and oversupply means we cannot anticipate an instant recovery of the housing market".
During a presentation giving an update on the housing market, they said that this recovery is also seen in the land market, in which the bank is also beginning to close operations in some regions through "an upturn in demand”.
In addition, Eduard Mendiluce (Director of Caixa’s Property Division) was convinced that Caixa Catalunya is not the only agent that has begun to raise prices. "There are increasing rates of sale and we are convinced that others are doing the same." It was not long ago that the financial institution offered discounts of between 15% and 20% in some of its developments, but he said "now housing prices have bottomed out.”
The study by the director of research at the institution, Josep Oliver, indicated that the adjustment has been "very fast", and in the case of employment in the sector, he considers that "a readjustment is nearly complete”, this is after the loss of around a million jobs.
However, the financial institution believes that there still are some assets to digest. First, although the property stock has almost been depleted in some regions, in others there still remain many that are unsold. In such areas, "the existence of a significant volume of potential demand and oversupply means we cannot anticipate an instant recovery of the housing market".
Monday, 30 November 2009
240 Euro per Month Saving on an Average Spanish Mortgage
In more mortgage related news, the Euribor has closed the month of November with its ninth straight record low at 1.23%, meaning an average saving of 240 euros per month or 2880 per year compared to one year ago, this data is based on an average mortgage of € 150,000 with a repayment term of 25 years. This data will be confirmed in the next few days by the Bank of Spain, and equates to more than three percent below the 4.35% that was in place in November 2008.
The index reached its highest level between the summer and autumn of 2008 and the differential rates between then and this year have reached more than four percent. In it's 10 year history, the Euribor peaked in July 2008 with a monthly high of 5.39%. Analysts believe that interest rates in the euro area will not rise until 2011.
Up until just a couple of months ago, experts expected the European Central Bank (ECB) to raise interest rates from mid 2010, but uncertainty about the extent of economic recovery and the credit crunch has delayed the change in monetary policy from the European regulator.
In fact, 10 days ago, the president of the European Central Bank (ECB), Jean-Claude Trichet said in Madrid that is too soon to declare that the crisis is over and that much of the apparent recovery is due to the support measures made by governments and central banks.
Therefore, investors do not expect any surprises on Thursday's ECB's Governing Council meeting and assume that Trichet will send a reassuring message on the permanence of the aid and its stimulus on the economy.
The index reached its highest level between the summer and autumn of 2008 and the differential rates between then and this year have reached more than four percent. In it's 10 year history, the Euribor peaked in July 2008 with a monthly high of 5.39%. Analysts believe that interest rates in the euro area will not rise until 2011.
Up until just a couple of months ago, experts expected the European Central Bank (ECB) to raise interest rates from mid 2010, but uncertainty about the extent of economic recovery and the credit crunch has delayed the change in monetary policy from the European regulator.
In fact, 10 days ago, the president of the European Central Bank (ECB), Jean-Claude Trichet said in Madrid that is too soon to declare that the crisis is over and that much of the apparent recovery is due to the support measures made by governments and central banks.
Therefore, investors do not expect any surprises on Thursday's ECB's Governing Council meeting and assume that Trichet will send a reassuring message on the permanence of the aid and its stimulus on the economy.
Banks Relucatant to Refinance Mortgages with Public Money
While not specifically Spanish related, many feel that this story is reflected worldwide and that banks are just looking to protect themselves and their shareholders and not helping normal mortgage payers as promised, even after seeking huge financial injections from world governments.
The story stems from new evidence to suggest that the USA government's plan of injecting 50,000 million Euros to refinance mortgages is breaking down. A large number of the applications that would benefit from this plan are being stalled because banks are reluctant to modify mortgages they have already issued.
"Banks are not doing a good enough job," said a report. In particular, it said that the government should make public the names of those firms that are moving slowly to reduce fees on mortgages.
"Many firms should be ashamed, and I will name them," said Michael Barr, an adviser to the secretary for financial affairs department of the U.S. Treasury.
There certainly seems to be a need for much greater transparency here and it will be interesting to watch developments unfold to ensure that public funds really do reach their intended recipients.
The story stems from new evidence to suggest that the USA government's plan of injecting 50,000 million Euros to refinance mortgages is breaking down. A large number of the applications that would benefit from this plan are being stalled because banks are reluctant to modify mortgages they have already issued.
"Banks are not doing a good enough job," said a report. In particular, it said that the government should make public the names of those firms that are moving slowly to reduce fees on mortgages.
"Many firms should be ashamed, and I will name them," said Michael Barr, an adviser to the secretary for financial affairs department of the U.S. Treasury.
There certainly seems to be a need for much greater transparency here and it will be interesting to watch developments unfold to ensure that public funds really do reach their intended recipients.
Friday, 27 November 2009
Massive Tax Evasion on Rental Properties in Spain
The Ministry of Finance has estimated that more than half of all residential leases in Spain not declared to the relevant tax authorities. This has been stated just over a month since income tax rent relief for landlords was raised from 50 to 60%. Specifically, they estimate that there are over one million undeclared rentals in Spain, some 54% of the total of all rented property and representing annual tax losses of 2,450 million to the government.
The figure of 2,450 million is calculated with the reductions, but excluded from this calculation are garages related rentals, shops, land and offices and commercial property. The report says that non declarations were slightly reduced by three percent in the last year, going down from 57.1% to 54%.
The report complains that three years after new laws on fraud prevention were put in place, the Tax Office has not yet adopted the controls that would enable effective implementation of its main weapon, which required energy and utility companies to pass on information that would permit the identification of buildings that, while seemingly unused were actually being used to rent.
Geographically, the report notes that over two thirds of rented accommodation whose leases are not declared (68% of the total) were concentrated in Catalonia, Andalucia and Madrid, while the regions of La Rioja, Cantabria and Aragon were least problematic. The study said, property owners who fail to declare the most were located mainly in Andalucia, where over 74% of rented housing is not officially declared.
The figure of 2,450 million is calculated with the reductions, but excluded from this calculation are garages related rentals, shops, land and offices and commercial property. The report says that non declarations were slightly reduced by three percent in the last year, going down from 57.1% to 54%.
The report complains that three years after new laws on fraud prevention were put in place, the Tax Office has not yet adopted the controls that would enable effective implementation of its main weapon, which required energy and utility companies to pass on information that would permit the identification of buildings that, while seemingly unused were actually being used to rent.
Geographically, the report notes that over two thirds of rented accommodation whose leases are not declared (68% of the total) were concentrated in Catalonia, Andalucia and Madrid, while the regions of La Rioja, Cantabria and Aragon were least problematic. The study said, property owners who fail to declare the most were located mainly in Andalucia, where over 74% of rented housing is not officially declared.
Thursday, 26 November 2009
Around 1 Year to Sell a Spanish Property
The average home in Spain is currently on the market for 344 days, taking more than 11 months to find a buyer, according to a study recently published, which indicates that many prices are still out of reach of many buyers.
The length of time is reduced in some areas of the country. Barcelona drops to 304 days, and it's 320 in Madrid. A year ago it took 217 and 242 days respectively.
The time required to sell a home has skyrocketed in the last five years, by more 300% in Barcelona and 272% in the capital of Spain, Madrid.
The length of time is reduced in some areas of the country. Barcelona drops to 304 days, and it's 320 in Madrid. A year ago it took 217 and 242 days respectively.
The time required to sell a home has skyrocketed in the last five years, by more 300% in Barcelona and 272% in the capital of Spain, Madrid.
Spanish Property Buyers just need Finance
A survey, conducted in June this year among more than 6,000 people reveals that currently the major obstacle in buying a property in Spain was in obtaining financing.
In fact, 87% said it is difficult or very difficult to get a loan today, well above the European average 60%.
However, it also highlighted the fact that almost half of people polled said they have problems in meeting the payments on their loans and mortgages, compared with 24% of the EU average.
The poll also shows that only in England is there a greater desire to invest in property, with 63% of respondents saying they are interested in buying a property.
And more than a quarter of respondents, 28%, believe that buying a property will still give high returns on investment.
In fact, 87% said it is difficult or very difficult to get a loan today, well above the European average 60%.
However, it also highlighted the fact that almost half of people polled said they have problems in meeting the payments on their loans and mortgages, compared with 24% of the EU average.
The poll also shows that only in England is there a greater desire to invest in property, with 63% of respondents saying they are interested in buying a property.
And more than a quarter of respondents, 28%, believe that buying a property will still give high returns on investment.
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