The Latest Spanish Property News from Kyero.com
January 29th, 2007
Notaries may refuse deeds if it is not clear where the cash has come from. Some owners, selling before the deeds are registered, do not want their names to appear on the paperwork to avoid paying taxes. The new Tax Fraud Prevention Law, which came into force in December, requires all parties and payments to be identified.
What were once commonplace tax evasion tricks during the sale of a property are now more and more difficult. The notaries’ offices in Malaga are starting to register cases in which transactions are interrupted as one or more of the parties refuses to identify the means of payment or even for their names to appear on the paperwork. It is normally the developers or even the banks who ask to review the operation as they think they may be leaving themselves open to problems with the taxman.
Public notary and local delegate of the Official School of Notaries, Joaquín Mateo, offers the following example of the cases that throw up most question marks when it comes to the sale of a property, especially following the introduction of the new Tax Fraud Prevention Law that came into force last December 1st.
“The developer A sells a flat to private individual B who in turn transfers it to a third party C. The real estate firm receives 100,000 euros from B who still owes 80,000. B agrees to sell the property to C by means of a sales contract, in exchange for a sum that covers the amount already paid plus an extra 10,000 euros profit. Then C agrees to pay A the 80,000 euros still owed and takes out the mortgage”. This is the technique known in Spanish as “dar el pase”, which can generate huge profits for investors.
This normally works well but problems arise when B, who bought the property off plan and hopes to sell before the keys are handed over and the deeds are drawn up, does not want his name to appear on the paperwork to avoid paying taxes. But the firm is obliged to name the first buyer.
As Mateo explains: “It’s impossible for the first buyer to disappear because he made a payment to the developer which has to be identified. The developer could be considered to have collaborated in the tax fraud and face criminal charges. The new law makes these transactions much more difficult and I have heard that the clauses that permitted them are being taken out of private contracts.
The senior member of the School of Notaries, Granada-based Andrés Tortosa, admits that in his offices he had also come across this type of case. “The seller does not want his name to appear and so problems arise. This is the intention of the new law, to control this type of tax free revaluation”. Tortosa points out that these transactions have to be registered and seven per cent is payable in tax. Furthermore the seller’s income has to be declared on the year’s income tax returns form and is subject to between 20 and 30 per cent in capital gains tax, which significantly reduces the profit margin.
Notaries explain that an immediate consequence of the new law will be a slump in the investment market. Marcial Bellido, the director of the Business Practice Institute (IPE) and expert in the real estate market, adds that the law will help make operations more transparent and reduce tax fraud. He does, however, break a lance in favour of the investors: “They buy when the property does not yet exist, something others do not want to do; they get in first and then sell on to someone who has the advantage of seeing the completed property. The same thing happens on the stock exchange; we shouldn’t criticise the speculator”.
However at the same time he admits that this practice encourages inflation within the sector, creating a “stock of housing that is not used”. As far as prices are concerned he considers that the decrease in demand could lead to a slight reduction, pointing out that 20 per cent of all purchases are as investments. “Now people aren’t buying so merrily”.
José Antonio Pérez, a teacher in the Real Estate Market section of the IPE, is more critical. He believes that the law has come late in the day and fails to solve the main dilemma, that is, the existence of black money. “This is the main problem of the real estate market and the law can do little when it comes to contracts between private individuals”. In his opinion the serious developers were already prohibiting the transfer of contracts before the deeds are registered. “The prices are causing the resale of properties to disappear in Malaga. Today’s cases are just the tail end of the trend”. The notaries themselves admit that it is difficult to control pacts between private individuals to hide money. All both parties need to do is stipulate a price to put on the title deeds and hand over the rest of the amount “under the table” to reduce tax. Mateo adds: “We ought to be asking why there is so much fraud. Taxes are very high and sometimes the amount payable crosses the line between being able to buy a property or not”. He calls for the State’s extra income resulting from the increased control over fraud to go towards reducing taxes for buyers and sellers in the lower income brackets.
January 26th, 2007
Thanks to new technological solutions you can connect lights, raise blinds and even answer with your own voice when someone rings the entryphone. An intelligent house must be a safe house. Domotics offers guaranteed comfort and at the same time the physical integrity of its inhabitants and the protection of its property. The house of the future is already here. In order to prevent these type of burglaries, Millennium Technologies, a Spanish company, leader in the integration of technology in housing and specialising in solutions that enable unification and simplification of the handling of all the electronic devices of our home, has just published the Guía de Seguridad para el Verano (the Security Guide for the Summer).
This guide offers simple domotic and user friendly advice in order to protect your home in the best way possible. It recommends using a presence simulator based on a temporiser, which only costs 135€. This device is capable of activating certain lights, the radio or television at different times of the day, so as to give the impression there is someone in the house.
Besides, the new remote entryphones can divert a call to a fixed or mobile phone, so that when the user is on holiday, the person calling the entryphone will hear your voice as if you were at home. Anothe security product that has caught on in a big way are burglar alarms. Now they are not only used to detect the presence of an intruder in the house, but they also include domotic control panels with which you can control, for example, the washing machine, heating, air conditioning or lights from your mobile or the Internet.
The Connected House is made up of an internal network, with external communication, which interconnects all the electrical and electronic devices of the house. Security, audio-visual equipment, electrical appliances, lighting, automatic blinds, computers, all interconnect sharing information and acting together in programmed schedules. The centre of this network is the home gateway, which has specific communication devices for all these home systems as well as the administration programme for the house. At the same time, the gateway has external connection via the conventional telephone line and broadband – ADSL, cable, etc.- in order to use remote control and obtain and share contents with the Internet.
Therefore, with different types of screens such as the television, a PDA, a Webpad, or a computer, and by means of easy to understand menus, we can know about the state of our house and change it at our whim. For example, we can turn off the light in the hall, activate the alarm on going to bed or deactivate it when we wake up. We can look at the family photo album or a film on the Internet on any television, open or close blinds, turn on the washing machine, watch the camera in the children’s room on any television, turn off the water in the bath, an endless range of possibilities that never stop growing.
Moreover, its external communication enables us to do this with the same ease from the office or from wherever we are on holidays, if we have easy access to the Internet or a mobile phone.
January 24th, 2007
With tax rates now reduced, a home in Spain makes a shrewd investment, as long as you do your homework.
Who says nothing good ever comes out of Brussels? Britons selling their holiday homes in Spain used to be clobbered with a capital-gains tax (CGT) rate of 35%, while permanent residents (Spaniards and foreigners alike) paid only 15%. Now, under pressure from the European Union, Spain has finally changed the rules. Since the beginning of this year, all EU citizens have been liable for the same rate of 18% Spanish CGT when they sell property there.
Lower taxes should make Spanish property a better investment for nonresidents, but taxes aren’t the whole story. With stiff competition from cheaper destinations such as Bulgaria, and Spanish property prices looking a bit peaky, is it still worth buying a holiday home in Spain?
Undoubtedly yes, in my opinion, but only if you are prepared to do your research, develop investment strategies based on local market insight and take a long-term approach. Buying any old property won’t work in a market that has risen by 100% in five years and now shows signs of fatigue. But if you are prepared to make the effort to become a well-informed investor with realistic expectations — rather than basing your decision on investment tips from pushy sales reps during whirlwind inspection trips — then here are some pointers.
The Gibraltar effect with low taxes, minimal regulations and endless sunshine, all just a couple of hours by plane from London, Gibraltar is having no trouble attracting new businesses such as internet gaming and financial services companies (rumour has it that Gib’s ambition is to become the Hong Kong of Europe). This is creating well-paid new jobs, but few of the new residents want to live on the rock, fuelling demand for quality housing over the border in Spain. Sotogrande — arguably Europe’s top residential golf resort — stands to gain the most. At least one internet gaming entrepreneur has been investing in multiple units there to use as housing for his company’s employees.
That’s not all: a new agreement between the UK, Spain and Gibraltar means that Spanish domestic flights can now land at Gib. This will cut down the journey time from Madrid by a third — a huge improvement. Madrileños are big buyers in this area — a majority of buyers at Sotogrande last year were Spanish — and easier access should boost demand.
Contrarian investment strategies in Marbella are having a terrible time with corruption scandals, illegal building and mindless development, all of which turn off buyers. Furthermore, a glut of two-bedroom flats is stunting prices because the market cannot digest all the new properties, with the result that prices across the board are either stagnant or falling.
But Edward Kay, 43, from London, is bullish about Marbella even as the market falls. Kay, formerly an investment banker with Merrill Lynch, is hunting down detached and semidetached beachfront properties, priced to sell, anywhere near Marbella.
“The glut of apartments is depressing the whole market, and distorting prices for other types of property,” he says. “As a result, you can pick up villas for less than they cost to build. Prices may fall further, but I don’t mind because I’m confident that the properties I’m buying will one day be worth a lot more. Based on fundamentals, this area has a great future.”
The price guides produced by Kyero.com, a leading Spanish property portal, show that Tarragona, in southern Catalonia, has emerged as a popular province with buyers. A new airport under construction nearby in the province of Castellon should help fuel demand for property around the Ebro River delta, one of Spain’s most beautiful regions.
Newly built villas on the coast are often wildly overpriced, but fincas (country properties) with a few hectares of land, not far from a village, still represent good value. “If it’s just land with planning permission, then prices start at about €30,000 [about £20,000],” says Mary Sidman, director of Catalunya Property Services. “Fincas with a habitable house start at about €200,000 [£132,000]. Younger buyers, families with children, are coming here for a change of life, and that demand is not going to disappear.”
Flight to quality Buying off-plan proved to be an unpleasant experience for many homebuyers and investors alike in recent years, due to the flaky conduct of countless mediocre developers. A difficult market, and risk-averse buyers, should cause a flight to quality, which will benefit developers with good reputations. You will have to do your homework to identify the best developments, and don’t rely on an estate agent for your information.
So much for what you should buy: what should you avoid? For a start, keep away from two-bed flats in mediocre locations on the Costa del Sol. There is a surplus of these, and prices need to fall further before the market clears.
Patience is also required. It used to be possible to make a quick killing by “flipping” properties bought off-plan, but this is no longer the case. Spanish property is not a good short-term speculative investment because transaction costs are high, at about 10%, both when you buy and sell.
A final word of warning: as Bill Blevins, of tax specialists Blevins Franks, points out, if you are a UK resident buying in Spain, you are still liable for British CGT — 40% after allowances if you are a higher-rate taxpayer. In other words, you may have to pay less to the Spanish, but will end up paying correspondingly more to Gordon Brown.
And, be warned, keeping your Spanish property dealings secret from HM Revenue and Customs is becoming more difficult. British and Spanish tax authorities are starting to cooperate, and the taxman is snooping on you like never before.
January 23rd, 2007
Two bills passed by the Spanish parliament have taken effect from January the 1st, 2007: the new Income Tax Act and the Tax Fraud Prevention Act, both of which affect non-residents owning or intending to buy a holiday property in Spain.
The Income Tax Act changes certain articles of the Non-Resident Income Tax Act affecting, amongst other things, the capital gains tax rate which drops from 35% on net gain to 18%, which is the same rate of tax applicable to the residents. These changes are due to EU pressure on the Spanish Government after receiving reports from foreign taxpayers complaining that the existing system discriminates against non-residents by applying a different Capital Gains Tax (CGT) to them than to residents.
Another significant change in the Law is the withholding tax which a property purchaser must pay to the Tax Office on account of the potential Capital Gains Tax liability of a non-resident seller. This also drops from the existing 5% of the purchase price to 3%. This reduction is in line with the equivalent reduction for the CGT rate as the resulting tax will be (as of the 1st of January, 2007) substantially lower than under the former legislation. Also, do be advised that if a non-resident incorporates property into a Spanish Company it will not be subject to this withholding tax. If payment of the withheld tax is not made by the purchaser, the property will be affected by the lowest of the following sums: either the CGT on the sale or the 3% on the purchase price.
The new Income Tax does away with the special system regulating Asset Holding Companies. These were companies owned by at least one physical person with most of their assets not affected by economic activities. The letting of property was not considered an economic activity unless the Company had an employee and premises dedicated exclusively to carrying out business. Under the former system any non-resident owner of real estate in this type of Company would benefit from the same CGT tax rate as individual residents if assets were disposed of by the company after one year. At present that rate is 15%. Under the new regime, for companies with a net turn over below 8M Euros corporate profits will be taxed at 25% up to 120.202,41 Euros profit and the reminder at 30%. There will be a transition period so that owners can opt to wind up the company and acquire the property in their individual names. The payment of Stamp Duty is exempted, CGT and the Plusvalía Tax will be deferred up to the moment the individual transfers the property in future. Individual owners can benefit from the 18% CGT rate when they sell.
The Tax Fraud Prevention Act creates new obligations when it comes to property transactions. First of all, in order for the Land Registry to register a transaction, the Title Deed must include the Fiscal Identification Number (NIF or NIE in case of non-residents) and the means of payment for the purchase price. Also, in order to subscribe to basic utilities (water, telephone, electricity, gas, etc.) it will be necessary to provide the reference number on the property’s Local Rates Bill (Referencia Catastral). Evidently, these measures represent the Spanish Government’s attempt to avoid future money laundering through real estate transactions and to use utility contracts in order to gain more control over the use of real estate property.
This Act includes important changes affecting Offshore Companies. These are companies from a list of jurisdictions (from the so-called Black List) which were subject to prime attention from the Spanish Tax Authorities. These Offshore Companies face severe tax legislation, with a 3% annual tax on the rateable value of property when the company holds real estate and with transactions they carry out with third parties valued (for tax purposes) at market value. Now the law attempts to close the circle, enlarging the list to include not only companies on the “Black List” but also those from jurisdictions of practically nil taxation or those with which Spain has not worked out a double taxation treaty with provisions for exchange of information. The Law will consider Offshore Companies resident in Spain if their main assets consist of real estate property situated in Spain. As far as CGT goes, the existing Non-Resident Income Tax Act provides for the taxation in Spain of the share transfer from a company whose main assets are directly or indirectly (through a subsidiary holding) real estate assets in Spain. Under the new draft bill, if an offshore company is involved, the appraisal of these transactions will be based on the market value of the real estate, regardless of the property price declared and the real estate assets of the company will be affected by the payment of the tax.
The foreseen consequences of the new legislation will be significant. On the one hand, mainly with the drop to 18% in the CGT, properties, even the expensive ones, will be purchased in the name of individuals instead of companies. The reduced rate for capital gains will certainly be an incentive for foreign investors who will be prone to purchase and sell property with a relatively low tax burden. Real Estate and all professionals involved in this sector will also certainly welcome the reduction of the CGT as they will see the benefits of the surge in the real estate market when the new legislation takes effect. On the other hand, to great extent it will help prevent tax fraud.
Article by Rafael Berdaguer from Rafael Berdaguer Abogados, Marbella, Spain.
January 22nd, 2007
Figures produced by the National Institute of Statistics (INE) have revealed that the population in the province of Malaga increased by 37,878 inhabitants in 2005. The 2.6 per cent increase between January 2005 and January 2006 means that the population of Malaga falls just short of the the million and a half mark with 1,491,287 inhabitants, according to calculations made on the population census last year. Several municipalities - in particular those in which the construction boom is most prominent - constituted the biggest surge in residents in recent years with Benalmádena, Mijas and Estepona each registering a growth in population of around four thousand residents in just one year. With regard to Benalmádena and Mijas, the total increase in residents exceeds four thousand; in fact, the former registered the greatest surge in new inhabitants at 4,612 which brought the total population to over 50,000. Mijas also registered the same amount, with the latest INE figures placing the population at 61,147 - an increase of 4,309 inhabitants. The increase in Estepona was slightly lower (3,894 new registrations) and there are now 58,603 residents in the municipality.
In contrast, the population changes in the town of Marbella were less drastic. Despite the town’s status as one of the biggest spenders on residential investment on the whole Spanish coast in recent years, there was an increase of just 1,186 residents. Another municipality which registered a substantial population increase was Torremolinos, which now has almost 60,000 residents - a figure which surged by 3,204, to bring the total number of inhabitants to 58,683. Similarly, the population of Manilva increased by 16 per cent and 11,181 people are officially registered as living there.
Despite the fact that municipalities on the western coast registered the biggest population increases, those located on the eastern coast also noted significant demographic changes. Principally, Vélez-Málaga - the capital of the Axarquía - which is experiencing a period of considerable growth, stands out most with an increase of almost 3,000 new residents, bringing the total population to almost 70,000 residents - and the town to third on the list of the largest populations in the province, behind Malaga and Marbella. Surprisingly, the total annual demographic growth of the area outstrips that of Malaga city which increased by 2,344 residents compared to the 2,778 new Vélez-Málaga residents. Fuengirola occupies the fourth position on the largest population list with 63,899 inhabitants.
Other notable increases along the eastern coast were registered in Rincón de la Victoria - with 2,000 new residents, and in Nerja and Torrox, with nearly 1,000 more inhabitants each.
A similar growth trend to that of Rincón was registered in Alhaurín de la Torre where there were 1,772 more names on the census, which brought the population to more than 30,000. The population of Cártama has grown by one thousand, the total now standing at 17,690 residents.
Eight out of every ten municipalities in the province saw their populations increase in 2006, and the rest registered decreases. Two examples are Cuevas Bajas and Igualeja which registered a decrease of around thirty residents. A total of 25 inhabitants left Atajate, which yet again was registered as the town with the fewest residents - 142 precisely. The census in Antequera was boosted by one thousand.
January 18th, 2007
The most expensive homes are on the east side of the city and the cheapest are in Ciudad Jardín, says a report.
Between December 2005 and December 2006 house prices in the city of Malaga went up 9.9 per cent, placing the cost of a square metre at an average of 2,112 euros, reported the Valuers Society (ST) last week. According to the ST study, the property price increase in Malaga is the fourth greatest in Andalucía, after Seville (up 15.4 per cent), Cadiz (13.4 per cent) and Granada (11.8 per cent).
If the city is divided up into districts, the east side is where the most expensive properties can be found, with a maximum cost of 4,830 euros per square metre, while in the city centre properties have reached 4,270 euros and in Puerto de la Torre, 4,140 euros.
At the other end of the scale the cheapest properties in the city can be found in Ciudad Jardín (2,976 euros), followed by the Carretera de Cádiz district (3,278 euros) and Bailén Miraflores (3,500 euros per square metre).
In the rest of the province the town of Ronda has experienced the greatest annual increase (up 14.4%), followed by Antequera (up 11.7%), Vélez-Málaga (up 11.6%), Marbella (up 8.1%), Benalmádena and Estepona (around 7%).
In Andalucía as a whole, the average cost of a square metre went from 1,916 euros in December 2005 to 2,142 euros in December 2006, which means that an average 100 square metre property would now cost 214,200 euros. The cities with the smallest price increases were Jaén (up just 6.4%), Huelva, (up 8.2%), and Almeria and Cordoba, (up 9.8%).
Furthermore the two most expensive provincial capitals in 2006 were Seville, at 2,445 euros per square metre, and Cadiz, with 2,260 euros; while Jaén and Huelva were the cheapest, with average prices of 1,667 and 1,779 euros per square metre, respectively.
On a national level, the average price of a square metre of a new flat reached 2,763 euros at the end of 2006, showing an interannual increase of 9.8 per cent, according to the statistics from the Spanish Valuation Society (ST). This is only a slight decrease on the 2005 figure. Barcelona, Madrid, San Sebastián, Bilbao, Vitoria and Zaragoza were the most expensive cities, while Lugo, Badajoz and Pontevedra, the cheapest. The market has shot up by more than 13 per cent Aragón and Castilla-La Mancha.
January 17th, 2007
A survey by Holiday Lettings has confirmed the recent growth in the ‘buy-to-jet’ market.
More than half of the company’s 6,000 holiday home owners had bought their holiday property within the last two years.
They found that 45 per cent of these enterprising individuals were initially attracted by capital growth prospects rather than the potential rental income, while having a holiday home at their disposal was the second draw.
However, after purchasing their holiday pad, 67 per cent of clients found that income from renting out was the most significant perk.
Holiday Lettings was also interested to see whether existing holiday home owners kept up research into holiday lettings through popular travel programmes and publications.
Ross Elder, managing director of Holiday Lettings, said: “We wanted to assess the influence of TV programmes like A Place in the Sun and Escape to the Country as well as the influx of holiday and travel magazines and the power of the internet.”
Few relied on media assistance when making their decision, preferring to trust their instincts about a place and seek local advice.
The Institute for Public Policy Research claims that 5.5 million Brits live abroad, preferring English-speaking nations and Spain.
January 16th, 2007
The white Andalucian sun beats down on the red earth of the fields, on the dusty grey-green leaves of olive trees, on the white-walled churches - and on Mark Thompson, 34, a builder from Newcastle who has just unlocked the door to his new home.
An hour earlier Thompson picked up the keys from a busy estate agent’s and drove across the bone-dry, flat land of southern Spain to the tiny village of Palenciana, population 2,500 and until recently shrinking fast.
He parks his Renault Clio and looks around proudly. Behind the house, a donkey brays mournfully. “Magic,” he says. “Magic.”
Palenciana is 70 miles and a world away from the beaches and high-rises of the Mediterranean coast. With its cobbled streets, shuttered houses, tractors and old ladies in black sitting on stools in the shade, it is very much the campo, not the Costa del Sol.
Yet it, and Thompson, are part of a massive new wave of immigration that is putting tens of thousands of young Britons - and often their families - into villages in remote parts of Spain.
Thompson, tattooed and sunburnt, expects to be joined by his partner and 13-year-old daughter soon.
The days when it was just the old hoping to soak up the sun or criminals on the run who headed for Spain are gone. The most recent official figures list 208,523 foreign residents in Andalucia, of whom the vast majority are British, double the total of five years ago. Most of the new arrivals are between 30 and 50.
Because only a fraction of immigrants register with local authorities, the true number of Britons heading to Spain to live is thought to be much, much higher.
According to British Foreign Office estimates, there are now more than 675,000 UK citizens living in the country, mainly along the southern and eastern Mediterranean coasts, and new tax laws that allow higher tax earners to buy second homes as part of their pensions, to come into force next April, coupled with a rapid expansion in cheap flights, are thought likely to spur a new flood of migrants.
In and around Malaga, heartland of the Costa del Sol, the local English-language paper, Sur in English, has increased its print run to 60,000 - and sells out. Once the newspaper was just read on the coast. Now, according to Liz Parry, the editor, copies are trucked far inland “to the oddest places in the back of beyond”. The profile of the readers has changed, dropping about 20 years in age. The paper is full of ideas of things to do with children.
In some areas, the newcomers have been welcomed for bringing life to agricultural communities that have become stripped of young people and economic activity. In others, the influx has led to social tensions, anger and massive pressure on space and resources.
There are few complaints in the village of Comares, high in the hills behind Malaga. There the 425 registered foreigners are credited with keeping the village alive. “So many people were leaving that the school was half empty. Now all the classrooms are full,” said Inmaculada Gutierrez, an assistant to the mayor.
In the village of Arboleas, a three-hour drive into the mountains from Malaga, the story is the same. British immigrants make up a quarter of pupils at the school. Carl Shears, a 40-year-old former manager for a fitness company in the UK who moved in 18 months ago, said that the newcomers had “reinvented the lives of people here. This is rural Spain. All the young people were leaving. They had the TV and internet and suddenly farming olives didn’t seem so attractive any more”.
Neither are many newcomers as insular as previous migrants. Felipe Plaza Cabrera, an architect in Alhaurin, said that even in his own conservative town the newcomers had fitted in well. In nearby Competa, Maria Kupers, a long-term Dutch-born resident, said that if it wasn’t for the new arrivals’, mainly between 30 and 50, the village would have “died” and its cultural traditions with it.
“It’s foreigners who have set up art exhibitions, opened pottery and ceramics shops, organised concerts and music nights in the bars,” said Kupers, who has been elected to the district council.
Yet the huge influx has not always been so well received. In La Vinuela valley, 50 miles northeast of Malaga, the population has risen by a factor of eight or nine in the past five years, according to a local resident.
One problem has been a shortage of water, caused both by the recent drought and the huge demands of the new housing developments with golf courses and swimming pools. And corruption in local councils has meant that many homes owned by the British are built on protected land. Last week dozens of UK homeowners in Alicante on the Costa Blanca were told that their houses might be demolished and a crackdown in the summer on the Costa del Sol has led to 73 arrests and the demolition of scores of properties.
Many new migrants are driven out of the UK by property prices. Thompson, Palenciana’s newest arrival, said he simply could not afford Britain any longer. He paid £70,000 for his new dwelling, a shell of a small townhouse that has been used as a warehouse.
Thompson picked up the keys for his house from the Inland Andalucia estate agency in the small market town of Mollina. The agency, according to Amelia Chacon, the manager, concludes two or three sales or long-term lets every day. Mollina itself, despite its relatively isolated location, has a thriving British community, some of whom live in a large trailer park on the outskirts of the town. The new immigrants are served by several bars, a shop selling English newspapers and books, a Chinese takeaway and an Indian restaurant.
Property developers talk of a 20 per cent year-on-year rise for the foreseeable future - with prices rising even faster.
As for Thompson, he is determined to make a success of life in Spain and to integrate as much as he can. He bought a Teach Yourself Spanish course before leaving Britain. “You’ve got to learn the language,” he said. “As they say, when in Rome, do as the Romans do.”
January 12th, 2007
After scorching weather across the Mediterranean last summer, meteorologists have warned that 2007 could well be the hottest year on record.
Experts from the UK Met Office believe there is a 60 per cent chance that worldwide temperatures will exceed the record set in 1998 over the course of the next 12 months.
Nine years ago, temperatures exceeded the long-term average of 14C, or 57F, by 0.52C (‘.94F). In 2007, the global temperatures are expected to finish 0.54C (‘.97F) above the average, due to both global warming and the Pacific Ocean’s El Nino weather phenomenon.
“The potential for a record 2007 arises partly from a moderate-strength El Nino already established in the Pacific, which is expected to persist through the first few months of 2007,” a Met Office statement read.
Hot weather is likely to fuel demand for a retirement getaway in the sun and boost property markets in traditional hotspots such as France and Spain.
According to Met Office statistics, 2006 was the hottest year since 1914 for the UK.
January 11th, 2007
With temperatures dropping still further as we start the long haul to spring, it’s the time of year when many Britons fly south.
Some 2.5 million of us own holiday homes abroad and, according to Halifax estate agents, that is set to double in the next five years. The most popular destination is Spain, followed by France, Portugal and Italy.
The cost of living may often be cheaper, but the cost of transferring funds to an overseas bank account is not. Your bank may charge up to 2 per cent commission for foreign exchange, along with transfer fees which can be as much as £40 a time.
However, there is a little-known way of moving money abroad quickly and cheaply. A few banks treat transfers to overseas branches in the same way as moving money between UK branches. Both Citibank and Halifax/Bank of Scotland (HBOS) allow you to transfer money from the UK to their foreign branches without any fees or foreign exchange commission.
Citibank operates in 25 countries, including the Philippines and Puerto Rico. HBOS has 20 branches in Spain, where it is known as Banco Halifax Hispania. The other benefit is that the exchange rate used is the commercial rate, usually 2 to 3 per cent more favourable than tourist rates.
HSBC has an extensive network in Europe, the Americas and the Asia Pacific region, but transfers between your UK account and your overseas HSBC bank cost £10 a time, regardless of the amount, and take three to four days.
None of the other major high-street banks has a free or discounted service for overseas accounts. Even Abbey, owned by Spanish banking group Banco Santander, charges up to £25 to send sterling abroad.
January 8th, 2007
VALENCIA — The mayor and four developers have been charged with perverting the course of justice in connection with an illegal building homes scandal which threatens the homes of hundreds of expats.
The socialist mayor of Catral, near Alicante, Jose Manuel Rodriguez Leal and the promoters, were charged by a judge with building 1,270 villas without any planning permission.
The charges come after regional government officials sent shockwaves through the expat community of Catral near Alicante after stripping the town hall of its housing powers and threatening to dissolve the local council over the scandal.
Hundreds of the homes have been built inside a nature reserve, with many of them sold to expats seeking a new life in the sun or a holiday home.
The rest have gone up on green belt land next to farms and orchards to the south of Catral, whose foreign population has rocketed in the past five years following a construction boom in the area.
Last October, the regional director of housing threatened to demolish all illegal housing built on protected land.
Esteban Gonzalez Pons, director of housing for the Generalitat Valenciana regional government body, said: “The homes built on protected land inside El Hondo Nature Reserve will all be demolished. The future of the remaining homes will be studied on an individual basis. We’ve already taken away the housing powers of the local council and will take away its town planning powers and seek its dissolution as a local authority unless it recognises more than 1,200 houses have been built illegally and proposes solutions.”
He added: “We will not hesitate in acting against other town halls that break the law, whichever political party holds power.”
Expats affected by the shock move were consulting lawyers to try to save their homes.
Many have invested their life savings - paying an average of EUR 200,000 for three-bedroom homes with swimming pools they thought were legal.
In the wake of the original scandal, British expat Dennis Archer, who has bought a home near Catral with wife Pat, said: “Our house was finished on time and was very nicely built. The problem our solicitors failed to notice was neither our home or the others on the complex had planning permission. Our dreams of a new life in the sun have turned into a nightmare.”
Another expat, who asked not to be named, added: “I moved out to Spain with my wife and two young children and wanted to do everything by the book. The estate agents put us in touch with a local solicitor who assured us everything was fine. Now we discover we’re living in a house that has been built illegally and is likely to be demolished. I invested most of my life savings emigrating. We face financial ruin.”
Thousands of expats have set up home inland from the Costa Blanca around Alicante in the past five years.
Across Spain, thousands of foreign buyers have fallen foul of cowboy builders who build without permission and dodgy estate agents suspected of buying the silence of corrupt town hall officials.
January 5th, 2007
This is not to be confused with other so-called leaseback systems already in existence in Spain which are, realistically, merely cheap imitations of the real thing. This leaseback opportunity offers investors significantly higher quality and the best terms within the leaseback world.
The main attraction of the leaseback system is the ability to buy your quality holiday-home within a development you may otherwise ill afford. It is a freehold investment while most or all associated costs are conveniently covered by a guaranteed rental income. Most leaseback properties, such as the development at Terrazas Costa del Sol near Manilva, Cadiz, are located in areas with free pools, gyms and other tourist facilities, making them highly desirable, in demand holiday locations and therefore easy to rent out.
The concept of leaseback property purchase is simple: As the purchaser you buy the freehold of a fully furnished property outright and then lease it back to a management company for renewable periods of up to 10 years. In return, you receive a guaranteed rental return, irrespective of occupancy, at a fixed annual amount, which often offsets the cost of your mortgage payments. The rental return is net of all community fees, running and maintenance costs as these are covered by the management company for an initial fee.
Leaseback gives great peace of mind and provides you with regular and reliable rental payments. What is more, you are not exposed to fluctuations in the tourist market as returns are guaranteed, irrelevant of occupancy. You have no worries about day-to-day management responsibilities such as looking for a rental agent, paying utilities, dealing with maintenance issues or insurance.
Meanwhile you can even use your property yourself, or any other property within the group, for agreed periods of time throughout the year, an option normally unheard of on other leaseback developments. Not only are investors buying into the best and most exclusive coastal locations in Spain, but they have access to their unit as well!
The leaseback system is timeless as at the end of the lease period, you have the choice either to live in the property or simply to sign a new leaseback contract with the management company for another fixed period of guaranteed income.
A substantial government-backed VAT-refund system is an added benefit for investors in Spanish leaseback properties. They are refunded the 16% VAT on the purchase price so that they only pay the VAT exclusive amount. Then stage payments are paid in the following way:
5% of VAT inclusive price 25% of VAT inclusive price Balance (VAT exclusive price less cash already paid)
The developers of Terrazas Costa del Sol however, pre-pay the VAT for their investors so that they only ever need to pay the VAT exclusive price, avoiding the need to raise the extra finance for the VAT.
Six to nine months after property purchase, the VAT is refunded to the client who then passes it back to the developers. However, the full VAT benefit is based on 10 years ownership and investors who choose to sell within 10 years owe the VAT back they pay it pro rata and the new buyer reclaims any outstanding portion.
Potential capital appreciation continues to be good in Spain, while demand for property remains high from local and overseas investors. As leaseback resorts are well located with many amenities and good accessibility that many normal properties may lack, they offer some of the most solid growth rates on the market. In addition, rental income is linked to the Spanish Consumer Price Index, so appreciation in annual rental returns is guaranteed - over the past ten years this has averaged at around 3.4%.
Excellent finance terms are in operation and, subject to some income level checks, you should have no trouble getting Spanish banks to lend up to 80% of the purchase price of the property. Euro interest rates are currently low which offer an added advantage to investors today.
With a long, trusted and proven track record in the European holiday homes leaseback industry, the developers and management agents of Terrazas Costa del Sol are experts at keeping a watchful eye on localized property and tourism trends, offering investors the opportunity to purchase on exceptional terms. The promoters are ISO 9001 certificate holders and have been working over the past 15 years in Spain to handle 7,000 new residential units per annum.
Nestled in the Bahia de las Rocas, the Terrazas Costa del Sol development sits between Sotogrande and Duquesa Golf, near the village of Manilva and we believe it is an unbeatable leaseback opportunity. It boasts all the facilities you might expect from a top class resort, with its beaches within walking distance, nearby golf courses, yachting ports, polo fields, kids clubs, swimming pools and plenty of family entertainment, as well as being easily accessed from abroad via Gibraltar or Malaga airports. The site is located on a gentle slope affording exceptional south westerly views across the sparkling Mediterranean to Gibraltar and onwards to Africa.
Terrazas Costa del Sol incorporates some stunning Andalucian style architecture and will boast 328 apartments divided into 16 buildings. all set within beautiful, managed community gardens. A reception and lobby, swimming pool with childrens play area, restaurant, bar, games and leisure areas as well as an underground car park are all provided for residents on the development.
With blocks 7 to 16 due to be delivered on 31 December 2008 and blocks 1 to 6 on 28 February 2009, purchasers are now moving fast to secure their units.
January 3rd, 2007
The number of non-Spanish inhabitants has risen by 13.25 per cent in the past year.
Residential tourism is also looking towards the interior of the province of Malaga. There has been a huge increase in the number of foreign residents in the Antequera area, with the non-Spanish population of the area having increased by 13.25 per cent in just less than a year. It must be taken into account, however, that this figure includes those non-Spaniards who have come to settle in the area for economic reasons, as distinct from those tourists who come from wealthy northern European countries. Such is the case of the Brazilians in the area, of whom there are 642, making them the biggest foreign community in Antequera. There are foreigners from a total of 55 different countries in the world living in the municipal, although most are British, Brazilian, Rumanian and Moroccan, representing 4.74 per cent of the whole population, which numbers 45,000 people.
The biggest northern European national group is the British, numbering 326 people, having increased over the past year from 279, according to recent data supplied by the Statistics Office in the Antequera Town Hall. The next biggest group is the Italians, with 46 of them living in the region, followed by the Germans, with a population of 40.
The growth in the foreign population is still less than in other years, nevertheless, although it must be taken into account that many foreign residents are immigrants who have failed to renew their work permits, thereby being excluded from the official census.
January 2nd, 2007
Buy off-plan and you risk losing your money, unless the right safeguards are in place.
If you keep up your scheduled payments on your off-plan property, and stick to your contract with a reputable developer, you are protected if construction gets delayed or, even worse, cancelled. Right? Well, all too often, the answer is no, as British buyers on the Spanish Costas have found to their expense.
Buying off-plan from a developer is riskier than most people realise. All sorts of things can go wrong that result in delays or even no delivery at all. Buyers nearly always make their stage payments on time. If they don’t, they risk losing the money they have already sunk into the purchase. The behaviour of the developer, however, is harder to control.
Buyers are meant to be protected when they hand over substantial sums of money for a property that is not yet built. Spanish consumer protection laws oblige developers to insure all the stage payments they receive from buyers. So if the developer goes bust, the buyer should be refunded through the insurance.
But what the law says is one thing; what developers actually do is another. Securing stage payments with either an insurance policy or bank guarantee costs money, so many developers ignore the law if they can.
In northern Spain, developers rarely provide financial guarantees, and the predominantly Spanish buyers rarely ask for them. At the same time, buying off-plan is less risky in the north, where developers have a good delivery record. But even on Spain’s popular southern Mediterranean coasts, where new developments have a patchier delivery record, most British off-plan buyers still don’t obtain adequate financial guarantees to protect their stage payments.
“If buyers do not ask for and check their guarantees, then developers will be tempted to avoid the cost of providing one,” warns Michael Davies, a Spanish-practice solicitor based in Almeria. “If you don’t have a bank guarantee in your own name specifying the amount guaranteed, then your stage payments are at risk if the developer goes to the wall.”
Some British buyers have also been let down by their lawyers, who should always be on top of this issue. Even if you have a certificate from a financial institution that apparently guarantees your payments, this may not be enough. You have to look into the small print - written in Spanish - to find out how well covered you really are.
You also need to confirm that the guarantee is provided by a viable financial institution, as some developers have been known to provide worthless bits of paper from financial bucket shops with grand-sounding names.
Ian Overgage, a 42-year-old marketing consultant from London, ran into this expensive problem when buying off-plan on the Costa del Sol. In April 2002 he signed up for a 190,000 (£132,000), two-bed holiday flat in Calahonda, with completion expected at the end of 2003.
At the time of purchase he discussed bank guarantees with his lawyer, and was given assurances that everything was in order. “At the time I thought I was asking all the right questions and didn’t feel I was being ill-advised,” says Overgage. “Now I know different, but hindsight doesn’t help right past mistakes.”
The developer ran into financial problems and the project was seriously delayed, but Overgage wasn’t sent a copy of the bank guarantee until late 2005, only to find that the guarantee had expired in March 2004. To make matters worse, the guarantee was from a company called Compagnie des Garanties de Luxembourg SA, specifically listed by the Spanish government as unauthorised to offer financial guarantees in Spain. When the developer folded, Overgage and other buyers had no option but to pay off the developer’s debts, which in his case meant coughing up a further £11,100 to buy the property as it was and avoid losing all the money he had already committed.
When making stage payments, you need a certificate from the financial institution providing the guarantee that names you as the beneficiary and details the exact sum you have paid. Make sure you know exactly when the guarantee can be executed, and avoid long execution dates that make you wait a year or more before you can get your money back.
Check that the guarantee is provided by a financial institution authorised to operate in Spain before you commit to making any payments. And because there is often a delay between making your stage payments and receiving your certificate of guarantee, you should negotiate small but frequent payments with the developer, and include a clause in your purchase contract that enables you to withhold payments if any guarantee certificates are outstanding. Never sign or pay anything to any developer until you have thoroughly investigated the bank guarantees it arranges, and don’t buy from developers who fail to provide adequate guarantees.
If you have made stage payments but have never seen a certificate of guarantee, then don’t panic. As I’ve explained, the majority of buyers don’t have guarantees, and the majority don’t have problems, either. Like all insurance policies, the guarantee is only necessary if the developer fails to deliver. Nevertheless, you are much better off with a guarantee and are entitled to one at no extra cost, so the first step is to find out if a guarantee has been issued.
If not, you should initiate proceedings to have the developer arrange for one to be issued. In the unlikely event that a developer refuses, report the firm to the regional consumer protection office.
