The Latest Spanish Property News from Kyero.com

Spain's enduring appeal to holidaymakers and property buyers is largely thanks to its weather and long, long coastline. With almost 5,000 km of coastline to choose from on the mainland alone, which of the Costas offers the best weather in Spain?

A new range of Costa property guides from Kyero.com helps answer that question using historical weather data from the Spanish Institute of Meteorology.

Average temperature (°C) and rainfall (mm) by costa in January and July

Green Spain: There's good reason for the northern coast of Spain being so called. Summer sun worshippers will take their chances here, but the flip-side is a wealth of lush green scenery, hard to find elsewhere. Even so, summer temperatures are respectable and even the low temperatures in January are not that cold - thanks to Atlantic breezes blowing bad weather further inland.

For dramatic scenery (and weather), head for the Rias Altas of Coruña. Home to almost 20% of the entire coastline of Spain and chart-topping rainfall of 194mm, this part of Spain's coast will blow the cobwebs away - literally.

For a south-west England experience of rolling green hills and fingers-crossed summer sunshine, head for the Costa Verde which spans Asturias and Cantabria provinces.

South Coast: If it's guaranteed sunshine you're after, head for any of the southern Costas in the Summer months. Top of the scorchers is the ever-popular Costa del Sol with the Costa Tropical and Costa Almeria not far behind. The section of the Costa de la Luz in Huelva is the one most likely to rain on your summer parade - thanks again to that unpredictable Atlantic influence.

Snow birds should head to the Costa Tropical in the winter months. Due to the sheltering influence of the Sierra Nevada mountains, it enjoys the warmest winter weather of any of the Costas.

East Coast: Unsurprisingly, the southern-most Costas offer the most predictable combination of hot & dry summers and mild winters. However, even the most northern Costa Brava, offers spectacular summers - and equally spectacular scenery. If guaranteed sunshine is your main aim, head for the Costa Calida in Murcia province.

The Costa Blanca and Costa Valencia also offer reliably sizzling summers and mild winters - which is why so many fleeing the colder climes of Northern Europe make their home there.

Spain's 5,000 km of coastline is distributed across 19 costas and spans 1,000 km from top to bottom. The variety of scenery and weather available in Spain is just one reason for the country's perennial popularity with holidaymakers and property buyers alike.

Martin Dell, Kyero.com

Thanks to a new series of Kyero.com property guides, you can now identify those parts of the Spanish coastline where you are most likely to find a Spanish property bargain.

By defining each costa as the strip of land within 5km of the sea, and overlaying our historical house price data, we discovered how each costa had responded to the downward pressure on house prices. By comparing asking prices in Q1 2008 with Q4 2008, we created this table of most keenly discounted property on the Spanish coast.

Even though it is extremely doubtful that properties are being purchased anywhere near the asking price, this table gives buyers an idea of where vendors and their agents have a more realistic expectation of sales price.

With an 11% drop in asking prices last year, property vendors on the Costa Azahar in Castellon and the Costa de la Luz in Huelva appear to be the most willing to negotiate a realistic sales price.

At the other end of the scale, those on the Costa del Sol and the Costa Blanca appear to be unprepared to drop asking prices at all - in fact they increased last year by 2% and 5% respectively.

The Costa Blanca in Alicante province is flanked by Murcia's Costa Calida to the south (showing an 8% discount), and the Costa Valencia to the north (showing a 7% discount). Further north is the chart-topping Costa Azahar (-11%), and further south is the Costa Almeria (-3%).

Faced with indicators such as these, I strongly suspect that property vendors on the Costa Blanca are losing buyers at the initial window-shopping stage to its neighbouring costas.

On the south coast, the Costa del Sol is at least in more consistent company with its eastward neighbour, the Costa Tropical recording a minimal 2% discount. Even so, it's difficult to rationalise a 5% increase in Costa del Sol asking prices when common sense and market events indicate that house prices are actually falling.

Comparing absolute prices, the neighbouring costas of Almeria and Murcia offer the lowest price property on the Spanish coast at an average of € 195,000 and € 199,000 respectively.

At the other end of the scale, Barcelona's twin coasts of Maresme and Garraf, weigh in with an average property price of € 548,000. No doubt this premium reflects the fact that Barcelona city, totem of Spain's economic power, is situated right on the coast.

Martin Dell, Kyero.com

A draft law introducing real estate investment trusts (REITs) in Spain is so complex and restrictive they would be of little use to property companies, Metrovacesa's legal chief warned on Thursday.

Manuel Liedo told a property conference in Madrid that the bill, which is going through parliament, needed to shed a series of provisions including limits on companies that are more heavily weighted to property sales rather than rental.

The law which will introduce REITS, or SOCIMIs as they will be known in Spain, should go through in the first half of 2009, said an economy ministry official who asked not to be named.

However Liedo said he was optimistic parliamentary deputies would introduce the changes property firms are pushing for before a deadline on ammendments closes in early February, following lobbying from the industry.

"The current formulation is not going to work. It should be adapted, getting rid of these obstacles of limits on investment, distribution of profits and level of debt," he told Reuters on the sidelines of the conference.

Metrovacesa is Spain's biggest property firm. Creditors are taking control of the company this month after its controlling shareholder defaulted on huge debts it amassed just as property markets were souring last year.

Spain's Socialist government is adopting REITS to galvanise Spain's traditionally underdeveloped rental market and boost investment in the flagging sector, where house sales have slumped and prices are diving as the deepest recession for a generation sets in.

Liedo said property companies might have to split their rental businesses and sales operations into separate companies under the rules -- even those like Metrovacesa where only around a quarter of its 12 billion euros ($15.57 billion) of assets are designated as for sale rather than rent.

He and other speakers said the current draft bill also made investment abroad difficult, if not impossible.

Despite the limitations on real estate firms, REITS will offer a valuable channel for banks to sell billions of euros of property they are accumulating via Spain's distressed market.

Liedo said he had no doubt that if the bill was altered, REITS would prove a huge success and would trump property funds as the most attractive investment route.

Under the rules, REITS must be listed, and have at least 85 percent of 15 million euros or more in urban property. They pay no company tax -- a burden which falls on investors themselves -- but do have to return 90 percent of profits excluding capital gains.

Story from Interactive Investor

A few of this week's news stories offered a welcome break from the regular "credit crisis" theme normally available. In the story about Fractional Ownership, it seems like the time may have come for this particular model of property investment - if they can successfully convince buyers that it's not the same thing as Time Share, and if the industry can figure out how to sell it effectively.

The pitch is pretty simple. Why buy 100% of a property when you only use it a fraction of the time? Why not buy the fraction of the property that you will use - and benefit from the capital investment and appreciation of that fraction. In the foreseeable credit-limited future, reducing the capital outlay for a property investment seems like a step in the right direction to me.

I'm grateful to Property Pulse reader, Stuart McGregor-Lovell, who pointed out the flip-side of the argument presented in this article about Capital Gains Tax. He rightly highlighted the good news about having a CGT liability in the UK: There had been a capital gain in the first place.

Stuart put some example figures together which resulted in this article entitled: Spanish Silver Lining to Sliding Sterling. Certainly, the window of opportunity created by the Sterling / Euro exchange rate is something those selling Spanish property need to take very seriously - while it lasts.

I found the article about EasyJet interesting because the AENA passenger figures quoted tally quite closely with the language preference of visitors we see at Kyero.com. I'd be willing to bet that foreign owners of Spanish property would also break down by similar percentages.

1. English: (UK, Ireland, USA) 47%
2. German: 28%
3. Italian: 12%
4. French: (France, Morocco) 12%

Conspicuous by their absence are visitors to Spain from the Scandinavian countries, the Dutch and the Russian - nationalities which we know are active property buyers in Spain. Presumably, their numbers are fragmented according to originating airports, and are therefore buried deep in the AENA data.

Finally, the point made in the story about Property brokers, CBRE is that Spanish property sells when the price is right. Admittedly, they mostly handle commercial properties - but if anything, that market is even more hard-nosed than the residential property market in Spain.

Martin Dell, Kyero.com

Normally implacable foes, Spanish MEPs from the Socialist Party and the right-of-centre Popular Party closed ranks yesterday in the face of heavy EU criticism of Spain’s abuse of property rights and the environment.

The criticism came in the form of a draft report by Margrete Auken, a Danish MEP from the Greens, who has been commissioned by the Petitions Committee of the European Parliament to report on property and environmental abuse in Spain.

This is the third time the Petitions Committee has ordered a report into town planning, public tender, property rights, and environmental problems in Spain, all in some way related to Spain’s unfettered building boom of the last decade.

Auken’s draft report is a hard-hitting condemnation of Spain’s urban planning practices, weak property rights, and unresponsive legal system. The report points out that this is the third time that the Petitions Committee has investigated “serious abuses of the legitimate rights of European citizens to property legally purchased in Spain.”

The Valencian Community, in particular, is in the dock for its so-called “land grab” planning laws that enable developers to promote private housing schemes on other people’s land, and force owners to help finance those schemes. It is also accused of allowing housing schemes without sufficient water resources, and ignoring EU directives on environmental protection.

The Petitions Committee of the European Parliament has received 186 petitions signed by 15,000 people denouncing urban planning abuses in Spain. The Greens claim there are 250 residential housing schemes that have no guaranteed access to sufficient water. Most of the urban plans denounced to the Petitions Committee involved the reclassification of rural land that lead to “considerable economic gains for to the urbaniser and developer,” says the report.

Auken also argues that the unfettered urban development has wreaked massive destruction on the Spanish Mediterranean over the last decade, “and all for the greed and speculation of some local authorities and members of the construction sector.”

Auken’s report proposes a moratorium on approving new housing projects that do not meet EU norms, and a threat to deny EU cohesion funds if Spain fails to comply.

A highly critical report from Auken was expected, but what has come as a surprise was the u-turn by Spanish Socialist MEPs, who have joined forces with the Popular Party MEPs to try and water down the report with amendments to remove references to a moratorium, and sections criticising the Spanish judicial system. MEPs have until 27 January to submit their amendments.

“The Valencian PP appear to have persuaded their Socialist colleagues to turn this into an issue of patriotism, that being the last refuge of the scoundrel,” says Charles Svoboda of the AUN citizens group fighting Valencia’s “land grab” laws.

Commentators in the Spanish press suggest that, with the construction sector in a deep recession, and with European elections just around the corner, the Socialists don’t want to be seen attacking a sector that has already shed hundreds of thousands of jobs, nor supporting moves denying Spain EU structural funds.

Story by Mark Stucklin

Property broker, CB Richard Ellis, said Spanish properties it sold via its online auction website were going for discounts of 20-30 percent on average.

While property stocks rise in Spain and sale plummet at the end of a decade-long property boom, CBRE said it sold 43 investment properties, commercial lots, warehouses and plots of land for discounts up to 47 percent since the web site began business in May 2008.

CBRE's Emilio Miravet, who is running the new project, said most of the assets being sold were distressed properties that banks were trying to offload, or developers bringing new properties to an already-saturated market.

'The outlook for this year is very good. There's a large pent-up demand and when we see attractive discounts between 20 and 30 percent, that's when you see things go really well. 'With discounts of 25 percent, or greater, demand starts to get more lively', Miravet said

CBRE said it sold the properties for a total of 9.5 million euros ($12.25 million), almost all in the last three months as the website gained popularity.

Story from Forbes

A This is Money article explains:

PIGS is an acronym for a group of four countries. Portugal, Ireland, Greece and Spain - all in deep economic trouble in the eurozone.

These are the four countries reckoned to be suffering from having to stick with the euro - and with the European Central Bank's interest rate policy.

Standard & Poor's, the ratings agency, thinks these four countries may have to ask the International Monetary Fund for help. To give you flavour, it seems that Ireland's economy could contract 4% this year.

Economists think we should be talking PIIGS here, not PIGS - they bundle Italy in with the four PIGS countries.

Since this article first appeared, S&P did indeed downgrade Spain's credit rating, and there is talk that the UK could also lose its coveted AAA rating.

Francisco, a reader from Madrid took exception to the original article and its slur against Spain. He (quite rightly) pointed out that people in glass houses shouldn't throw stones:

"Spain produced a star performance: Average growth of more than 3% for the last ten years, budget surplus, low public debt, massive immigration (five million, second only to the US)."

"Even at these tough times, no Spanish bank has been nationalised or bailed out as has been the case in the UK, Germany, the US, the Netherlands or Belgium."

"Furthermore, Spanish public debt stands below 36% whilst the UK's is 50%, Germany is 60 and the rest is higher than 70%. So think twice before using this kind of derogatory term against these countries, because countries like the UK are in a bigger mess."

As more recent articles from This is Money deal with the continued devaluation of Sterling, and the likely nationalisation of more UK banks, it seems that Francisco might well have a point.

In reality, the whole of Europe is in trouble, and comparing the degree of economic suffering in each country - especially those linked through a common currency - is an exercise in futility.

Martin Dell, Kyero.com

Easyjet carried the most passengers into Malaga Airport in 2008, flying more than 2.1million visitors into the Costa del Sol city, an increase of 16.7% y-o-y, according to figures released by the Spanish Airports Authority (AENA).

The Authority revealed that Monarch came second on the list, jetting in 804,00 passengers, a drop of 15.8% on 2007 when it was actually the fourth most active carrier to Malaga. Between easyJet and Monarch, the two airlines represented around 25% of all passenger traffic to the city. Over five million people visited the region, via Malaga Airport, in 2008.

Iberia airline’s passenger numbers were down to 722,901, a 17% drop y-o-y. The impact of easyJet is most widely felt by Iberia which used to hold top spot until 2005. Following Iberia was Spanair, Air Europa, Ryanair, Thomson Airways, Transavia and Clickair.

The AENA data also found that the new Delta Airlines route from New York to Malaga has carried over 33,500 passengers since June and looks set to feature significantly in 2009’s list.

The body also said that, while its domestic passenger numbers saw a reduction, international visitors to the country continued to grow. The UK was the single biggest tourist group to the country with 34,779,158 visitors, according to the AENA, followed by Germany (21,990,447), Italy (9,905,118) and France (8,452,880). In terms of visitors from outside the EU, the USA was the biggest group (2,238,366), followed by Morocco (1,058,067), Argentina (978,711), Mexico (939,858) and Brazil (721,187).

The AENA figures are representative of all airport traffic in the country and include internal and external flights to Spain.

Story from OPP (Registration required)

Thanks to recent dramatic changes in the Euro / Sterling exchange rate, British owners of Spanish property can realise a profit when they sell - even if they purchased at the height of the Spanish property market.

In September 2007 - the height of Spanish property prices - 1 Pound would have purchased 1.45 Euros. Today, it will buy 1.07 Euros - a drop of 26%. Whilst this is cause for concern to Brits who have not yet purchased property in the Eurozone, it allows existing property owners to price their properties competitively - if they intend to repatriate the proceeds of the sale to the UK.

Example 1: Mr. Smith purchased a Spanish property for €200,000 in 2007 - for which he exchanged £138,000. Due to personal circumstances, Mr. Smith is now a motivated seller, but property prices have fallen. He won't even get viewings for the property unless it's priced at €160,000 - a 20% reduction from when he purchased.

Eventually, Mr. Smith agrees to sell for €150,000 - netting him a significant loss of €50,000 in Spain. When used to buy Sterling, however, this equates to £138,000 at today's exchange rate. Although Mr. Smith has made a paper loss in Euros, he has broken-even in Sterling.

Although over-simplified, this example neatly demonstrates that, thanks to Sterling's 26% slide against the Euro, property owners can afford to discount their properties by 26% - without incurring a loss in Sterling.

Those who purchased before the height of the Spanish market, when Sterling was even stronger against the Euro, could fare better still.

Example 2: Mrs. Jones purchased property in Spain in mid 2001 for €200,000. At an exchange rate of 1.64, Mrs. Jones paid £122,000 in Sterling. At it's peak in 2007, Mrs. Jone's house was valued at €350,000 - although the market price today is hovering around €250,000. Again, due to personal circumstances, Mrs. Jones needs a quick sale and agrees to do so at €230,000 - a 35% reduction of it's peak market valuation.

Whist a €30,000 profit in Euros over 8 years is not an impressive return on capital invested, things look better when converted back to Sterling. Today, €230,000 is worth £212,000 - meaning that Mrs. Jones has almost doubled her money in Sterling - enough to pay a hefty slice of Capital Gains Tax in the UK.

Even so, after a CGT liability of £18,000, Mrs. Jones will have realised a net profit of £72,000 - equivalent to a net interest rate of 7% on her invested capital.

Of course, buying and selling costs will eat in to her profit, but Spanish property owners looking for a quick sale, and wishing to take the proceeds to the UK, now have an ace up their sleeves. The sliding value of Sterling against the Euro means they can price their properties to sell - and minimise the impact of that price reduction.

Those in Mr. Smith's situation may well be able to break-even in the UK, while those like Mrs. Jones can still make a healthy Sterling profit on their Spanish property investment.

Martin Dell, Kyero.com

Fractional property will take over from freehold sales in Europe within five years, according to industry specialists, as poor economic conditions leave its legacy on the world’s mid-range buyer market.

Fractional ownership was already growing in prominence with global buyers before the downturn, according to data from Mintel and the world’s two biggest fractional consultancies, the Ragatz Association and Northcourse Ltd, which revealed that in 2007 the fractional ownership industry was worth US$1.98bn, (20% up on 2006) excluding destination clubs which registered a further $2bn in sales.

In 2008, the market is predicted to be worth $1.2bn alone in the Middle East, with the majority of establish European and Mediterranean markets all recording strong growth in sales figures.

The industry is also taking root in Egypt, with agency Egypt Real signing a new affiliate partnership with consultancy Fractions Abroad, making it, what it claims, the first company to offer fractional ownership in Egypt.

More and more developers are looking to fractional as a way to secure sales in an uncertain future. Brad Lincoln, CEO of fractional consultancy The Best Group, said his company has been approached by an average of two developers per day to help them consider structuring a fractional product, but turn down 85% because there are not enough trained sales people to handle fractional sales, also stating that “fractions do not turn a poor resort into a good one”. “In five years time the only people not buying fractional will be retirees. Fractional is going to take over completely,” he added.

As a result, the new launch RGM Fractional held its inaugural Fractional Awareness Day in London, designed to raise awareness within the industry about fractional ownership and advise those brokers looking to enter the sector.

Speaking about the future of the international property industry, Lincoln suggested that freehold ownership will become a “luxury, with only high-end buyers taking this path” in the future, with fractional ownership, and its lower cost of entry, taking over.

Graeme Grant, MD of Resort Group International, agreed with Lincoln and said, at the awareness day: “Fractions have been successfully marketed in the USA for some 10 years now and will become the major leisure property product in Europe within five years, easily outselling freehold within that period.”

Story from OPP (registration required)

Over 90% of British overseas property owners are under-insured, opening themselves to public liability challenges in UK courts after the Rome II legislation came into effect this month.

The regulation change particularly impacts European property owners where insurance cover for public liability in Europe is often at a very low level, with those renting their property at a particular risk, according to insurance company Tonic Underwriting.

It warned that if a UK national suffers an injury in a European property, and both owner and tenant live in Britain, than action can be brought in the UK where awards are historically higher and, as a result, often exceeds the level of cover provided by a local insurance company. This, the company suggested, is potentially damaging to the property owner and the reputation of an agent, if the client believes they should have been warned of this possibility when buying.

“In our experience we have seen the consequences of inadequate policies and Tonic was created to fill that gap,” said John Newman, chairman and chief executive of Tonic. “The liability cover for Spain and Portugal is often extremely low, frequently in the region of €100,000 to €160,000. This would leave a client very dangerously exposed as any meaningful claim would potentially exceed this limit. It is for this reason that Tonic provides £5million limit of indemnity.”

Story from OPP (registration required)

The Spanish government on Friday slashed its economic forecasts for 2009 from growth of 1.0 percent to a contraction of 1.6 percent due to the global financial crisis and warned of dark days ahead for Europe's fifth-largest economy.

Unemployment, already the highest in the European Union, will hit 15.9 percent this year, worse than the 12.5 percent forecast in July while the public sector budget deficit will clearly surpass the eurozone limit of 3.0 percent of output in 2009, it said.

The government predicts the deficit will hit 5.8 percent of GDP this year instead of around 2.0 percent as previously forecast.

"The financial crisis that exists at the moment at the global level has changed the scenario very drastically," Economy Minister Pedro Solbes told reporters following a weekly cabinet meeting which approved the new economic forecast.

The government estimates the economy expanded by 1.2 percent last year compared to growth of 3.7 percent in 2007.

The collapse of a decade-long real estate boom due to oversupply, higher interest rates and the international credit crunch has spread to other areas, pushing the Spanish economy to the brink of its first recession since 1993.

Spain's unemployment rate hit 13.4 percent in November, the highest in the 27-nation European Union, according to the bloc's statistics agency Eurostat.

The new government forecasts are in line with predictions for the Spanish economy made last year by the Washington-based International Monetary Fund (IMF) and the Paris-based Organisation for Economic Co-operation and Development (OECD).

The IMF predicts Spain's economy will shrink by at least 1.0 percent this year while the OECD forecasts an economic contraction of O.9 percent in 2009.

Deputy Prime Minister Maria Teresa Fernandez de la Vega warned that "2009 will not be an easy year" but she predicted measures adopted by her socialist government to stimulate the economy will allow Spain to return to growth in 2010 "in force."

The government predicts the economy will expand by 1.2 percent in 2010 and by 2.6 percent the following year.

The unemployment rate will dip to 15.7 percent in 2010 and 14.9 percent in 2011, according to the new government forecasts for the economy.

Prime Minister Jose Luis Rodriguez Zapatero unveiled an 11-billion-euro (14.5-billion-dollar) stimulus package last year, mostly dedicated to public works, that is aimed at fighting unemployment.

The spending on stimulus measures at a time of lower tax revenues due to the economic slump has fueled fears over the state of Spanish finances

Standard and Poor's on Monday to put the country's credit ratings on watch for a possible downgrade, move a that would make raising money in debt markets more expensive.

"The creditwatch placement reflects our view of the significant challenges facing the Spanish economy as it traverses a period of very weak growth," the agency said in a statement.

Spain currently enjoys the top AAA long-term sovereign credit ratings. Only three other western European countries - Belgium, Italy and Portugal - do not have AAA ratings.

Story from Expatica

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

Standard & Poor's has threatened to strip Spain of its coveted AAA rating as country's budget deficit explodes, offering the clearest warning to date that even wealthy states are running out of room to borrow. The move caused fury in Madrid and revived fears in the currency and bond markets about the underlying health of Europe's monetary union.

Spanish officials are irked that S&P has placed Spain's debt on "CreditWatch Negative", a notch lower than the "outlook" alert issued on Irish bonds last week. It is the first time that a AAA country has suffered such a harsh verdict since the start of the global financial crisis.

Such a move typically precedes a downgrade within weeks but the finance ministry insisted this would not be allowed to happen. "There's not going to be a rating downgrade because we are taking measures to overcome the crisis," it said.

Trevor Cullinan and Myriam Fernández, the agency's analysts, said the housing crash had set off a downward spiral in Spain that would drive the budget deficit above 6pc by 2006, double the EU's Maastricht limit.

"We expect a substantial worsening in the Kingdom's public finances," it said, predicting 2pc contraction in 2009 and a long slump as years of credit excess are slowly purged.

Spain is discovering the limits of action within the eurozone. It can no longer let its currency take the strain, or follow the US, Switzerland, Sweden, Britain, in slashing rates. Indeed, Frankfurt raised eurozone rates last July at a time when Spain's housing crash was already under way. Unemployment has surged to 13.4pc, breaking the 3m barrier.

Michael Klawitter, from Dresdner Kleinwort, said Spain was now crumbling on every front. "Tax revenue is collapsing. There is a banking crisis and a massive deterioration linked to housing. It is arguable that Spain has already let matters go past the point of no return," he said.

"We are going to see fresh talk about the sustainability of monetary union and it is going to get messy. Spain is the most pro-EMU of the big states so there has not been any backlash against EMU, but who knows what will happen," he said.

Ian Stannard, a currency strategist at BNP Paribas, said Spain needs to raise €70bn (£63bn) this year on the bond markets, both to roll over old debts and to pay for a fiscal rescue package worth 1pc of GDP.

Europe's bond supply will reach €765bn this year, up 15pc from 2008. It is far from clear whether the markets can absorb so much debt. Although Spain's public debt is modest at under 40pc of GDP, this may not prevent a downgrade.

"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," said Mr Fernandez.

Story from The Telegraph

Owners of overseas property could be in for a two-fold tax hit due to the falling sterling and property prices, warns PKF Accountants & business advisers.

Matt Coward, director of personal tax, says UK tax laws stipulate any gains on overseas assets are calculated using the spot exchange rates on the given day assets are bought and sold.

He adds: "In our case study, a UK national buying a Spanish property in January 2007 for €1.25m (£854,818) sells in January 2009 for €1m (£966,744). Although there is a loss in euros, there is a profit in sterling of £111,926 on which he will need to pay UK CGT of at least £18,419 on 31 January 2010."

Coward warns this predicament could worsen whether homeowners decide to invest in a new overseas property with the profits, or leave the money in a foreign bank account.

"The position could be particularly difficult if owners now reinvest all their equity in a new overseas property as they may then have difficulty finding the cash to pay the UK tax liability when it becomes payable in January 2010. Even those who are aware they have a UK tax problem will often realise a smaller amount of post-tax equity from their properties than they may have expected.

"Worse still, if owners simply sell an overseas holiday home and leave their equity from it in a foreign currency bank account, they could face a double hit if the value of sterling recovers before the UK tax is payable on any gain. If they cannot pay the UK tax from UK funds, they would have to convert some of the original sale proceeds back to sterling at a disadvantageous rate. Of course, the value of sterling may yet fall further, which shows just how difficult these decisions can be."

He says homeowners should be aware of these various issues while undertaking a possible property sale, to best prepare for potential future tax payments.

Story from Investment Week

Spanish unemployment topped 3 million for the first time ever in December and the government said unemployment would worsen in 2009, as the global economic crisis continued to wreak havoc on the country's property-driven economy.

The number of people out of work in Spain jumped by 139,694 people, the ninth straight month of increases and more than expected, to reach 3.13 million, government data showed on Thursday.

The Labour Ministry's tally nearly matches totals in much larger economies such as Germany, where the December level was 3.18 million.

Since the same month last year, Spain's registered jobless has soared by nearly 1 million people or 47 percent as the global credit crunch toppled a decade-long housing boom and hammered spending.

'In 2009 it will be very difficult, in that unemployment will continue growing due to the fall in economic activity and demand,' said Employment Secretary General Maravillas Rojo.

Fourth quarter unemployment rate will be reported Jan. 23 by the statistics institute, with the rate expected to rise to over 13 percent from 11.3 percent reported in the third quarter.

Spain's jobless level compares with 5 million in the United States, which has over seven times more workers, and underscores its over-dependency on construction, easy credit and consumer spending to drive 14 years of rapid economic growth.

Analysts had expected Spanish joblessness to rise sharply in December, as the euro zone's fourth largest economy entered its first recession in 15 years, but were surprised by the increase which was four times higher than the year-earlier month.

'This figure was worse than we expected. We're expecting some bad months, especially in the first half of the year. Right now, it doesn't look like the situation will get any better,' said Sergio Diaz Valverde, economist at Caja Madrid.

The government of Prime Minister Jose Luis Rodriguez Zapatero has launched a 10 billion euro public works and infrastructure program to create 300,000 jobs in 2009.

Zapatero has budgeted over 60 billion euros in tax cuts, rebates and low cost loans to boost economic activity.

The stimulus measures will provide only partial relief given analysts' forecasts Spanish unemployment will rise by over a million to over 4 million by 2010.

Spain's property-driven service sector has shown the highest level of losses, with a total 1.8 million jobless compared with 591,000 in construction and 400,000 in industry.

Unemployment among immigrants rose 94 percent in the 12 months to December as building sites, households and businesses laid off 411,000 of over 5 million foreigners who flocked to Spain since 1998 in search of work.

Multinational agencies like the International Monetary Fund warn Spain could suffer years of low growth and high unemployment unless it reforms labour laws and develops economic substitutes to construction.

Story from Forbes

Last year was the worst year ever on record for the Spanish property sector, and this year doesn’t look like it’s going to be any better, reports the Spanish daily ‘El Pais’. Residential property sales collapsed, as did housing starts, and now there is hard evidence of unprecedented price falls, with new build prices falling 6.6%, according to Sociedad de Tasación, one of Spain’s leading appraisal companies.

The price falls recorded by Sociedad de Tasación are the biggest in the two decades that the company has been publishing price statistics. And according to Pedro Pérez, general secretary of the G-14 group of Spain’s biggest developers, prices are going to continue falling.

This is a novel development, as developer associations like the G-14 have taken a hard line against price falls ever since the Spanish property market started to wobble. At first they insisted that new build property prices would never go down, then, from one day to the next, that prices had already fallen by 15% to 20%, and so did not need to fall further.

It is easy to see why developers are loath to admit that prices might fall in future. If potential buyers expect prices to fall they delay their purchase, which helps force down prices. The expectations become self fulfilling, which is why developers always try to stamp them out.

Now developers have thrown in the towel and concede that new build property prices will continue falling.

“New build property is now between 15% and 20% cheaper,” says Pedro Pérez, quoted in El Pais. “This is the biggest fall we have ever seen. Furthermore, 2008 has been the worst year since property statistics began. Despite all this, I don’t see any light at the end of the tunnel. And if there is no change, prices will continue falling.”

El Pais points out that some experts have spent months calling for big price falls to bring the Spanish property market back to life. According to economics professor José García Montalvo, quoted in El Pais, “At the moment the housing affordability ratio stands at 7 times average annual disposable income. We will return to equilibrium when this figure falls to 4, which is where it was in the year 2000, before the property bubble began to inflate.”

Story by Mark Stucklin

For most of the 1990s, the euro was the big political question for both Spain and the UK. In Britain, the question was whether to join, while in Spain the concern was whether its economy was robust enough to qualify for membership.

As the credit crisis begins to bite with particular severity in the UK and Spain, opinions about the pros and cons of the single currency on its 10th birthday are again fluid.

With Britain at risk of an old-fashioned sterling crisis in which currency flexibility suddenly does not appear so attractive, the euro seems more attractive to the UK. But as Spain suffers from high costs and the inability to devalue against Germany, membership could become less agreeable.

On being accepted into the euro club in the 1990s, Spain immediately benefited from lower costs of servicing government debt, and its governments have been prudent in running surpluses that have turned to deficit spending only in the past few months in the face of the global crisis.

The single currency is about much more than economic statistics. Spaniards are not only much wealthier in absolute terms than they were a decade ago, they are also more confident about their place in European politics and commerce.

Not all of Spanish society was so thrifty, however, with the private sector (both households and companies) taking full advantage of the combination of low interest rates and a solid currency to spend beyond its means.

The uncomfortable truth is that Spain owes much of its high economic growth of the past few years to an unsustainable burst of spending on housing and imported consumer goods, financed by borrowing pushing the current account deficit to 10 per cent of GDP.

Those were the good times. But now that the housing market has collapsed and credit flows have dried up, Spain must adapt fast. In the old days, that would have meant devaluing the peseta to keep exports competitive; today, inside the eurozone, the only remedies are to be found in the real economy through greater efficiency and reduced demand – in short, unemployment and recession, something Dominic Bryant, an economist at BNP Paribas, calls “the painful adjustment”.

Britain’s recent economic history – single currency apart – has been remarkably similar. It had its own revolution in economic policy in 1997 when the Bank of England was given operational independence to set interest rates for the first time since its foundation in 1694.

Bank independence created the impression within Britain and abroad that the country had cracked its troubled history with inflation, pushing down government bond yields and attracting foreign capital flows.

Everyone was aware that the housing market was inflating faster than expected, but the rises in prices, in household debt and in the foreign funding of banks were argued away as a corollary of the UK economy’s strong performance.

Gordon Brown, the prime minister, was so confident in 2007 he had transformed the outlook that in his Budget speech he boasted: “We will never return to the old boom and bust.” But confidence has evaporated with the government conceding that Britain is due for a recession.

Treasury and Bank officials insist that things would be worse if Britain were constrained by euro membership and unable to allow the pound to depreciate. But there lurks a deep-rooted British fear that the currency’s more than 20 per cent decline is the start of a wider loss of confidence in the British economy that could lead to higher yields on government debt and capital flight from the country.

The euro, whether in or out, has had less effect on each economy than is often supposed. Linking to a bigger economic zone did not protect Spain from a housing and credit bubble and nor did currency flexibility in Britain.

By this year, both countries were running large current account deficits and had amassed record levels of private sector debt.

Story from The Financial Times

More than six in 10 economists believe 2009 will be a year in which to avoid buying property, with prices falling into 2010.

This still leaves a significant minority who think that prices will be close to their nadir towards the end of this year as the recession and credit constraints ease.

Economists are divided on whether falling prices will depress the economy further or are a symptom of more general weakness.

But a majority think the poor state of the housing market will add to the wider gloom in 2009, not least because housing construction, durable goods sales and services related to housing transactions are such a large part of the economy.

The overriding feeling among the panel is that house prices are still too high compared with incomes and credit conditions. John Calverley of Standard Chartered says: "The key thing is that a 50 per cent decline in prices only takes many values back to where they should be. It does not make them cheap."

Jonathan Loynes of Capital Economics says: "The experience of previous housing downturns suggests that, even after prices stop falling, it could be some time before they start to rise again at any meaningful rate."

Many, such as Andrew Oswald of Warwick University, believe the market should be reaching a bottom towards the end of the year. But Prof Oswald is cautious: "As I called the house-price crash too early, I am particularly conscious of the difficulty of predicting the turn of the herd."

David Miles of Morgan Stanley sees a chink of light. "Assuming that credit availability improves somewhat, a further sharp decline in house prices over 2009 does not seem the most likely outcome."

A few, mostly academics such as Patrick Minford of Cardiff Business School, believe 2009 will be a good year for buying property. Dieter Helm of New College Oxford sees late 2009 as a good time to buy because "house prices are likely to be much lower and the real assets may increasingly be seen as a protection against currency debasement".

Robert Barrie of Credit Suisse supports the Bank of England's case that property is a symptom of other economic events rather than a cause. "The housing market is a dial on the dashboard rather than a key component of the economy's engine.

Story from The Financial Times

Around the world the property industry is preparing for rough seas, clamping down budgets and stowing expectations.

In many ways, 2009 will be “a deeply unpleasant year,” the Global Property Guide forecasts in its annual report, a fairly typical example of industry projections. A review of 2009 forecasts finds pessimism running rampant, with many prognosticators seeing 2009 as even worse than 2008.

“2008 was the year that subprime borrowers and speculators got hurt by the real estate crisis. 2009 could be when everyone else gets hit,” a Business Week analysis warns.

But business goes on. Investors are still hunting for deals; construction and sales continue. Markets like Latin America and Middle East may even grow in the year ahead.

“Raising the Roof” wades in with its own predictions for 2009, from intriguing markets to the trends that may impact the industry.

-Death of the speculator: Ah, who will forget the good old days when buyers would get on the phone and buy two or three units they’ve never seen, knowing they could flip them in a couple of years. That buyer sleeps with the dinosaurs.

-Vultures rule: There’s never been a better time to be a bottom feeder. Deals are available around the world for investors willing to pick through the remains. The good news: Vulture activity suggests a market is bottoming out. The bad news: What happens a year from now when the vultures put that property back on the market and look to quickly cash out?

-Return of the Americans: The dollar is gaining strength, making the world a more affordable place for U.S. buyers. Suddenly that Tuscan farmhouse looks a lot more appealing to Joe and Martha from Iowa, thanks to the drop in the euro.

-Safe haven shoppers: Real estate is the new blue chip investment. Already developers say investors are looking for places to stash their money outside stocks and banks, making overseas property an attractive alternative, especially for mid-range buyers seeking a long term way to diversify their portfolios.

-Off plan is no plan: Convincing people to buy in pre-construction is almost impossible these days, developers say. Few buyers are willing to put money down until they see a finished product, especially skeptical Americans.

-Green is In: Conventional wisdom suggests eco-policies will take a back seat in tough economic times. But the election of Pres. Barack Obama will likely bring the United States into global discussions, fueling new technologies and a renewed eagerness (and requirement) for eco-friendly development among conscientious buyers and municipalities.

-Eastern Europe slowdown: The high fliers of the last few years will likely slow, as Western buyers grow more skittish. At the same time a wave of new developments started three years ago at the height of the market in countries like Bulgaria and Romania will come on line, creating a glut of supply of luxury condos.

Story from Raising the Roof

A large number of Britons buying off-plan homes from bankrupt Spanish developers say they are tens or even hundreds of thousands of pounds out of pocket, because banks in Spain are refusing to honour guarantees.

Bank guarantees, or Aval Bancario, from developers have been compulsory by law on off-plan purchases in Spain for the past 40 years. They mean that if a developer fails to build on time, or goes into administration and does not build at all, buyers should get most or all of their money returned.

Until recently they worked well. As the holiday home market boomed, few developers went bust and buyers would accept minor delays. If a buyer did claim a refund, developers and banks gladly obliged knowing that rising values and strong demand would see any subsequent unsold home snapped up.

But now Spain's property market is in free-fall. At least 15 developers building holiday homes on the Costas filed for bankruptcy last year. Thousands of homes remain part-built and buyers are calling in bank guarantees. But many are discovering they were given faulty documents by developers, or have guarantees with conditions that make them worthless. One major developer in administration, Martinsa-Fadesa, has been accused by the newspaper El Pais of not issuing bank guarantees at all.

"Until recently some developers would regard it as an insult to be asked for them by foreign buyers and just wouldn't issue them. In other cases guarantees exist but may be out of date or worded in a way that make banks feel they need not honour them," says Peter Ebders of the International Law Partnership, a British legal firm.

More ominously, Ebders says even some guarantees that are in order are not being honoured because banks do not want to pay out large sums in the current dire financial situation.

Ruth Genda, from Wymondham in Leicestershire, fell foul of a worthless bank guarantee on an apartment in Marbella on the Costa del Sol. The retired educationalist put down a £75,000 deposit in 2003. But construction was delayed and then the flat was declared an "illegal build" for lacking formal planing permission. Genda took Banco Popular Hipotecaria (BPH) to court, which declared her guarantee valid. But BPH appealed and the original result was overturned. A further legal review found in the bank's favour.

Genda says the lack of appropriate building consent makes the flat impossible to occupy: "We're not prepared or able to buy an illegal property. It can't be mortgaged and it can't be sold because of its status. Our coffers are drained by legal fees and other costs, and we're likely to lose our deposit."

Genda has launched an online petition - but is realistic about the slim chances of success. "The guarantees have been given under false pretences, and no one in authority we've approached - MPs, MEPs, ministers, ombudsmen and so on - have been able to help."

More than 100 people claiming to have valid guarantees have signed Genda's petition. "The problem is widespread. Lots of Britons are caught up. It's scandalous," says Barcelona-based Mark Stucklin, editor of the website Spanish Property Insight.

The Bank of Spain says it has told banks to honour valid guarantees but has no power to enforce the instruction. Lawyer Mark Wilkins of Marbella-based The Rights Group says any prospective buyer, or one in mid-purchase, should instruct a lawyer to check the eligibility of his bank guarantee - even if the developer appears not to be in financial difficulties.

Story from The Guardian

The Ministry of Housing recently released their provisional figures for Q3 of 2008. You can download the revised, sanitised and translated MVIV figures from Kyero.com.

Most of the data released by the Ministry of Housing (MVIV) is unreliable because it uses property valuations rather than actual sales prices. However, the Ministry's figures for the number of property transactions is rock-solid, and provides a useful insight into Spanish property market trends.

The big story is that developers are forging ahead with sales of new build properties - at the expense of the resales market. Even so, in most areas of Spain, sales of both new build and resale properties were dramatically lower, comparing Q3 2008 with Q3 2007.

Overall, the volume of property transactions completed in Q3 2008 reduced by 42% YoY. Sales of new build properties reduced by 25%, with resales transactions decreasing by 50%.

Sales of new build properties decreased in almost every province - Huesca saw the largest decline at 42% YoY. However, as developers in some provinces rush to complete, sales of new builds actually increased - three by 70% or more:

Across Spain, the number of resales transactions fell in every province, Alicante was the worst hit - recording a decrease of 59% YoY.

The reduction in the volume of transactions in Q3 2008 translates to an overall reduction in spending of almost 11Bn Euros in Q3 2008 - 3.5Bn less on new build properties and 7.5Bn less on resale properties. Only one province, Teruel, saw an increase in overall spending - by 11M Euros - thanks mostly to increased sales of new build properties.

The fact that the resales market is suffering more than the new build market is not surprising for two reasons:

1. Sales of new build properties completed in Q3 2008 were actually contracted some years earlier. Buyers of these properties are under contract to complete or forfeit their deposit money. Developers are forging ahead to complete on developments to bolster their cash flow.

2. Developers have a lot more scope and motivation to reduce prices of new build properties than do vendors of resale properties. As the Kyero Q4 2008 Spanish house price index demonstrates, vendors persist with unrealistic pricing of their properties - hence they are not selling.

The Spanish National Institute of Statistics (INE) also released their Q3 2008 House Price Index recently. It showed a 3.7% increase YoY for new build housing and an 8.6% decrease in resale property prices comparing Q3 2008 with Q3 2007.

However, the INE figures are calculated using values from notarised property transactions, which are unreliable. Tax evasion is widespread in Spain, and it is common practice to under-declare the notarised value of a property transaction - rendering the INE figures all but useless.

The well documented glut of new build properties is estimated to be over 1 million units which, at the current rate, will take two years or more to be absorbed into the market. Until that happens, expect the number of resales transactions to suffer - except for homes which are priced to complete with comparable new build properties.

It could take two and a half years for the glut of new, unsold properties in Spain to be cleared, according to the latest data.

It is estimates that there are almost a million new homes that are unsold, most on the Spanish coast, many of which were built for British property investors who have now deserted the market because of the global economic downturn.

According to the Institute of Construction Technology any property finished by developers in the next year will join Spain's inventory of unsold new homes.

Because long lead times and inertia are endemic in the Spanish construction industry the glut is just going to get bigger and the firm estimates that around 600,000 homes have been completed in 2008, despite a severe slump in property sales.

'In 2008 there has been a lot of work, almost as much as in the best years of the property boom,' said spokesman Josep Fontana.

Its report forecasts that the number of finished homes will fall to 300,000 in 2009, a 50% drop in output, before stabilising with a 2% fall in 2010. That would take residential construction levels back to where they were in 1996 and 1997, before Spain's real estate boom kicked off.

Meanwhile the latest forecast from BBVA, one of Spain's largest banks, predicts that property prices will fall by 25% by 2011. Swiss banks Credit Suisse and UBS have already forecast falls of 30% in a similar time frame.

BBVA also estimates that the inventory of new homes languishing on the market in search of a buyer stands at between 800,000 and 1.4 million, somewhat higher the Ministry of Housing's estimate of 650,000 unsold new homes.

Story from Property Wire

The number of people seeking a new life in Spain has surged by 12% as Britons firmly established themselves as the country's fourth-largest immigrant community.

Figures released yesterday by the Spanish government revealed that the number of British expatriates registered as resident in Spain had risen to 352,000 at the start of 2008. That gave Spain a bigger British population than all but eight local authorities in England, according to the most recent census figures.

Although the new figures were gathered before the tumbling value of the pound began creating problems for those living off British pensions in Spain, few people expect numbers to start falling.

"Some people have had to head back to Britain recently but the impression is still that there are lots more just waiting for things to change so they can come over," said James Parkes, editor of the English-language Costa Blanca News. Emigrants to Spain are no longer mainly pensioners. The figures show only one third of Britons living in Spain are aged over 55.

Most Britons there are of working age, though their traditional jobs, such as selling holiday homes, are disappearing this year as property bubbles burst in both Spain and Britain.

British voters have helped elect compatriots as councillors in some town halls. Mark Lewis, a councillor in the town of San Fulgencio, near Alicante, even found himself as acting mayor earlier this year after many of his fellow councillors were arrested on suspicion of corruption.

The Foreign Office believes the official Spanish figure still hugely under-represents the real numbers living in Spain. "Around 1 million Britons now live permanently in Spain," it says. That would suggest most Britons still refuse to register at town halls, making life difficult for councils which receive funding on the basis of their registered population.

Story from The Guardian

Spanish banks are turning into some of the biggest real estate companies in Spain, just as they did during the last property crash of the late 80s and early 90s.

To a greater or lesser extent, banks are running some of Spain’s biggest listed developers, companies like Colonial and Metrovacesa, who were forced to throw themselves at their bankers’ feet when they couldn’t cope with their billions of Euros of debt.

It’s not just the big developers with billions of Euros of debt that the banks are having to take over to prevent their loan default rates from going through the roof. All around Spain many small regional banks and savings banks have been quietly taking over small local developers for the same reason.

Having taken over developers or their assets in return for cancelling debts, many banks and savings banks, known as cajas, now find they own a wide variety of real estate assets from land and flats under construction to finished developments and business parks.

Knowing what to do with all their new real estate holdings is an increasing problem for Spain’s banks. Big banks like Santander have set up new divisions to manage property portfolios, which in Santander’s case is valued at more than 2 billion Euros.

But banks are not property companies, and on the whole do not do a good job of managing real estate assets. That said, the property crash of the early 90s turned out to be one of the most profitable episodes in the history of Spanish banking. Having got assets on the cheap, all the banks had to do was hold on until the market picked up, which it inevitably did.

The big question is, will it be the same again this time?

Story by Mark Stucklin

Over the Christmas break, I was reminded how some things never change.

After systematically working my way through a big tin of Quality Street, it was the round, flat, yellow toffee pennies which remained for several days before being thrown away. Perhaps it's just me, but I've never understood why Nestlé persevere with that particular sweet.

According to our latest Spanish House Price Index, property vendors in Spain are also persevering with a lost cause - maintaining asking prices. Despite the well publicised economic downturn, and despite Spain suffering from the boom to bust cycle more than most countries, it seems that vendors are not willing to reduce their asking prices at all.

In reality, property in Spain is being sold - but not at anywhere near the asking price. I know of a handful of properties sold recently in Almuñecar where the vendors were willing to reduce their asking prices by around 30%. Yes, it's harder to get a mortgage these days, but there are buyers when the price is right.

I can understand the vendors' reluctance of dropping asking price by 30% - and not leaving any room for further haggling - but leaving asking prices high is simply putting off buyers from even contemplating making an offer.

My advice? In the absence of any reliable house price data about actual sales prices, take the asking price with a pinch of salt. You know how much you want to spend on a Spanish property - just add 30% to that and begin searching in that price range. Once you've found a property that appeals, make a cheeky offer. What's the worst that can happen?

Not every vendor will be willing to drop their price substantially - and they're entitled to hold out and wait several years for property to actually be worth today's asking prices.

When you factor in the devaluation of the Pound against the Euro, the ideal vendor to seek out in 2009 is a vendor in a hurry (for whatever reason) who wants to repatriate the proceeds of the sale to the UK. If you are buying in Euros, you can now offer at least 20% less than just six months ago. The vendor will still finish up with the same amount in Sterling, and their tax liabilities will be 20% lower in Spain too.

If you are buying in Sterling, conduct the entire transaction in that currency to reduce the buying and selling costs and to remove the currency risk from the equation for both parties.

I think that there will be some great Spanish property bargains up for grabs in 2009, but like the Quality street toffee pennies, there will also be a lot of properties just making up the numbers.

Martin Dell, Kyero.com

A new statistic from the Ministry of Housing helps to show that the Spanish property boom is definitely over. The number of transactions involving resale properties is back to the pre-boom low, with sales falling 47% to 179,000 in the first 9 months of the year, compared to 339,500 in the same period last year.

The fall is even more pronounced if you just look at transactions in the third quarter, when there were only 45,400 home sales in all of Spain.

Sales of newly-built properties have been holding up much better, down only 16% in the first 9 months of the year. This is little comfort for developers, however, who have seen an almost total collapse in new sales contracts, which will show up in the Ministry’s figures during the course of next year. Overall, Spanish property sales are down 33% year on year.

Meanwhile, the international ratings agency Standard & Poors has forecasted that Spanish property prices will fall 30% peak to trough, saying that this will be the worst property crash for Spain since the 1970s. According to official figures prices peaked in the last quarter of 2007, and S&P doesn’t expect the market to turn around before 2010.

Story from Mark Stucklin

Download the latest Kyero.com Spanish House Price Index. Updated with the latest analysis of average asking prices for Q4 2008, it shows Spanish house price trends from mid 2007.

Comparing the average asking prices of Q4 2007 and Q4 2008, many vendors and estate agents continue to price properties optimistically.

Although double-digit price decreases have been observed in six of the provinces measured, most Spanish property vendors seem intent on maintaining a fictitious asking price - presumably to leave room for haggling.

Overall, the average asking price in Spain fell by 0.3% over the past 12 months, yet 10 provinces recorded a price increase - some as hefty as 17%.

Whilst the reasoning behind adopting this kind of pricing is questionable, these statistics are consistent with the figures published by the Ministry of Housing and the Institute of National Statistics for Q3 of 2008.

The figures from the Ministry are based on property valuations rather than sales and are therefore subject to the whim of the assessor and the motive for the property valuation. Their Q3 2008 figures show a slight increase in the national average price of property in Spain.

The National Institute of Statistics uses actual notarised sales to publish their figures - which demonstrate a 3% annual decrease by Q3 2008. However, even these figures must be taken with a pinch of salt because they do not account for the still-common practise of conducting part of the property transaction in cash.

Whether it's notarised prices, property valuations or asking prices, each set of numbers hides the scope of the downturn in Spanish property prices. Personally, I believe that this lack of transparency is one of the fundamental causes of the property crisis in Spain - not a symptom of it.

Property vendors and their agents have the power to kick-start property sales by pricing properties to sell and being prepared to demonstrate an actual and significant reduction in their asking prices. Instead of asking vendors what sales price they want, estate agents in Spain can now drive the sales process by advising their clients of a realistic asking price - one which will attract buyers.

This week, I noticed the same property being promoted by a handful of agents between 385,000 euros and 280,000 euros. I also heard of a property sale where the price had genuinely been reduced to 3 million euros from over 4 million. Spanish properties are selling when the price is right.

In lieu of consistent and realistic property pricing in Spain, and in the absence of reliable price data, my advice to buyers is to completely ignore the asking price and make a cheeky offer. This is the most productive strategy until vendors and agents price properties to sell, or a reliable set of house price data becomes available.

As a guide, consult the Kyero.com house price index for the area you are interested in - and start making offers at 30% below that level. What's the worst that can happen?

Martin Dell, Kyero.com

Spanish property prices may barely have fallen so far, if you believe the official figures that is (down just 0.5% in 2008), but all that is going to change in 2009, according to BBVA, one of Spain’s largest banks.

Prices will fall “close to 5% in 2009 and 10% in 2010,” says José Luis Escrivá, head of research at BBVA, leading to a total fall of 25% by 2011. Swiss banks Credit Suisse and UBS have already forecast falls of 30% in a similar time frame.

BBVA also estimates that the inventory of new homes languishing on the market in search of a buyer stands at between 800,000 and 1.4 million, somewhat higher the Ministry of Housing’s estimate of 650,000 unsold new homes. Neither offer figures for the number of resale properties on the market, which is likely to be at least as big again.

With Spain’s housing glut putting prices under pressure, it won’t be until 2010 that the market starts to digest the oversupply, thanks to lower mortgage rates and a drastic fall in housing starts. BBVA forecasts that in 2010 base rates will be 1% and Euribor – the interbank lending rate normally used to calculate mortgage repayments in Spain – will be just 1.9%, whilst housing starts will be down to 200,000 per year, from more than 800,000 in recent years.

Story by Mark Stucklin

Is any property below €50,000 a cheap Spanish property? Are cheap Spanish properties only to be found at auction or as bank repossessions? How much below market value does a Spanish property need to be to be considered cheap?