The Average House Price Fell 8.1% in 2011

January 11th, 2012

The average price of a house fell 8.1% in 2011 over the previous year, accumulating an adjustment of 24.7%, since the maximum reached in late 2007, according to data released on Tuesday by Real Estate Appraisers (Tinsa).

Thus, Europa Press reported that the decline in house prices recorded in December was a tenth higher than that observed in the month of November.

The decreases registered in the last couple of months were higher than the rest of the year following declines of 6.9% in October, 7.4% in September, 6.8% in August, 6.4% in July, 6.6% in June, 5.9% in May, 4.4% in April, 3.7% in March, 4.5% in February and 5% in January.

The price of housing remained low in December in all areas, with the drop in the price of apartments reaching 9.1% year-on-year in the capitals and major cities, followed by other municipalities, with a decline of 8.4%. Next came the Balearic Islands and the Canary Islands, which matched the average market decline, falling 8.1%.

Mediterranean coastal towns registered below this average, with a drop of 7.2%, while the metropolitan areas completed the list, recording a decline in prices of 6.1%.

After the drop recorded in December, the accumulated decrease since the highs reached in 2007 before the bursting of the real estate bubble and the outbreak of the debt crisis, reached 31.5% for the Mediterranean coastal areas and 26.4% in the capitals and large cities.

In the metropolitan areas, the cumulative fall in home prices stood at 25.2%, while in the Balearic and Canary Islands the decline is 22.2%, and 21.5% for the remaining municipalities .

JANUARY 2012 – SPANISH MORTGAGE NEWS

Welcome to our January newsletter. In our newsletter this time last year, we wrote "What a year!" and the same can definitely be said for 2011!

The next 12 months also promises to be eventful with "la crisis" ongoing and a second wave of recessions likely to hit many countries. Also, let's not forget Greece's rather large debt problem and the less than rosy economic outlook for Italy and Spain (the third and fourth largest economies in the Eurozone respectively).

In December, banks were able to raise capital by borrowing at very attractive interest rates through an ECB (European Central Bank) 3-year loan offering. However, there is concern that the banks will not increase their lending to customers, including mortgage applicants, but instead will retain the funds to improve their balance sheets for future EU stress tests.

MAXIMUM LTV*	Fiscal Residents	80%
MAXIMUM LTV*	Non-residents	70%
EURIBOR **	1-month (monthly)	0.894%
	3-month (quarterly)	1,267%
	6 month (half-yearly)	1,545%
	12-month (annual)	1,875%
EXCHANGE RATES	1 GBP = 1,21050 EUR
EXCHANGE RATES	1 EURO = 0,822018 GBP

Data correct at the time of writing
* LTV (Loan-To-Value), which is usually based on the purchase price (or valuation, if lower)
** Most mortgages are based on the annual Euribor with a loading of 1,4 – 2.5%

We have noted that the banks seem to have become stricter in recent months and are coming back with offers lower than their maximum loan amounts, for example, they will offer 60% instead of the maximum 70%, even when on paper the applicant(s) appear to satisfy their affordability criteria for the higher amount. Since this became apparent, we have been focusing more than ever on presenting the cases in the best possible light.

Despite the ongoing negativity in the Spanish banking and property sectors and the lowest levels of mortgage lending since records began, the Bank of Spain has just released some extremely positive data on the level of foreign investment in Spanish property, which increased by 27,8% during 2011. This increase is huge compared to the increase of just 2,6% over 2010. The level of investment itself (3.601 million euros) is around half what it was in 2003, but clearly foreign buyers see the current climate as a good opportunity to snap up bargain properties.

With regards to taxation, in July 2011 we saw a reduction in the VAT on new–build property purchases from 8% to 4%. Although this is continuing for the moment, we do not know for how long the new government will keep it in force. It has announced that tax relief for fiscal residents purchasing their main residence will be re-introduced, allowing them to offset 15% of their payments in any tax year. Capital Gains Tax has just increased to 21% for all non-residents. Spanish residents will also feel the pinch with figures rising to 21% for gains up to 6.000 euros, 25% for 6.001 to 24.000 euros and 27% on higher gains.

Market Summary

In the past couple of months, the European Central Bank (ECB) has dropped its base rates twice from 1,5% to 1,25% and then to 1%. The banks increased their margins after the first increase, but have not done so since, so new applicants are currently getting the benefit of the second decrease. Many existing mortgage holders are now benefitting fully from both decreases.

The euro has been falling steadily against the pound over the last few months, which makes investment in Spanish property more attractive for British buyers. The € / £ rate was 0.881 at the end of October 2011 and 0.822 at the time of writing, which is nearly a 7% decrease. It has lost around 9% since the beginning of July 2011.

Other news

You may have noticed that we have completely revamped our online enquiry form and we have started to see the benefits with more enquiries coming through. The form is shorter and more user friendly and we are in the process of translating it to other languages. Initially the form will also be in Spanish, with French and German forms to follow. You will also see an improved home page. Again, for those of you displaying our banner, you should see the number of client enquiries increase, as we have researched ways to keep potential clients on our website for longer, so that they send us their contact details.

Money Making Ideas

MORTGAGE DIRECT BANNER -

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Fall of Housing Prices Increases Foreign Buyers in Spain

19th December 2011

With sales figures showing foreign purchases of Spain increased by 24.7% in the third quarter, over the same period of 2010, according to the Housing Price Index (HPI) of the National Statistics Institute (INE) sales prices in the same period were shown to have fallen by 7.4%.

Cinco Dias reported that the fall in housing prices leaves the vendor little choice but to lower prices in order to attract a buyer. Housing has continued to get cheaper since the beginning of the crisis with a flood of cut price properties available.

According to the Housing Price Index published on Thursday by the National Statistics Institute there are now fourteen consecutive quarters in which home prices have negative year-on-year figures. This means that prices have fallen steadily since mid-2008.

The decline began in the second quarter of 2008 (-0.3%) and recorded the biggest drop in the second quarter of 2009 (-7.7%). The 7.4% decline experienced in the third quarter of this year is the most pronounced since then.

By type of housing, new housing prices fell at a lower rate of 5% in the third quarter year-on-year, compared to -5.2% the previous quarter. Meanwhile, second hand home prices saw a year-on-year reduction of 9.6%, higher than the reduction in the second quarter (-8.3%).

Prices fell in all the autonomous communities in the third quarter, but the biggest decreases in prices in year-on-year values were recorded in La Rioja (-11.3%), Catalonia and Cantabria (-10.3% in both cases), Melilla (-9.8%) and Madrid (-8.9%).

TINSA December House Price Report

19th December 2011

TINSA has a new Spanish house price report available today. You can download it here.

The accompanying TINSA press release summarises this report as:

The decline in house prices continues

The General IMIE index fell again in November to 1725 points to a year-on-year decline of 8% compared with 6.9% the previous month.

The cumulative decline from the top of the market in December 2007 has widened to 24.5 %.

This situation was also reflected in the market’s various segments,with “Capital and Major Cities” again recording the highest year-on-year decline of 9.7% ,followed as in the previous month by “Metropolitan Areas” with 8.2% and the “Mediterranean Coast”, which echoed the decline in the overall market at 8%.

The remaining two areas fell by less than the national average.

The year-on-year decline for “Other Municipalities” was 7%, while in the “Balearic and Canary Islands” it remained at 3.7%.

The cumulative declines to November by area, from the top of the market, were:

Mediterranean Coast 30.4%
Capital and Major Cities 26.7%
Metropolitan Areas 25.9%
Balearic and Canary Islands 19.4%
Other Municipalities (not included in the previous categories) 21%.

What's the matter with Spain?

7th December 2011

Spain's recently-elected Prime Minister, Mariano Rajoy, faces a potentially unsolvable economic dilemma.

He may also face a major financial crisis, if the latest plan to rescue the euro fails.

Only last week Spain was staring into the same financial abyss that had already swallowed Greece, Portugal and the Irish Republic, and was sucking in Italy.

That was before markets came alive with talk of an imminent bailout of Italy by the European Central Bank.

The Spanish government's cost of borrowing money on the financial markets for 10 years - a popular barometer of lender fear - peaked at a rate of 6.7% before falling back on the rumours.

That's close to the level where other eurozone governments turned to their neighbours for a bailout.

In comparison, Germany only has to pay an interest rate of 2.1%.

Off-message

However, Spain's potential descent into the abyss is important for more than the fact that it is - like Italy - an enormous economy that may be too big to rescue.

It is because Spain does not fit the narrative.

Indeed, Spain's story lays bare the fact that the eurozone's problems run far deeper than the issue of excessive borrowing by ill-disciplined governments, which most politicians have focused on.

Until now it has been easy to blame southern Europeans for their economic woes.

Greece couldn't control its spending, and lied about its borrowing statistics.

Portugal also borrowed and spent too much.

Italy, while more frugal, simply has way too much debt - a legacy of government profligacy from way back in the 1970s and 1980s.

But Spain has been a model European. Unlike, say, Germany.

Breaking the rules

When the euro was first conceived in the 1990s, Germany insisted on a "stability pact" to ensure that governments inside the eurozone would keep their finances in order.

Spain's former Prime Minister Jose Luis Zapatero is only the latest victim of the crisis

Each government promised to keep their total borrowing each year to less than 3% of their GDP - the total output of their economy.

And to join the euro in the first place, they were also supposed to have debts less than 60% of their GDP.

That latter requirement was dropped at the outset, because otherwise Germany itself would have failed to qualify. Its debts, when the euro was created in 1999, were 60.9% of its GDP.

Then the entire stability pact had to be scrapped, as Germany broke the 3% annual borrowing limit every year from 2002 to 2005.

What about Spain? When it joined the euro in 1999, it admittedly also broke the debt rule, with a ratio of 62.3%.

But the Spanish government then proceeded to run a balanced budget on average - that is to say, its borrowing was zero - every year until the eve of the 2008 financial crisis.

And as Spain's economy grew rapidly, its debt ratio fell to a mere 36% of GDP by 2007. Germany's, by contrast, continued to rise.

So, given this record, why are markets telling us that they fear Spain may not repay its debts, while they think Germany's debts are the safest bet within the eurozone?

Continue reading the main story Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: GDP GDP Gross domestic product. A measure of economic activity in a country, namely of all the services and goods produced in a year. There are three main ways of calculating GDP - through output, through income and through expenditure. Glossary in full

It doesn't seem entirely fair.

Boom and bust

The reason is that Spain is facing an impossible economic dilemma.

When Spain joined the euro, interest rates fell to the much lower levels typical in Germany.

While the Spanish government resisted the lure of cheap loans, most ordinary Spaniards did not.

The country experienced a long boom, underpinned by a housing bubble, as Spanish households took on bigger and bigger mortgages.

House prices rose 44% from 2004 to 2008, at the tail end of a housing boom, according to ministry of housing data. Since the bubble burst, they have fallen 17%.

During the boom years, Spaniards earned more and spent more.

That helped to flatter the government's finances. More economic activity means more tax revenues.

But it also helped push Spanish wages up to uncompetitive levels.

Unit labour costs in Spain - a measure of the cost of employing an average Spaniard - rose 36% from the euro's creation in 1999 until the end of 2008.

Contrast that with Germany, where unit labour costs rose just 3% over the same period.

Shrunken economy

Now Spain is bust.

Its workers are overpriced compared with German workers. Its construction sector - bloated during the building boom - has collapsed.

What are bonds and what can they tell us about the borrowers who issue them?

Households are cutting their spending as they struggle to repay their debts. And unemployment - always high in Spain - has shot up to 21.5% of the workforce.

The economy, which grew 3.7% per year on average from the euro's foundation until the end of 2007, has since shrunk at an annual rate of 1%.

So, although the Spanish government still has relatively little existing debts, it is now having to borrow like crazy to fill the gap left by the jump in unemployment benefits and collapse in tax revenues during the downturn.

And the government may also have to throw a lot more money at its banks, which are looking very exposed to the housing collapse thanks to all the mortgages they have lent.

All of which makes financial markets nervous about lending to Spain.

Inflate or devalue

But here is the nasty dilemma facing the incoming Spanish government.

To get out of its economic hole, Spanish workers need to regain their competitive edge. That will boost demand for Spanish output, and help the economy grow.

And a growing economy is one that can support a heavy debt load.

Continue reading the main story

Eurozone debt crisis

But how will they do this?

If workers agree to large wage cuts - which is unlikely unless unemployment rises even higher - they will find their mortgages even harder to repay.

So most Spaniards would spend less, and many might be unable to repay the banks, all of which would make the economic downturn even more severe.

On the other hand, if Spanish workers increase their wages, they will become even less competitive and lose even more business to their eurozone competitors.

There are two possible solutions.

First, German wages could rise much more quickly. That means Spaniards could regain a price advantage without having to take a wage cut.

To achieve this, the European Central Bank would probably need to raise its inflation target to a level higher than the current 2% rate. That is an absolute no-no at the ECB, particularly among its German members.

The alternative is that Spain could leave the euro and devalue the newly recreated peseta. Spanish wages would fall with the peseta's value, but so would their debts.

Leaving the euro would also largely eliminate the risk of the Spanish government running out of money, because the Spanish central bank would be free to bail it out - something the ECB has refused to do.

However, it is precisely the possibility of a break-up of the euro that now has financial markets most worried of all.

House Prices Fall to 2005 Levels

20th October 2011

House prices in Spain fell by 5.6% in the third quarter of the year over the same period in 2010, continuing the downward trend that began at the end of 2008, according to pricing statistics published on Tuesday by the Ministry of Development. In addition, the data shows that the average price per square metre for a house stood at 1,729.3 euros, the lowest figure recorded since the first quarter of 2005, when it reached 1,685.4 euros. Over the previous quarter, this marked a fall of 1.3%.

El Pais reported that house prices had a marked fall in the third quarter, of 5.6%, after posting declines of 4.6% in the first quarter and 5.1% in the second. According to the time period of these statistics, the average price per square metre has dropped by 17% in nominal terms since its peak, reached in the first quarter of 2008.

By region, the biggest falls in private housing prices year-on-year were in Aragon, with a price decrease of 8.6%, Madrid (-8.5%), Murcia (-8.3%), Navarra and La Rioja (both with drops of 7.5%). Extremadura, on the other hand, was the only community where the prices rose – by 1% year-on-year, followed by Ceuta and Melilla (with a decrease of -0.3% each), Basque Country (-0.8%), Asturias (-1.3%) and Cantabria (-1.4%).

In the case of social housing, the average price per square metre was 1,158.1 euros, with a variation over the same quarter of 2010 representing a growth of 0.8%. This means that housing prices in Spain overall (taking into account both private and social housing) registered a decrease of 5.5% in the third quarter of the year.

Spanish Banks in Merger Talks

12th October 2011

Banco Popular, Spain’s fifth-biggest listed bank by assets, has offered to buy its smaller listed rival Banco Pastor in a merger that marks a new stage in the restructuring of the country’s financial sector.

In filings published on Friday by the Comisión Nacional del Mercado de Valores (CNMV), the market regulator, the banks said they were proposing a friendly all-share deal in which Popular would offer to buy 100 per cent of Pastor.

The CNMV had earlier suspended trading in shares of Popular, with a total market value of €4.99bn, and of Pastor, valued at €827m, apparently after news of the discussions leaked before the planned announcement on Monday.

At Friday’s share prices, the Popular offer represented a one-third premium for Pastor and valued the target bank at 0.75 times book value, according to the Pastor camp, although Popular’s share price could fall once the suspensions are lifted.

CaixaBank, the banking arm of the Barcelona-based La Caixa savings bank, was valued at 0.8 times book value at its flotation earlier this year, but Bankia, comprising Caja Madrid and six others, managed only 0.4 times when it was listed. Three savings banks seized by the official bank rescue fund last month were valued at between zero and 0.12 times book.

Until now, the Bank of Spain and the Spanish government have focused on forcing unlisted savings banks to recapitalise themselves and merge with each other to reduce costs and improve efficiency after the collapse of the Spanish housing and construction bubble. Listed banks have been seen as potential buyers rather than takeover targets.

“This is only the start,” said one person aware of the talks as the boards of the two companies held separate meetings. “There is going to be a huge shake-out in the banking sector.”

Popular is a national Spanish bank that has focused on retail banking and lending to small and medium-sized businesses, while Pastor’s activities are concentrated in the north-western region of Galicia.

Pastor – along with four Spanish cajas or savings banks – was one of the nine European banks that failed Europe-wide stress tests in July.

The Bank of Spain, increasingly under fire from bank analysts for failing to move faster to address the failings of the Spanish financial sector, is driving weaker institutions into the arms of the stronger banks.

Cajas have been reduced in number from 45 to 15 through mergers, and the authorities have so far seized control of six struggling caja groups. The Fund for Orderly Bank Restructuring, or Frob, is trying to find buyers for Banco Cam, formerly Caja Mediterráneo.

Source: Financial Times

Household Debt at Lowest Level Since January 2008

6th September 2011

Household debt fell by 1.7% in July, compared to the same month last year, to 882,420 million euros, the lowest level since January 2008, when it amounted to 878,541 million euros, according to figures released by the Bank of Spain.

The drop in July was as a result of the decline in consumer credit, which fell 3.7% in the seventh month of the year, compared with 2010, to 207,707 million euros.

Similarly, mortgage debt fell by 1.1% over the same period, and stood at 671,308 million euros, representing 76% of the total household debt.

This ratio is held over several years, since the drop in property investment has paralleled that of the total debt, in that the amount that families spend on their households uses up most of their savings, El Mundo reported.

Comparing the figures for the previous month, household debt fell 0.4% in July, after having picked up slightly in June. Consumer credit fell 1.8%, while mortgage debt remained practically stable.

Corporate Debt Drops 0.9%

Corporate debt fell 0.04% month-on-month and 0.9% year-on-year, to 1.2 billion euros, mainly due to the 2.9% fall of lending institutions’ residents loans and off balance sheet securitised loans, to 868.583 million euros.

In contrast, debt securities rose 7.3% in the seventh month of the year to 67,169 million euros, while foreign loans increased 2.7% to 351,679 million euros.

TINSA August House Prices Report

30th August 2011

TINSA has a new Spanish house price report available today. You can download it here.

The accompanying TINSA press release summarises this report as:

House prices in July follow the trend set in recent months

- In other words, nothing much happening during the quiet Summer months

In July, the General Spanish Real Estate Market Index (IMIE General) again dipped slightly to reach 1775 points which, in relative terms, gives a year-on-year decrease of 6.4%.

As a result, the cumulative fall has now increased by 22.3% since the high point reached at the end of 2007.

In terms of variations per area, the year-on-year cuts were generally similar to those of the previous month.

Once again the “Mediterranean Coast” lead the trend with 9.5%, compared to 8.7% registered in June, followed by “Capitals and Large Cities” with 7.5%.

Below average were the “Metropolitan Areas”, repeating the figure of the previous month with a year-on-year decrease of 6.1%.

Next were “Other Municipalities”, which fell by 5.4% and finally, “Balearic and Canary Islands”, the only areas to moderate their fall in July, with 2.5%.

Regarding cumulative decreases from maximum figures, the “Mediterranean Coast” leads the way with 29.5%.

Next come “Capitals and Large Cities”, with 24.6%, followed by “Metropolitan Areas” with 23.2%.

Below the average cumulative decrease are “Other Municipalities” with 18.4% and finally, “Balearic and Canary Islands” bringing up the rear with 17.7%.

Santander, BBVA and Banesto Rank Among the 50 Safest Banks

25th August 2011

Europe boasts 30 banks among the safest in the world in 2011, and features in the top ten, despite the sovereign debt crisis.

Santander, BBVA and Banesto are among the 50 safest banks worldwide, according to the ranking by Global Finance magazine, which in their 2011 edition is headed by the German agency KfW, followed by the French Caisse Depots et des Consignations (CDC) and the Dutch Bank Nederlandse Gemeenten, reported Cinco Dias.

In the case of the Spanish banks, Santander appears in 10th place, four places ahead of last year, while BBVA also improves four places putting them in 17th place. Meanwhile, Banesto, which in 2010 ranked at no. 24, is in the 2011 edition in 32nd place. “Now more than ever, companies worldwide are reevaluating the strength of long-term credit banks and are associating only with those who have shown strength and stability,” said the editor of Global Finance, Joseph D. Giarraputo. Global Finance says the twentieth edition of its “ranking” of the safest world banks throws light on the fact that the sovereign debt crisis is still affecting Europe and the renewed fear of contagion in turn affects the prospects for banking and Continental European markets.

However, despite this distrust of the sovereign debt of some European countries, Continental European banks dominate the classification of the safest banks in the world, taking up 30 places on the list, compared to 29 last year, as well as reaching the top ten. In particular, France and Germany each have six places, while Canada placed another six, and Australia placed four of its banks. For its part, the U.S. had 6 entities ranked among the safest in the world: BNY Mellon ranked 24, JP Morgan Chase 34, Wells Fargo 36, U.S. Bancorp 40, Northern Trust Corporation at 44 and CoBank ACB at 45.

Spanish Government Lowers VAT on New Homes

22nd August 2011

Following the Extraordinary Meeting of the Council of Ministers held on Friday, Government Spokesman and Minister of Development, José Blanco, announced that the Spanish Government has decided to reduce VAT from 8% to 4% on the purchase of new housing, temporarily, until December 31.

According to Blanco, this measure aims to “revive the construction sector” and “contribute to job creation in the sector most affected” by unemployment, reported El Mundo.

This tax cut, when applied, will mean a saving to the buyer of €8,000 in a house costing €200,000, explained the minister.

The reduction of VAT on new housing comes just 13 months after the Government, in early 2010, announced that in July that year VAT would be increased on new homes from 7% to 8%.

“With this measure we intend to dispose of the ‘stock’ of unsold homes and reactivate the construction sector where there is potential demand,” said Blanco during a press conference when he went on to say that he was confident the initiative would have a “very positive” effect.

This was one of the three measures adopted by the Council of Ministers on Friday aimed at fiscal consolidation and deficit reduction. The other two initiatives are the increase of the advance payment of corporation tax charged to large companies, and the reduction of pharmaceutical expenditure, forcing pharmacies to dispense generic drugs.

The initiatives were approved by Royal Decree, and put into effect immediately.

Corporation Tax

The Financial Vice President, Elena Salgado, explained that the increase in advance payments on corporate income tax will affect around 3,900 companies, which account for more than 20 million euros per year, representing less than 0.5 % of Spanish businesses.

Salgado explained that for companies with an annual turnover of between 20 and 60 million euros, a tax rate of 24% will be applied, while for those companies with a greater turnover the tax rate will be 27%, in both cases still below the general rate of 30%.

Elena Salgado has stressed that this will be a temporary measure which will apply during the years 2011, 2012 and 2013.

Saving on Drugs

As for the pharmaceuticals issue, José Blanco has said that the Royal Decree will save on public administration costs – both for the State and the autonomous regions – a total of 2,400 million euros per year in medicines and 177 million euros overall to citizens.

Jose Blanco pointed out that, from now on, doctors must prescribe drugs according to their substance, and not by their name brands, and that pharmacists should dispense the lowest priced drug in each particular category.

“We do this from the principle of responsibility, we must all take responsibility for saving, there must be a collective commitment of the Government, doctors, pharmacists and citizens (…) houses cannot be overflowing with used or expired medications, we all pay our taxes,” he said.

Moreover, Blanco also detailed the approval of the distribution of aid to small pharmacies that are in rural and depressed areas of Spain, who have small sales volumes. The goal, he says, is to “ensure the viability of the service, by compensating the development of pharmacy services in these areas with a maximum of 800 euros per month.”

Spain to Limit the Entry of Romanians Until the End of 2012

15th August 2011

The European Commission on Thursday gave the green light to the Spanish Government to proceed with the decision to reintroduce the work permit requirement for Romanian citizens who want to live in Spain. The approval is based on the “serious commotion in the Spanish labour market” and includes conditions and a deadline of 31 December, 2012, EU sources confirmed.

Brussels has warned it will allow the Spanish authorities to take such an action, as long as they remain “vigilant” to ensure that it is not a “disproportionate” action. Spain will have to report regularly on the progress and impact of the measure, and the EU executive may withdraw the permit if they consider it is not relieving the pressure on the Spanish labour market or that the initiative is unfair.

Not Valid for those Romanians already Working in Spain

The EU executive also made it clear in their approval that no other rights of Romanian citizens may be affected by the restriction. Nor shall the measure apply to any of the Romanians, or their families, who are already working in Spain, salaried or self-employed, who are registered with the unemployment office. The Government informed the EU executive on 28 July of its intention to reintroduce work permits for Romanian nationals, and based its decision on the difficulties of the Spanish labour market.

Brussels said at first they could not reintroduce restrictions on a European Union country which had previously been removed, but admitted that safeguards did exist for very specific circumstances. The EU executive agreed to Spain’s request because they believe that “the continued rise in numbers of Romanians living in Spain and their high level of unemployment has had an impact on Spain’s ability to absorb new flows of workers.”

Romanians Have More than Doubled in Four Years

“The unprecedented decline of Spanish GDP, which fell by 3.9% between 2008 and 2010, has resulted in the highest unemployment rate across the European Union” (21% in Spain compared to 9.1% in the EU in June, according to Eurostat), the Commission explained in a statement. According to the data handled by the EU executive, the Romanian population in Spain grew from 388,000 residents to 823,000 between 2006 and 2010, and it is a group which is “strongly affected by unemployment,” with an unemployment rate of 30%. In total, 191,400 Romanian workers in Spain were unemployed in the first quarter of 2011.

In making its decision, Brussels considered the fact that Spain was one of the first countries in the European Union to open its labour market to Romanians. Following the accession of Romania and Bulgaria to the EU in 2007, member states agreed to postpone until December 2013 approval of the right to move and work freely throughout the EU. Spain decided to lift this restriction in 2009 to promote the arrival of manpower from these two countries at a time of great demand in Spain.

Therefore, restricting the movement of workers is a “repeal”, a right they already have, and Brussels has decided to grant their authority to this as an “exceptional” case and “only temporarily,” according to EU sources. In this way they want to avoid creating a precedent in which other EU countries would follow Spain’s example. The European Commission will also “closely monitor” the labour market situation in Spain to evaluate the impact of the measure, and they reserve the right to modify or revoke their decision “at any time” if they think fit. The Council can also block permission to Spain if a member state voices objections, something that has not happened so far.

Spain, Open to Foreign Workers

ABC News reported that the European Commissioner for Employment, László Andor, emphasised in a statement that this decision was taken based on “a really specific situation in Spain” and stated that, in principle, he is not in agreement with “restricting the freedom of movement of European workers as a response to high unemployment”. Andor called for the measures against unemployment to be “focused on creating new jobs.”

The European Commissioner for Employment also concluded that “from the beginning, Spain has always had a very open policy towards workers from other countries” and “understands” that the “dramatic employment situation and complex financial environment” that exists in Spain are “evidence” supporting the request of Jose Luis Rodriguez Zapatero’s Government. He also emphasised that, despite the reintroduction of work permits for Romanian residents, Spain “still remains more open to workers from new member states than some other” countries of the EU. “We hope that this step is for as limited a time as possible,” he concluded.

House Prices Continue to Fall, says Bank of Spain

10th August 2011

Property prices continued to decline in the second quarter, and even more sharply than in the first, according to the Bank of Spain, giving an annual decline of 5.2% between April and June.

The Spanish property market has blamed the ending of tax relief for those with incomes exceeding 24,100 euros, which unexpectedly affected both property purchases at the end 2010, and the problems of getting access to finance. The credit drought and tax changes have led to a decline in purchases compared to the same period last year, according to the Bank.

Prices have not only continued their downward trend, but have increased slightly, falling by 5.2% between April and June, from 4.7% at the end of March, as a result of high levels of stock and the rising costs of mortgage financing. The cumulative fall since late 2007 is approaching 17%, which represents 22% in real terms, according to the spokesman.

The Bank of Spain said that access to finance for home purchases has experienced a further tightening due to tensions in the financial markets resulting in an increase in interest rates on loans to companies and households “prolonging the upward trend which began in early 2011.” However, they did note that the criteria for awarding loans had not experienced any significant changes.

Cinco Dias reported that according to the Bank Lending Survey (BLS) in July, the outlook for the housing market and consumer confidence may continue to reduce the demand for loans for property purchases in the coming months.

The Bank of Spain also reported in their annual Economic Bulletin that the Spanish GDP grew 0.2% quarter-on-quarter to 0.7% year-on-year, which is one-tenth less in both cases for the first quarter, when GDP rose 0.3% from the close of 2010 and 0.8% year-on-year.

However they argue that, on the expenditure side, much of the slowdown is due to the decline in domestic demand, which fell 1.9% year-on-year and was more pronounced than in the first quarter. Meanwhile, foreign demand continued to be strong, increasing its positive contribution to 2.6% from 1.4% points in the previous quarter.

ECB Purchases Debt from Spain and Italy

9th August 2011

The leaders of the euro zone central banks agreed on Sunday to intervene decisively in the markets in response to the escalating crisis, sparked off by debt problems in the USA. The European Central Bank (ECB) has already moved into action and is planning to buy Italian and Spanish debt, according to traders cited by Reuters.

The ECB announced on Sunday that the monetary authority was ready to implement its SMP (Securities Markets Programme) program of buying bonds, saying “the program is designed to help restore a better transmission of our policy decisions, taking into account dysfunctional market segments, and to ensure price stability in the euro zone”.

In a statement, the ECB said it applauded the announcements of Spain and Italy, the countries at the centre of the debt crisis, on their new fiscal and structural policy measures, and urged those respective governments to implement these measures quickly.

Officials taking part in the video-conference, carefully considered the situation of both countries and had very much taken into account the statement issued by France and Germany, which welcomed European financial reforms, the source said.

Earlier, the Vice President of Economic Affairs, Elena Salgado, had urged the European Central Bank (ECB) to “do their job”, saying “the ECB should do their job and support stability in the markets”.

The Governing Council of the European Central Bank had been discussing the latest developments in euro zone countries relating to the sovereign debt crisis, and studying the possible purchase of Italian and Spanish bonds in an effort to contain the deepening financial crisis in the region.

ECB President, Jean-Claude Trichet, said on Friday that the bank would resume the purchasing of government bonds, suspended since May, in a bid to calm the markets. However, it was not clear at the time which countries the institution would buy bonds from, but the beneficiaries are expected to be Spain and Italy.

Salgado also said on Sunday that the Spanish Government revenues would increase by 2.5 billion euros this year through a corporate tax reform, reported El Mundo.

Resale asking prices in Spain fall 8.2%

Monday 8th August 2011

Resale asking prices in Spain declined by 8.2% in July compared to the corresponding month last year, according to data provided by leading Spanish property portal idealista.com.

The average asking price of resale property advertised for sale on Idealista currently stands at €2,172sqm (£1,886), down from €2,365sqm (£2,054) a year ago.

The greatest property price fall month-on-month was recorded in the northern region of Navarre, down by an average of 2.6%.

However, prices did increase in four autonomous regions, led by the Valencian region, up 0.3%, followed by the Canaries, up 0.2%.

“Whichever way you look at it, 8.2% is a substantial decline in vendor expectations, and the trend suggests it will get worse for vendors before it gets better,” said Mark Stucklin of Spanish Property Insight.

Stucklin’s views are supported by a range of Spanish housing and economic experts.

Last week, James Daniel, an expert from the International Monetary Fund, also projected that Spanish property prices would fall further moving forward, mainly due to the severe oversupply of homes on the market.

Spanish Economy: A “Modest” Recovery but “not clear” of Danger

4th August 2011

The Spanish economy is “not clear” says the International Monetary Fund (IMF), so they should not abandon their reform drives because, despite the “ambitious” plans for ongoing fiscal consolidation, there are still many accumulated structural imbalances, which make reforms and additional adjustment measures necessary in order to complete the financial reforms, improve competitiveness and to cope with a “dysfunctional” labour market and meet the deficit target.

The international institution warns in the findings of ‘Article IV’ that Spain should not slow the momentum of reforms while faced with restoring market confidence, as they are “not yet out of the danger zone” and there are still many imbalances and structural weaknesses, built up over the years of economic boom, which the country needs to face in order to be able to move towards a new model of “sustainable” economic growth.

As reported in Europa Press, the IMF stressed that, despite an “ambitious” plan for fiscal consolidation being underway, it is “based on optimistic macroeconomic projections, and there is a risk that some regional governments will fail to meet their goals.” For this reason the IMF says that to achieve fiscal sustainability, Spain “needs additional measures.”

In addition, the Washington-based organisation reiterated the need for the country to carry out a “decisive” reform of its financial system, supplemented with a “bold” strengthening of labour market reforms to substantially reduce unemployment, and continue with the agenda for structural reforms to improve competitiveness and employment, enlisting broad political and social support for these strategies.

A modest recovery thanks to exports

The IMF considers that the Spanish economy has experienced a gradual and “modest” recovery, led by exports, which have offset weak domestic demand and enabled the reduction of the country’s current account deficit, but they warn that “significant risks” remain, especially the danger of further contagion from the crisis of sovereign debt in the euro zone.

“The recovery has not been sufficient to reduce the very high levels of unemployment,” which the institution headed by Christine Lagarde described as “unacceptable”, while inflation again exceeds the euro zone average and the costs of sovereign financing and the financial sector remain high and volatile.

Thus, the IMF confirmed its growth forecasts for the Spanish economy for 2011 and 2012, when it expects a GDP growth of 0.8% and 1.6% above government estimates, which forecast 1.3% growth this year and 2.3% in 2012.

Handing Over the Keys Will not Cancel a Mortgage

3rd August 2011

.The cross-party Congressional sub-committee set up three months ago to look into reforming the Spanish mortgage system has rejected proposals that would allow borrowers unable to meet mortgage repayments to cancel their debt by handing over the keys to the property to the lender, an approach that is permitted in much of the United States.

Instead, the commission has put forward proposals that would see greater regulation of the agencies that set the value of properties – these agencies have been accused of working in cahoots with banks to inflate house prices.

In early July the government passed a decree that seeks to address the plight of evicted debtors. It protects more of their wages from being claimed by banks, and changes the way such people’s post-foreclosure debt is calculated, to try to trim it.

The Platform for Mortgage Victims – the association that has staged rallies to prevent the authorities issuing eviction orders to borrowers who cannot meet their repayments, and is part of the broader 15-M popular protest movement – wants Spain to usher in US-style mortgage legislation.

At present, if a bank manages to sell a foreclosed home, that amount is struck off the remaining debt. But the norm these days is that the property is put up for auction and nobody bids. That has meant the bank then takes over the house for just half its originally assessed value, and wipes the amount off the remaining debt – leaving the borrower still owing. The legislation passed in early July raises the proportion the bank has to effectively pay in the event of non-sale to 60 percent.

“Everybody on the committee agrees we need to address abuses in the system. Banks are demanding not just the money that hasn’t been paid back, but huge amounts of back payment,” says Pere Macías of Catalan nationalists CiU.

“We have to take measures that will reduce interest on delayed payment, which, when added to legal costs, can increase the amount borrowers must pay back by as much as 30 percent,” adds Fernando Méndez, a property registrar who appeared before the committee.

The Spanish Banking Association says that walkaway mortgages would wreck Spain’s low-interest-rate mortgage system: even now, as loan-shy banks raise rates, they can be below 3 percent, with repayment periods of as much as 40 years and no mandatory mortgage default insurance.

The result of a walkaway system, it says, would be banks granting fewer, smaller and more costly loans that are repayable in a shorter time, meaning that the nearly 98 percent of mortgage-holders who do make their payments on time would suffer.

The Congressional committee has heard from representatives of the banking and real estate sector, as well as academics and those whose properties have been foreclosed. But only one of those called has backed moves to introduce a walkaway system.

Source: El Pais

Spanish Land Registrars Launch ‘On Line’ Service in English

30th July 2011

The Chairman of the Spanish Association of Registrars, Alfonso Candau, submitted this week to the Secretary of State for Housing, Beatriz Corredor, their new ‘on line’ service, created by the agency in order to help foreigners obtain information in English on more than 1,000 records of properties distributed across Spain. Another step aimed at paving the way to attracting international home buyers, in addition to the property ‘road show’ led by Development Minister, Jose Blanco.

El Mundo reports that on the website (buyingahouse.registradores.org), the user can get in touch with the Association of Registrars and make an enquiry on a property. A group of experts will then follow up this application and send back the required information, translated into English.

According to a statement from the institution, this new service responds to the need to “help international users to jump the barriers of Spanish legal terminology when investing in real estate in Spain” and the document continues, “to evaluate and correctly interpret the information issued by the Land Registry Offices.”

In addition, the registrars indicate that all legal concepts that appear in the records shall be interpreted in accordance with current legislation in Spain and, in case of discrepancies regarding the translation, the Spanish version will prevail. To facilitate the review and comparison of the original extract and its translation, the information is presented in a double column format in both languages.

The Secretary of State for Housing said that “in this way, foreign citizens may have at their disposal, in a format more understandable to them, all the physical, legal and development information about the property, so that any buyer can go to this register before purchasing a property to check that there is no risk in the operation.”

The Chairman of the Spanish Association of Registrars said that “this new service is aiming to bring the registry a step closer to users not residing in our country, and to contribute to the transparency of the Spanish property market beyond our borders”

Zapatero Brings Elections Forward to November 20

29th July 2011

The Spanish Prime Minister confirmed in a press conference today, that the next general election, scheduled for March 2012, will be brought forward to November 20. The decision to advance the election was taken “because the new elected government takes over all fiscal responsibilities for 2012 and so this will allow the new government to be in office at the end of the year and be able to take charge of making decisions that constitutionally apply. If I have decided to announce this today, it is to project political and economic certainty for the coming months,” said the Prime Minister.

Zapatero said that “the Government will continue to exercise its constitutional powers with all intensity for economic consolidation and for the control of the public deficit, a key issue. That is my duty and I will forge on with it.” As for the choice of date, Zapatero said that “November 20 allows us to avoid fiesta dates that would affect a possible electoral campaign and allow the new government into office from 1 January,” reported Cinco Dias.

The Prime Minister said “I have thought through this decision for a while. My decision was influenced by the approval of substantial reforms, mainly the approval of the pension reform, as these have to be completed in September”.

Zapatero ruled out that the last CIS survey, in which the PSOE would have cut to up three points from the Popular Party in voting intentions, motivated the change of position and said it “did not influence electoral prospects” and that the next electoral contest will focus on “proposals for the country’s progress.”

The announcement came on a day in which Moody’s struck a blow to Spanish debt, placing domestic bonds on negative outlook, which could lead to a lowering of the Spanish rating. The risk premium is above 340 points with a yield of 6%. In this respect, Zapatero said that “our country is firmly confident in the credibility of political effort to reduce spending. We must continue these intense efforts to maintain the credibility and solvency. The Eurogroup’s plan is credible and solid, and I hope that the review proposed in the future by Moody’s does not take place. The country’s commitment to the payment of debt is manageable.”

TINSA July House Prices Report

12th July 2011

TINSA has a new Spanish house price report available today. You can download it here.

The accompanying TINSA press release summarises this report as:

The second quarter ended with a slight fall in the value of housing

The General Spanish Property Market Index for June once again intensified its year-on-year fall to stand at 6.6%, compared to 5.9% in the preceding month.

Regarding levels, 1782 points were reached, twelve points below the figure for May. The cumulative decline already stands at 22% from the peak reached at the end of 2007.

Regarding variation by area, it should be highlighted that all of them showed greater year-on-year falls than in the previous month. The “Mediterranean Coast” once again led the way with a figure of 8.7% followed by “Capitals and Large Cities” with a 7.3% fall and the “Balearic and Canary Islands” with a decrease of 7%.

“Metropolitan Areas” with a year-on-year fall of 6.1% and the “Rest of Local Authorities” not included in the above-mentioned categories with a decrease of 5% underwent below average falls.

Regarding cumulative falls from maximum figures, the “Mediterranean Coast” leads the way with a fall that has already reached 28.8%. It is followed by “Capitals and Large Cities” with a figure of 23.4%, closely followed by “Metropolitan Areas”, which recorded a cumulative fall of 22.9%.

The decline in the “Balearic and Canary Islands” stood at exactly 20%. The “Rest of Local Authorities” not included in the preceding classifications closed the group with a cumulative fall of 18.6%.