Zapatero Reelected, What Now?
March 26th, 2008
Eager for any positive signs, the property industry closely followed the recent elections in Spain.
The reelection of prime minister José Luis Rodríguez Zapatero was seen as a new mandate for his socialist party (PSOE), which came to power four years earlier in the wake of the terrorist bombings in Madrid.
With the faltering construction industry a major segment of the economy, pressure will now mount for Zapatero and the socialists to address an over built housing industry which has grown too expensive for most Spaniards. Meanwhile, foreign investors face a slowing market with sagging values.
In the wake of the election, we asked three leaders in the Spanish property market, each with a different perspective, “What impact do you think the election will have on the property market?”
Carlos Ferrer-Bonsoms, national director, land & residential, Jones Lang LaSalle, a real estate consulting firm
“In my opinion, the results of the elections won’t have great importance in the real estate market’s behavior. These days our real estate market is suffering the consequences of an international finance crisis, which is causing trouble for sector companies, as well as private individuals interested in acquiring a house.
In the first case, the sector companies, there are some with high levels of bank indebtedness and the financial entities are not disposed to consider the refinancing operations that they need. In the case of private individuals, they are finding problems to subrogate their mortgages, and in many cases they are being asked to present more guarantees than they were before summer of 2007.
To sum up, apart from the political matter, we have to take into account that all the real estate market is intimately linked to the financial market. This financial market changed drastically last summer of 2007, and because of that, as long as it won’t become more flexible, the real estate market in general will remain in a restrictive situation.”
Martin Dell, co-owner, Kyero.com, a property portal
“According to the PSOE, they’re very focused on making affordable housing available to low income families and young people. They’re offering a €200 monthly rental subsidy to young people to dissuade them from buying at the moment—in an attempt to drive house prices down through “natural market forces.” I think the government will eventually acquire unsold newly-built housing at the developer fire sales and use them for subsidized housing.
They’ve also distanced themselves from ailing property developers and have refused to step-in with financial assistance. What’s more, they’ve announced measures to ensure that developers are more transparent in their dealings with government in the future. This is probably a roundabout way of them acknowledging that the kind of collusion between developers and local government that we saw in Marbella and elsewhere has got to stop.
For most people, it’s mostly good news. For those entitled to subsidized housing, there should be more of it available, at lower prices. For property owners who aren’t in any hurry to buy or sell it’s business as normal.
The worst hit in the short term will be buyers of off-plan property who, for whatever reason, are on a fixed timeline to sell. More than likely, the developer will undercut private asking prices with their own unsold units—and that’s assuming there are buyers available. New build starts have ground to a halt but more properties are coming on to the market every day as developers rush to complete so they can service their bank debt.”
Charles Svoboda, vice president, Abusos-Urbanísticos No, a citizen’s property rights group
“Property markets, like the economy overall in Spain, will stay shaky for some time to come, and that would have been true no matter which party won.
Promoters and developers have for too long called the shots and a massive oversupply of housing has been one unfortunate result. Dependence on construction as the “motor” of the economy has been another. But coupled with that, since the Socialists under Rodriguez Zapatero must now do deals with Catalan Nationalists and political groups even further to the left to govern, the needed strong measures to tackle key economic issues will be subject to negotiation, and may well be compromised. Property markets will follow suit. There is no doubt that housing has become unaffordable for most Spaniards entering the market, just as there are over three million unoccupied dwellings held by speculators.
If and when these units come on the market, the bottom will be a long way down. The government has promised to encourage these excess dwellings and new “social” housing to become available, and if it can deliver, this should push market prices lower.
Unfortunately, I don’t see that the reelected government in Madrid will have the confidence to introduce the needed measures to restore the all-time low consumer confidence level, or the economy, let alone the property market soon.”
Full story from The International Herald Tribune
