Guide to Getting Over the Property Slump

The Spanish government has initiated a number of measures to reinvigorate the slumped property market and avoid a worsening of current conditions. The main elements of president Zapatero's plan to boost the market with 10 billion euros annually involves providing incentives for renting over buying and increasing the offering of VPO's (viviendas de protección official or subsidized government housing).

Boosting the rental market
Towards the end of the last year's legislative season, the government presented a plan aimed at boosting the rental market and helping young people move into their first homes (Plan de Ayuda a la Emancipación y Fomento del Alquiler).

The state has started off by providing economic assistance in the form of 210 euros a month to young people between the ages of 22 and 30 with annual incomes beneath 22,000 euros. Additionally, young people will be offered a loan of 600 euros to pay the rental deposit.

There will be a 10.05% fiscal deduction for people of any age renting property in Spain whose incomes don't surpass 24,000 annually.

Shock plan
The government has designed a stimulus package that will inject 10 billion euros into the Spanish economy on a yearly basis for an undefined number of years. A good part of the 11 measures approved by the legislature are aimed at assisting the property market and indebted families.

a) Reducing unemployment: The plan foresees providing employment to 500,000 of Spain's unemployed, especially in the construction sector. 1,500 career specialists will take care of preparing personalized itineraries for the reintegration into the workplace for each unemployed person, reinforcing the mechanisms of employment access and facilitating the transfer of workers to more dynamic activities.

b) Fomenting bidding on public works: The goal here is to guarantee a level of activity in the construction sector and compensate for the loss in employment due to decreased residential construction.

c) More VPO's: 150,000 government subsidized housings will be built each year.

d) Free extensions on mortgages: All mortgaged families will be able to extend their payment plans beginning in May 2008. The measure will be sustained for two years.

Invest in Spanish Quality of Life

Picture yourself lounging on the beach on a typical Tuesday afternoon, pleasantly drifting off to sleep with the rhythm of the gentle Mediterranean tide, amused by the occasional burst of glee from children hunting sea-treasures on the shore.

Imagine that not more than 100 feet from your comfortable spot in the sand, a welcoming Spanish villa set in a quiet, intimate neighborhood awaits your daily return from the sun, sea and sand.

As you bask in the heat under a dependably blue sky and contemplate a refreshing dip in the calm, clear waters, you’re comfortable in the knowledge of the simple luxuries that await you back home: a relaxing shower to brush off the salt, a light meal to satiate your appetite and a comfortable couch to read a good book or perhaps watch a bit of local TV to catch up on your Spanish skills.

The possibility of a relaxed life under blue skies is what draws such large numbers of expats to Spain’s sunny shores, tranquil rural villages and modern, dynamic cities. Much more than a mere ‘fun in the sun’ tourist destination, Spain offers great geographic and cultural diversity, satisfying a truly wide range of lifestyle preferences.

The southern Costa del Sol has been a traditional haven for foreign retired expats. Increasingly, however, areas such as the lush northern region of Galicia have attracted foreign homebuyers as well. This indicates a growing awareness in the overseas property market of Spain’s value not only as a sun destination but as a country with an excellent quality of life (since these northern regions, though green and very beautiful, are known for more rainy climates.

Spain’s coastal regions, however, continue to draw the largest numbers and remain very active markets among foreigners in search of a retirement or vacation home despite the deceleration in Spain’s national property market. Murcia, on the southeastern coast (Costa Calida), boasts the strongest local market with a rise in prices over 2007 far above the national average at 8.1%. The region offers a good combination of beautiful surroundings, luxury and affordability.

Southern Spain’s Andalusia is still highly popular among those who seek a relaxed lifestyle above all else. Its characteristic whitewashed coastal villages, many of which (Nerja, Torrox, Benalmadena) have become veritable expat towns, offer a renovating departure from the stresses of Western city life.

Fortunately, the Mediterranean “life is to be enjoyed” mindset of the Spanish is present throughout the country. Spanish cities offer plenty of opportunities for leisure and relaxation and maintain a high quality of life. Thanks to the now-concluded property boom, the Spanish cityscape has been revolutionized and today enjoys a modern and architecturally stimulating presence.

Thousands of young expats each year move to large cities like Madrid, Barcelona and Valencia in search of a job abroad to expand their employment potential or simply looking for a stimulating and healthy environment in which to raise a family.

With the current shift in Spanish property from a boom market to a more stabilized and consumer-oriented one, foreign homebuyers are presented with the most attractive deals on a Spanish home in over a decade. Whether for retirement, relocation or vacation, Spain represents one of the world’s most interesting opportunities for a home abroad.

Spanish Government Predicts Market Stabilization by 2010

Spain's Ministry of Housing (MiV) considers that there may still be margin for further price decreases in property prices. The first quarter of the year saw a price increase of 3.8% compared to a 4.5% rise in the consumer price index. Hopes are that property prices will end up settling at similar levels to inflation.

The MiV declared that the real estate market should attain stabilization by 2010, once supply and demand are regularized. Beatriz Corredor, the Minister of Housing will be meeting soon with developers to develop formulas that will facilitate this stabilization.

Experts Say Government Measures Not Enough

Emilio Ontiveros and Juan José Toribio, heads of Spain's top financial analysis organizations (AFI and IESE, respectively), announced that the government's proposed 10 billion euros annually wouldn't be enough to remedy the property market's deceleration.

Both figures presented their own proposals at a debate held today in Toledo on the Spanish economy. Ontivieros suggested the Spanish government follow the UK's move to temporarily trade treasury locks for loans with private banks in order to inject liquidity into the market. This, he said, would help avoid financial tensions in coming months.

Toribio proposed emergency procedures such as a reduction in corporate taxes and measures similar to the removal of the weath tax (which has already been abolished).

10 Billion Euros a Year to Stimulate Property Market

The Spanish Minister of Economy, Pedro Solbes, announced recently at the International Monetary Fund in Washington that Spain would spend 10 billion euros a year to stimulate its real estate sector.

60% of this amount will be used to provide taxpayers with a 400€ rebate. The money will also help finance small and medium-sized businesses and to facilitate access to subsidized housing.

Among other measures to stimulate Spanish property are tax breaks and quicker rebate payments for sector businesses to encourage continued construction and renovation in Spanish cities.

15% Price Drop Expected in the Next Three Years

The vice-president of Parquesol, one of Spain’s leading real estate companies, predicted a drop in house prices of 15% during the next three years. Antonio Bustamante stated that this period would be necessary for Spain’s property market to readjust following its 10-year boom.

Bustamante made this statement at a round-table meeting held before the opening of Madrid’s international tradeshow and largest European real estate exhibition SIMA 2008. He stated also that the companies belonging to the G14 (a lobby that represents the country’s main estate agencies and developers) initiated 70% fewer properties in the first months of 2008.

Issuing what could be seen as a mea culpa, the vice-president of Parquesol apologized for the part real estate companies played in driving up prices and driving potential national buyers out of the market.

Finally, Bustamante pointed out that “all scars heal” and that sooner or later the stilled national demand will pick up following the current situation of surplus demand and extreme debt.

New Measures to Fight Draught

Last autumn and winter were the driest seasons on record in Spain, and mounting concern over civilian access to water has led the government to undertake new measures to ensure adequate water distribution throughout the country.

Spain is heavily dependent on water, not only for consumption but also to maintain its hydroelectric plants – especially that the government has put great emphasis on renewable energies.

Part of the plan to alleviate Spain’s driest areas (particularly the southeast) includes diverting water from the Tagus river, which flows from the north to the west of the country, to the Segura river basin in the southeast.

Demolition of Illegal Constructions Could Worsen Spain's Property Slump

It's a well-known fact that during Spain's ten-year property boom, illegal construction was rampant. An estimated 100,000 illegal homes were built during the last decade, and thousands are threatened for demolition as Spain's government takes action against illegal building.

Innocent foreigners who unknowingly purchased homes that had been built without a permit are now faced with the possible demolition of their new homes. Ironically, it was investment from foreign buyers that fueled Spain's property market during the boom and continues to stimulate the market today.

Consumer advocates are currently fighting against the demolition of illegal homes that have already been purchases. One of the proposed solutions involves paying a 5 euro per-square-meter charge to legalize illegal homes.

Spanish Pirate Prisoners Released

A crew of twenty-six Spanish and African fishermen returned home this week after being captured by pirates off the coast of Somalia and held hostage for six days.

The fishing trawler Playa de Bakio was assaulted by pirates armed with grenade launchers and, according to Kenya's Seafarers Assistance Programme, released after a ransom payment of 770,000 euros.

The fishing trawler Playa de Bakio was assaulted by pirates armed with grenade launchers and, according to Kenya's Seafarers Assistance Programme, released after a ransom payment of 770,000 euros.