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More problems for Spain?

More problems for Spain?

Old Nov 29th 2010, 12:33 am
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Default More problems for Spain?

What a mess Spain is in! There is now another massive set-back in the possible revival of the Spanish economy, in that changes introduced by the Spanish central bank in September threaten to flood the market with properties in the New Year. Under the changes, banks must now make provisions for bad loans after just 12 months rather the current 72 months, which will provide a strong incentive for lenders to dump properties more quickly. The new rules also force banks to value properties more realistically which gives them further incentive to sell.

A leading market organization predict that up to 350,000 properties will be dumped on the already stagnant housing market, reducing house values by around 20% during 2011. The problem is that nobody really knows the true figures. Official data from the Ministry of Housing (MVIV) is politically driven and bears no reality to the true figures and until it starts to release true figures concerning property values, overseas investment will not take Spain seriously. The lack of clarity about housing prices scares off potential investors who could provide a clearing price for assets, allowing the housing market to start to recover.Unbelievably, Spain still has the highest over-valued property prices in Europe (+47.6%) despite its non-existent sales!
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Old Nov 29th 2010, 12:55 am
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Default Re: More problems for Spain?

Originally Posted by metalmike
What a mess Spain is in! There is now another massive set-back in the possible revival of the Spanish economy, in that changes introduced by the Spanish central bank in September threaten to flood the market with properties in the New Year. Under the changes, banks must now make provisions for bad loans after just 12 months rather the current 72 months, which will provide a strong incentive for lenders to dump properties more quickly. The new rules also force banks to value properties more realistically which gives them further incentive to sell.

A leading market organization predict that up to 350,000 properties will be dumped on the already stagnant housing market, reducing house values by around 20% during 2011. The problem is that nobody really knows the true figures. Official data from the Ministry of Housing (MVIV) is politically driven and bears no reality to the true figures and until it starts to release true figures concerning property values, overseas investment will not take Spain seriously. The lack of clarity about housing prices scares off potential investors who could provide a clearing price for assets, allowing the housing market to start to recover.Unbelievably, Spain still has the highest over-valued property prices in Europe (+47.6%) despite its non-existent sales!
This isnt new news, the new rules have been in place for at least a year, although I understood the new rules were 24 months, not 12. The rules are to make the values on the banks books more realistically reflect the value of their assets.

And if it causes house prices to drop 20% then good, they need to!
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Old Nov 29th 2010, 1:18 am
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Default Re: More problems for Spain?

Originally Posted by cricketman
This isnt new news, the new rules have been in place for at least a year, although I understood the new rules were 24 months, not 12. The rules are to make the values on the banks books more realistically reflect the value of their assets.

And if it causes house prices to drop 20% then good, they need to!
With respect Mr. Cricketman, my post was not intended to be year old 'news'! It is an observation on the rules that were introduced 2 MONTHS ago, that may possibly cause further distress in the housing market. Please will you old school consider being a little more tolerant of us newbies who may have something new to add?
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Old Nov 29th 2010, 1:19 am
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Default Re: More problems for Spain?

Originally Posted by metalmike
What a mess Spain is in! There is now another massive set-back in the possible revival of the Spanish economy, in that changes introduced by the Spanish central bank in September threaten to flood the market with properties in the New Year. Under the changes, banks must now make provisions for bad loans after just 12 months rather the current 72 months, which will provide a strong incentive for lenders to dump properties more quickly. The new rules also force banks to value properties more realistically which gives them further incentive to sell.

A leading market organization predict that up to 350,000 properties will be dumped on the already stagnant housing market, reducing house values by around 20% during 2011. The problem is that nobody really knows the true figures. Official data from the Ministry of Housing (MVIV) is politically driven and bears no reality to the true figures and until it starts to release true figures concerning property values, overseas investment will not take Spain seriously. The lack of clarity about housing prices scares off potential investors who could provide a clearing price for assets, allowing the housing market to start to recover.Unbelievably, Spain still has the highest over-valued property prices in Europe (+47.6%) despite its non-existent sales!
It looks like 2011 will be the crunch year, and in 12 months time we should have a lot more idea just how damaging the recession has been and a also bit more idea of what are realistic property values.
It's probably still to early rule out the possibility of a bail-out.
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Old Nov 29th 2010, 1:22 am
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Default Re: More problems for Spain?

Originally Posted by metalmike
With respect Mr. Cricketman, my post was not intended to be year old 'news'! It is an observation on the rules that were introduced 2 MONTHS ago, that may possibly cause further distress in the housing market. Please will you old school consider being a little more tolerant of us newbies who may have something new to add?

In future please don't post anything, that even in the vaguest sense may be regarded as anti-Spanish.

It's just not Cricket !
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Old Nov 29th 2010, 1:26 am
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Default Re: More problems for Spain?

Originally Posted by metalmike
With respect Mr. Cricketman, my post was not intended to be year old 'news'! It is an observation on the rules that were introduced 2 MONTHS ago, that may possibly cause further distress in the housing market. Please will you old school consider being a little more tolerant of us newbies who may have something new to add?
My apologies

Someone I know has had their house up for sale for 18 months, near Mijas. It started off at 625k, now it is at 450k and still not a word of interest (up with 2 estate agents and all the online sites). He said last night he is considering putting it on at 350k to get rid of it as he needs to release the capital.

We'll see!
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Old Nov 29th 2010, 6:33 am
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Default Re: More problems for Spain?

Originally Posted by cricketman
My apologies

Someone I know has had their house up for sale for 18 months, near Mijas. It started off at 625k, now it is at 450k and still not a word of interest (up with 2 estate agents and all the online sites). He said last night he is considering putting it on at 350k to get rid of it as he needs to release the capital.

We'll see!
Well, as a general rule we have to remember that a house is only worth what someone will pay, no matter what it's value may be to the owner.

So, yeah, you would appear to be right in saying that properties are still grossly overvalued. That's a real bitch tho for those who have a mortgage on that property that was taken out when such properties were rated far higher.
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Old Nov 29th 2010, 7:39 am
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Default Re: More problems for Spain?

I agree that Spanish housing is in a terrible mess, for all sorts of reasons, but on the question of house price valuations how can those be fixed without sales records?

Without buyers (and sellers) testing the market you’re dealing with abstracts. It doesn’t matter whether people think that house prices are too high, or too low, what measurements can you apply in a dead market?
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Old Nov 29th 2010, 11:58 am
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Default Re: More problems for Spain?

Originally Posted by HBG
I agree that Spanish housing is in a terrible mess, for all sorts of reasons, but on the question of house price valuations how can those be fixed without sales records?

Without buyers (and sellers) testing the market you’re dealing with abstracts. It doesn’t matter whether people think that house prices are too high, or too low, what measurements can you apply in a dead market?
i bought my house 10 years ago off plans for about 100k,i now want to sell,agent comes up and asks me what i want,i think he should value the house tbh,but then i remember the twat has no training,so i just say 250k,and then ask whats the comission?
5%
ok i say,add it on,now on market for 275k,you do the maths,damn fool never even put a pic on website of the outside of house arriba estates
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Old Nov 29th 2010, 6:09 pm
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Default Re: More problems for Spain?

Originally Posted by sensationalfrog
i bought my house 10 years ago off plans for about 100k,i now want to sell,agent comes up and asks me what i want,i think he should value the house tbh,but then i remember the twat has no training,so i just say 250k,and then ask whats the comission?
5%
ok i say,add it on,now on market for 275k,you do the maths,damn fool never even put a pic on website of the outside of house arriba estates
I butt in with a question on commission I'm not clear about: is it custom here to add the commission to the asking price or does the buyer usually know that if he/she deals with an agency he/she should end up paying commission on top of the asking price?
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Old Dec 1st 2010, 3:05 am
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Default Re: More problems for Spain?

One of the reasons that the hroperties are or were overprised stems from the roughly 10 per cent for fees and such that goes on top of the price.

Using the example of 2 houses or flats side by side, if both cost 100k to start, and 1 changes hands various times then the asking price gets silly.

100k for house plus 10pcent 110k for buyer 1

buyer 1 wants to recoup his money even if he doesnt make any profit, so the asking price to buyer 2 is 110k.

Buyer 2 pays 110k plus 11k fees total spend 121.
If buyer 2 only get his moeny back the asking price would have to be 121k

So buyer 3 pays 121k plus 10 percent ish which is 132k.

This does not mean that the property is worth the extra from the one next door, but as nobody wants to take a loss, that is the way it is

and so on and so on, that is only getting ones money back, but whenb the seller want to recoup money spent on improvements or simply make a cash profit on the property, then the really silly prices start..........

One good way to get the market moving a little more quickly would be to do something to lower these sill fees which artificially raise the price of property.
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Old Dec 1st 2010, 3:11 am
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Default Re: More problems for Spain?

Originally Posted by JLFS

One good way to get the market moving a little more quickly would be to do something to lower these sill fees which artificially raise the price of property.
Unfortunately these fees are a drug to the government. They made up 50% of all government income in the boom years!

Like a commercial enterprise, they'd need to do so calculations to see if lowering the tax (price) would increase sales, and therefore increase the government income overall
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Old Dec 1st 2010, 3:37 am
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Default Re: More problems for Spain?

Originally Posted by cricketman
Unfortunately these fees are a drug to the government. They made up 50% of all government income in the boom years!

Like a commercial enterprise, they'd need to do so calculations to see if lowering the tax (price) would increase sales, and therefore increase the government income overall
Well now that the wheels have fallen off, maybe its time to redo the maths.

I am sure that if the taxes were lowered, Spanish people would find it easier to upsize and downsize as needs arise. Then the taxes could be recouped in a different way (smaller taxes per person, but more moving from the population as a whole. that would make life easier for many who would love to move but cannot because of the fees.
The population would move more often if the fees were lower I am sure.

When we lived in a few houses as our needs changed, very few folks do that in Spain
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Old Dec 1st 2010, 3:41 am
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Default Re: More problems for Spain?

Originally Posted by JLFS

When we lived in a few houses as our needs changed, very few folks do that in Spain
Even more reason to rent! Spain has the lowest proportion of renters in Europe. Some new legislation in that area could help too
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Old Dec 1st 2010, 4:10 am
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Default Re: More problems for Spain?

Originally Posted by cricketman
Unfortunately these fees are a drug to the government. They made up 50% of all government income in the boom years!

Like a commercial enterprise, they'd need to do so calculations to see if lowering the tax (price) would increase sales, and therefore increase the government income overall
Hang on. We're talking estate agents fees now right? You have to ADD the tax and notary fees as well!
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