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A monetary crisis is brewing in Spain

A monetary crisis is brewing in Spain

Old May 16th 2007, 11:51 am
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Default A monetary crisis is brewing in Spain

Spain has been living on credit and this can't last forever.

http://www.telegraph.co.uk/money/mai.../cnspain16.xml

Does it affect you? Maybe... if you are planning to buy now or are planning to sell a property in Spain over the next few years. Renting never looked better around here.
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Old May 16th 2007, 12:03 pm
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Default Re: A monetary crisis is brewing in Spain

Hi,

When I was looking for a place to rent I was also checking out the buy prices as well. At first I thought I was imagining things but the two numbers definitely didn't make too much sense. The rental value is definitely lower than you would expect for the value of a sale house. Of course, I'm basing this on how the UK let/sell market works it's numbers out.

You get to a point where the rental cost and the cost of say a mortgage is too far apart. When this happens people will suddenly start asking themselves "Do I need to actually buy a house right now?". A house, for many young people like me, is essentially a pention investment. Can you reply on the government/company to give you a livable pension for when you retire? I think those days have gone, people are feeling the panic and need to secure this for themselves.

Now this is where I personally see the problem. While there is still people thinking that property can be their retirement plan, prices won't move too much on this basis. People feel the need to have that security, no matter how much it will cripple them. Other factors can push prices down, abundance of supply, interest rates due to people stretching themselves too far.

Wow, I really started to rant here, haha.

To be brief, yeah I noticed the rent/sell different and it is kinda strange.
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Old May 16th 2007, 12:14 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by SoJohn
Hi,

Wow, I really started to rant here, haha.

To be brief, yeah I noticed the rent/sell different and it is kinda strange.
You are right. Rents have to adapt to what people can pay. This seems to be obvious. House prices seem to have different reasons: maybe there is a bubble. The truth is that probably 90% of people in Spain wouldn't be able to afford the houses they live on.

My message is not about houses though. It's about a crisis that it's certainly starting. We had lived on credit and now it's time to pay it. How? That is certainly a hard question to answer. How is Spain going to be able to remain in the euro zone in our current situation? Tough question.... Maybe Spain will become cheaper... and that is good news for foreigners unless you have relied on real estate to become wealthy....

It's hard to predict the future and that is why you should rent...

my 2 cents.

Last edited by gudes; May 16th 2007 at 12:19 pm.
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Old May 16th 2007, 12:21 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by gudes
You are right. Rents have to adapt to what people can pay. This seems to be obvious. House prices seem to have different reasons: maybe there is a bubble. The truth is that probably 90% of people in Spain wouldn't be able to afford the houses they live on.

My message is not about houses though. It's about a crisis that it's certainly starting. We had lived on credit and now it's time to pay it. How? That is certainly a hard question to answer. How is Spain going to be able to remain in the euro zone in our current situation? Tough question.... Maybe Spain will become cheaper... and that is good news for foreigners unless you have relied on real estate to become wealthy....

It's hard to predict the future and that is why you should rent...

my 2 cents.
Hey gudes!!!

Nice to see you back....

Totally off-topic.......but what has happened to Spanish Crash Course V????? Huh, huh, huh? I think we were all enjoying those (hint, hint)!

Hope to be seeing you posting more often
Martha
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Old May 16th 2007, 12:28 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by MnM
Hey gudes!!!

Nice to see you back....

Totally off-topic.......but what has happened to Spanish Crash Course V????? Huh, huh, huh? I think we were all enjoying those (hint, hint)!

Hope to be seeing you posting more often
Martha
Thanks MnM (Martha?), what a sweet thought! I had fun writing them too!!! OK! let's see what I can do. Maybe next lesson will be about driving. That's certainly FUN around here.

Saludos!!!
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Old May 16th 2007, 12:33 pm
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Default Re: A monetary crisis is brewing in Spain

Hi,

A similar problem in the UK. The difference? We don't have an abundance of supply. If people are ruining themselves in debt there is someone else behind them willing to make the same mistakes.
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Old May 16th 2007, 12:54 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by SoJohn
Hi,

A similar problem in the UK. The difference? We don't have an abundance of supply. If people are ruining themselves in debt there is someone else behind them willing to make the same mistakes.
The UK is not part of the euro... maybe for the better. I am sure there are advantages and disadvantages. But in Spain our external deficit (exports - imports, basically) is at 9.5% of the GNP, the biggest in the world and clearly unsustainable. In a normal situation Spain would devalue its currency but in this current situation this can't be done. We will probably have to reduce imports and stop borrowing money which will hurt the economy. Combine that with a "probable house bubble" and you have the makings of an economic crisis...

Saludos!
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Old May 16th 2007, 12:56 pm
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Default Re: A monetary crisis is brewing in Spain

A crisis is often determined by how people choose to react. If people panic then things could go BOOOOOOM indeed.
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Old May 16th 2007, 1:40 pm
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Default Re: A monetary crisis is brewing in Spain

Property is the best investment you can make. In the long term. I started buying in the UK in 1975 and moved house around every 7 years. By 2006 I had made enough out of it to retire 13 years early with no mortgage and live in Spain.

I don't expect to make a quick killing on the property here, but over the years I will make money. When we sell here we will probably downsize to a small town house, nearer shops and with easier access (we're up a hill) and that will release more funds for our later years.

The days of buying a property in Spain and then selling it a few years later for immense profit are gone, but the excellent long term advantages remain.

I would never have been able to do this by stock market investments alone, unless I had been extremely lucky. Relying on a pension is pointless now. Get on the property market! Your investment may go up as well as down, but overall its a winner.
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Old May 16th 2007, 1:41 pm
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Default Re: A monetary crisis is brewing in Spain

Hello gudes

I have missed you too, where have you been?
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Old May 16th 2007, 1:59 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by crispygirl
Hello gudes

I have missed you too, where have you been?
Thanks, crispygirl. Let's see if we can go back to our "Spanish culture lessons". Nice photo!!!

Last edited by gudes; May 16th 2007 at 2:50 pm.
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Old May 16th 2007, 2:05 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by Mitzyboy
Property is the best investment you can make. In the long term. I started buying in the UK in 1975 and moved house around every 7 years. By 2006 I had made enough out of it to retire 13 years early with no mortgage and live in Spain.

I don't expect to make a quick killing on the property here, but over the years I will make money. When we sell here we will probably downsize to a small town house, nearer shops and with easier access (we're up a hill) and that will release more funds for our later years.

The days of buying a property in Spain and then selling it a few years later for immense profit are gone, but the excellent long term advantages remain.

I would never have been able to do this by stock market investments alone, unless I had been extremely lucky. Relying on a pension is pointless now. Get on the property market! Your investment may go up as well as down, but overall its a winner.
I wish you the best. I have my own house but I didn't buy it to make money. Anyway I am worry about our economy more than house prices. But I disagree with you concerning investments. The USA stock market has delivered 11% per year over a hundred years, despite the cyclical crisis that the market goes through.
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Old May 16th 2007, 2:32 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by gudes
I wish you the best. I have my own house but I didn't buy it to make money. Anyway I am worry about our economy more than house prices. But I disagree with you concerning investments. The USA stock market has delivered 11% per year over a hundred years, despite the cyclical crisis that the market goes through.
I bought my last but one house in 1994 for £112,000, spent 50k on an extension, and sold it for £368,000 in 2001. At 11% pa that would be approx £142k as opposed to the £206,000 I realised.

In Spain the house I purchased 3 years ago has theoretically appreciated in value by around 30%.

Apparantly Spain has one of the better growing economies in Europe, 2.7% last year and predicted to do the same this year, although there are concerns
http://www.expatica.com/actual/artic...story_id=19424
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Old May 16th 2007, 2:49 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by Mitzyboy
I bought my last but one house in 1994 for £112,000, spent 50k on an extension, and sold it for £368,000 in 2001. At 11% pa that would be approx £142k as opposed to the £206,000 I realised.

In Spain the house I purchased 3 years ago has theoretically appreciated in value by around 30%.

Apparantly Spain has one of the better growing economies in Europe, 2.7% last year and predicted to do the same this year, although there are concerns
http://www.expatica.com/actual/artic...story_id=19424
I disagree with this paragraph from your link

"But it is not all bad news. Key industries, like tourism and house building, which are crucial to the Spanish economy, remain healthy."

House building is not healthy at all. Three weeks ago Astroc and other companies in the housing business all but collapsed in the stock market in Madrid. They are now facing extremely slow sales and huge credit payments at growing interest. To give you a number... this sector owes a total of
250.000.000.000 euros to the banks. To put that number in perspective they would have to sell 2 million houses or apartments at an average price of 125.000 euros just to pay the debt. This paragraph sounds like wishful thinking to put it mildly. If these are "not the bad news" I don't want to hear about the really bad news.
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Old May 16th 2007, 3:07 pm
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Default Re: A monetary crisis is brewing in Spain

Originally Posted by gudes
I disagree with this paragraph from your link
"But it is not all bad news. Key industries, like tourism and house building, which are crucial to the Spanish economy, remain healthy."
House building is not healthy at all. Three weeks ago Astroc and other companies in the housing business all but collapsed in the stock market in Madrid. They are now facing extremely slow sales and huge credit payments at growing interest. To give you a number... this sector owes a total of
250.000.000.000 euros to the banks. To put that number in perspective they would have to sell 2 million houses or apartments at an average price of 125.000 euros just to pay the debt. This paragraph sounds like wishful thinking to put it mildly. If these are "not the bad news" I don't want to hear about the really bad news.
Don't shoot the messenger
I'd have to agree with you, but this is what's being put out in the media presumably in an attempt to talk things up
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