Hi Neil,

interesting article, however from what I have read the Spanish mkt is in complete freefall. What is your opinion from on the ground? Is the market as bad as the press are reporting? Do you see it picking up?

thanks
Alex

Hi Alex,

This is Daniel Talavera from PS Spain.

I agree: Neil´s article is pointing out a culture factor in property business. In Spain it is quite common to have support from your family in order to increase assets, which is important in order to generate family wealth. Not only young first time buyers are helped by their parents to buy the first property, but also family support is a way to create a large portfolio of properties.

Regarding the situation of the Spanish economy, current indicators are hitting negative records since the early 90s. This summer the employment rate in Spain has just grown by 0.4% -which is quite poor since Spain is a classic tourist destination and regularly employment tend to grow by 2,5% in summer. Unemployment rate in Spain is now 10%. 2008 GDP forecast is 1.8% (the lowest since 1993). Household consume has decreased by 1% in the last quarter.

From an economic perspective, the key questions in Spain are: How long will take us to go through the crisis? In which conditions will be the economy at the end of the tunnel?

Regarding the specific crisis in the Spanish property market, the main consequence is that the prices are falling in some cases by 30%. Only investors with liquidity (purchasing power) will get advantage from it.

Be careful investors: the Spanish case has proved that the fundamentals of the market and the Golden Rules of the Property Investment are important. In the wave of the massive property investment in Spain (2003-2006) many investors just followed the trend and started investing in property without proper advice and guidelines. Then, they bought a bad investment that in the current crisis can not be sold out even being offered with a 30% discount. I have seen cases in which a property has been offered with a 50% discount.

Thinking in the property market the key questions are: When are we going to have the lowest price? Which business model is going to lift up the property industry?

Hi Alex and others,

Interesting article.

There opportunities in Spain right now, especially if you are a cash buyer cos many banks are only giving 60% LTV (traditionally 80-85% in Spain) these days & are asking for additional ´avales´= ´guarantees´ which was uncommon say two years ago.

Furthermore, banks are giving very low valuations which also means that its next to impossible to get the money to buy.

However, opportunites exist if you track down motivated sellers or buy from developers with cashflow problems.

On the other hand, it won´t be easy to find bargains if u r buying in a good area anywhere or in a booming city (at least in my view).

Flats which are falling in price are probably the ones in very bad locations, or with oversupply, no services, poor infrastructure or transport links etc, or just too expensive in some areas as everyone was chasing the market up for years and now it´s come to a halt.

The banks now want guarantees from parents of buyers, or another property and want to have their fingers in many pies just in case the market crashes more in next year or two. Cos its a crash in paper terms in the big cities. Noone is really buying or selling much.

Some Spanish savings bank are also believed to be caught up in the credit crunch.

I also agree with article that Latin countries have high prices due to the family factor. Sit down on a terrace with any Spaniard on a cool breezy summer night and if the topic of property crops up, he or she will soon tell you how he has one or two flats or his family, brother-in-law or whoever has a lot of property or plans to have alot..!

Its common for Spaniards to keep their investments close to home. They often have 2 or 3 apartments in the same block, one or two of which will be the childrens future inheritance. Moreover, real supply is cutback or distorted due to their reluctance to sell if it aint for the right price plus the fact that Spaniards prefer to leave their flats sitting idle due to the unfair rental laws in Spain.

Spain is a great country and always will be I´d recommend anyone to buy there if you want to live in the country, but only in the right area and with sound property fundamentals in mind and your homework done. The days of quick easy money are gone in Spain.

Ramble over.

Liam