Foros de la Plataforma por una Vivienda Digna

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Costas house price crash?

Thomas Catàn in Madrid and Joanna Bale
Thousands of British homeowners in Spain were on edge yesterday after billions of pounds were wiped off the value of Spanish property developers.

After a hammering on Tuesday, shares in many construction companies rebounded yesterday. But analysts are divided on whether the tremors mark an isolated stock market event or the end of Spain’s decade-long property boom.

For Britons, who have collectively invested several billion pounds on the Spanish Costas, the stakes are high: many face steep losses if house prices fall. There are also worries that those who have bought into future development could be left high and dry.

The Spanish Economy Minister sought to reassure investors that the wobble in financial markets was unconnected with the strength of the real economy. Miguel Ángel Fernández Ordóñez, Governor of the Bank of Spain, also played down fears of an imminent property crash, pointing to continued mortgage loan growth.

Many British families are hoping he is right. Up to a million are thought to live in Spain for at least part of the year. Hundreds of thousands have bought homes on the coasts and many more have indirectly invested capital in the sector. Barclays estimates that Britons own more than 90,000 second homes in Spain.

Andrew Lupton, owner of Stacks Relocation Spain, which helps people moving there permanently, said: “Everyone’s asking ‘has the bubble burst?’, but, in my opinion, it burst some time ago. The price crash started last year and is an ongoing process. There is an oversupply of apartments in popular coastal areas so the owners of these properties will suffer.”

Mark Stucklin, of the Spanish Property Insight website, said: “Share prices in property companies have dropped. It is not a housing market crash. However, share pricing tells you something about the outlook for the housing market. After a ten-year boom, investors are nervous due to increasing interest rates and slower demand.People who bought ten years ago will still make a good profit. Only those who bought recently are likely to get hurt. This is also a good opportunity to buy.”

For years, economic Cassandras have been warning that Spain’s soaraway property market is destined for a fall. The Organisation for Economic Cooperation and Development believes that Spanish property prices are 30 per cent overvalued, and that a sudden rise in interest rates could trigger an “abrupt adjustment in which prices would plunge”.

But prices have continued to rise, as sun-starved Northern Europeans have rushed to buy a piece of the Spanish coast. Awash with cheap credit, Spaniards have also poured billions into the market in recent years.

This week, however, the day of reckoning appeared to come closer when investors abruptly lost faith in construction stocks, which have driven the Spanish stock market to record highs in recent years.

The immediate trigger was a 60 per cent drop in the value of Astroc Mediterraneo, a Valencian developer whose shares had soared tenfold in less than a year. The plunge in Astroc’s value caused jitters in the whole market, with much larger construction companies like ACS, Ferrovial and Acciona all taking a hit.

The crisis of confidence has focused attention on the fragile foundations underpinning the Spanish property boom. As in Britain, house prices have tripled in a decade. Unlike Britain, Spain has responded by going on an unprecedented building spree: more than three million houses have been built in the past four years, half of them on the coast. The result is that there is now a glut of housing in many parts of the country. Some 800,000 licences for new housing starts are being issued every year, twice as many as France or Germany and substantially more than the 500,000 or so that are thought to be needed.

House prices have not yet fallen, but the rise of 7.2 percent in the first quarter is the slowest in 8 years, down from a high of 18.5 percent in the final quarter of 2003. Estate agents report that prices are now falling in some regions.



Have your say

You only have to drive down that eastern coast of Spain to see the madness of the developments. As you get down towards Benidorm it becomes like a futuristic horror story. It is quite scary.

Nick Wibberley, Neuvic-Entier, France

Having worked in a managerial position in Spanish off-plan property for 5 years, I can tell you that from an insiders perspective, we were aware of this situation developing for at least the last 3 years.
Most major estate agencies have quietly branched out into new countries.
Meanwhile, in Spain, there has been a collective "hush hush" approach amongst agents - discussing the problem has been taboo.
The greed of Spanish developers is legendary, many hammering UK purchasers with hidden surcharges and price increases with no tie-in to what the market has actually been doing.
Clients offered supposed "rental guarantees" have simply purchased a property with a loaded price - only finding out 2 years later that the property cannot be rented out.
It's not all bad news though - a holiday home (or permanent residence) serves its purpose very well. One property per person is a great idea, Spain after all is a lovely place.
Pity anyone who bought as a short term investment though...

Steve, Benalmadena, Spain

In my opinion the cash started last year and is sprains own fault, the country is rife with corruption and no one any longer has any faith in the government to deal with it. They have encouraged over supply in there greed to make money and collect tax. They wont sort out the land grab laws and have allowed illegal building for so long it has become the norm. The local government seems all to be bent and out for there own gain. The market will not return until Spain can be trusted.

r ellis, sidmouth, devon

http://property.timesonline.co.uk/tol/life_and_style/property/overseas/article1712024.ece