The following are abstracts of press articles on trends and developments in the Spanish property sector.Spanish parliament approves new Land Law. Various 11 May 2007
The Spanish parliament has approved a new Land Law which is designed to halt speculation, provide more transparency and accountability amongst Town Halls and provide more subsidised housing. It comes into effect on 1 July and key measures include:
- Urban plans and agreements with developers to be made publicly available before being approved by the Town Hall.
- All planning agreements with third parties must be approved by via a council meeting.
- Elected Town Hall officials and senior managers must declare their private assets and activities.
- Council officials with executive powers will not be able to serve in the private sector for at least 2 years after cessation of their public position.
- 30% of property developments to be reserved for social housing.
- Planning decisions taken over the past two years to be reviewed under certain circumstances.
- Expropriation of land for infrastructure projects to be made at price which reflects current zoning for that land and not at a price based on gain resulting from future developments.
- Between 5 and 15% of land for approved development projects to be ceded for local council facilities.
Some alarming things have been written
about the Spanish property market in recent articles. Based on the headlines would think that the Spanish
property market was in an advanced state of collapse. This is not
actually the case. The event that inspired all these
gloomy articles was a share price correction of property companies
quoted on the Madrid stock exchange, as jittery investors dumped
construction stocks in April.
In fact, the reality of Spain’s property market’s performance in the last quarter is not as bad as you might think from recent articles, but not as good as the official housing price figures from the Government imply. Spain’s decade long real estate boom is over, and it is a buyer’s market, but it is also a complex situation of regional markets performing in different ways.Latest figures on the Spanish property market
Average national Spanish property prices rose by 7.2% to 2,024 euros/m2 over 12 months to the end of March 2007, according to figures from the Spanish housing ministry.
The story these figures tell is one of Spanish property inflation slowing down from 18.5% in 2003, 17.2% in 2004, 12.8% in 2005, and 9.1% by the end of 2006. This is the lowest rate of property price inflation since 1998, when Spain’s property boom started. Based on the Spanish government’s figures, it looks like the Spanish property market is on course for a soft landing.The problem is that the government’s figures have to be taken with a pinch of salt. They can be unreliable. It is difficult to gather reliable housing price statistics in a country like Spain where under-the-table cash payments are still widespread.
Whilst the government’s figures show reasonable, if cooling, price increases, figures from Spain’s land register show a clear slowdown in transactions during 2006.
The total number of
property transactions recorded in Spain’s property register – the
Spanish equivalent of the UK’s land register – fell from 989.341 in
2005 to 916.103 in 2006, an annual drop of 7.4% in unit terms. Resale
property transactions fell by 4.97% to 526,509 units (57% of the
total), whilst completed transactions on newly-built properties fell by
10.11% to 389,594 units (43% of the total). These figures show a market
contracting against a background of an increasing supply of new
The confluence of a number of factors are affecting demand for holiday homes in Spain reports Grupo i, a specialist consultancy. Grupo i believes that the high levels of new homes coming on stream may create a situation of oversupply. They also believe that high prices, following several years of double digit growth, are affecting demand for buyers seeking to buy a holiday home with €300,000 being the critical price point. As a result, developers are reducing the number of properties being built and taking longer to bring them to market, 22 months versus 10 months in 2003. Ignacio Pindado of Grupo i believes domestic demand will not fall much but that demand from non-residents has been affected not only by high prices but also by recent urban planning scandals, such as the Malaya investigation in Marbella and the land grab abuses in the Valencia region.
UK Inland Revenue scraps benefit-in-kind treatment for Directors of companies owning overseas properties. Sunday Times 25 March 2007
UK residents who have purchased a property abroad via a company have, until recently, been regarded as shadow Directors who are being provided accommodation and hence subject to income tax on this "benefit-in-kind". However, provided that the property is the company's only asset and is used solely by the owner, the Inland Revenue will no longer consider the property as a benefit-in-kind. The decision is retrospective and those that have been paying the tax will be able to claim refunds from the Revenue.
Junta de Andalucia studying possibility of reducing Inheritance Tax. Expansion 19 April 2007
The Junta de Andalucia has announced that it is studying simplifying, and in some cases reducing, Inheritance Tax in the Autonomous Region. Proposed changes include unifying Groups I and II, increasing tax free allowances, reducing tax rates for Groups III and IV and simplifying the process.
It is still possible to buy a property at less than €1,000 p/m2. Expansion 12 April 07
A study by Expansion identifies 10 Spanish cities where it is still possible to buy property for less than €1,000 per m2. These include: Alicante, Jerez de la Frontera, Granada, Jaen, Murcia, Salamanca, Sevilla and Santander.
"Incorrect" valuations to be more difficult, Metro 12 March 2007
The proposed new Mortgage Law will place further obligations on valuation companies to ensure that they are not subject to undue influence by banks and other interested parties when valuing properties for mortgage purposes. Penalties for infractions include up a fine of up to 1% of the value of their assets, subject to a maximum of Euro 300,000.
Spanish property market slowdown gathers pace Various March 2007
El Pais reports that “the party is over”, at least
according to Joan Ollen – president of Barcelona’s professional
association of estate agents. This is based on the fact that sales of
resale properties have fallen by between 40% and 50% since June 2006.
Figures from the land register also reveal that the number of property
transactions in Spain has been falling for some time, with 22,800 fewer
transactions in the first quarter of 2006, compared to the same period
the year before.
The Spanish financial newspaper El Economista reports that property developers in Spain are beginning to feel the pinch as their margins shrink. The article refers to a report from the consultancy Grupo I showing that developers’ before tax margins have fallen from 15%-20% in 1990, to 13-18% in 2005, and 9%-14% this year (estimated).
According to ABC what most
worries developers is the possibility of a price war to
try and shift many of the newly built properties presently on the market.
Developers in the Autonomous Region of Valencia see the slowdown as a return to ‘normality’, according to an article in the regional newspaper ‘Levante’. In the recent boom years 50,000 properties were built and sold each year in the province of Alicante alone. Between now and the year 2010 developers forecast 65,000 property sales per annum in the whole of the Valencian Region, of which only half will be newly built properties. The article quotes Benjamin Muñoz of the Valencian developers’ association as saying that the slowdown “is a return to normality, and not a crisis.”