What Spanish Property Market?
January 20th, 2009
Clearly, no country in Europe is immune from the current economic squeeze. A painful adjustment for Spain and Britain deals with the similarities between the economies of the two countries.
Currency differences apart, it seems that Britain and Spain have a common love of cheap credit – which drove house prices upwards to unsustainable levels. A classic boom to bust cycle ensued – one now on the downward leg of its journey.
In Spain struggles with credit rating (I just love that photo), Spain has joined a select group of countries, including Ireland and Greece, in danger of losing their top credit rating status – effectively making it more expensive for them to borrow internationally.
Criticised for its cavalier attitude to debt (at 6%, Spain’s borrowing is double the EU limit), Spain may well be forced to contemplate exiting the Euro in 2009.
A representative of S&P summarised Spain’s position: “The economy is less resilient than any other AAA state. It is more dependent on real estate and tourism, and there is very high corporate debt. Household debt is close to levels in Britain and the US.”
The article entitled Spanish banks pile on the misery, will do nothing to reassure property buyers either. With the new-build property market already in free-fall, the news of Spanish banks reneging on their guarantees will effectively halt investment in off-plan property for the foreseeable future. If you feel strongly about this issue, I encourage you to sign the petition linked from that article.
Despite all this, despite the difficulty in obtaining a mortgage in Spain, despite the country’s childish management of its own wealth and resources, properties are still being bought and sold – not at the same prices and in the same quantities as the boom years – but there still is an active market.
Who is buying? Predominantly cash buyers who can negotiate a bargain and secure a Spanish property at pre-boom prices. This equates to a discount on today’s prices in the region of 30%. Of course not every vendor can afford to drop by this much – but as a buyer, a 30% reduction is where the action is today.
If you are selling a Spanish property and repatriating the proceeds to the UK, make sure you read and get advice about a potential Capital Gains liability in the UK. More info here: Beware of CGT sting.
Clearly, 2009 will be a tumultuous year for every property market in the world. Even so, Kyero.com is serving 30% more visitors than the same time last year. It seems that, despite the current economic climate, interest in Spanish property remains high – when the price is right.
Martin Dell, Kyero.com
Related Posts
- Spanish Property Market Q1 2007
- Spanish Property Market 2006 – 2007
- Spanish Property Market Recovery?
