Spanish Property

rffrydr · Posted: Tue May 01, 2007 7:17 am Post subject:

"The Pain in Spain"

Not going any higher

Signs that a 14-year boom is ending

THE only question in Spain now is which bubble is bursting. Are only overvalued property companies in trouble, or is the country's entire property market going down? For the economy as a whole, in which construction weighs in at a hefty 18%, it could mean the difference between a soft landing and a hard one, after 14 years of a construction-led boom that put Spain near the top of the euro zone's growth league.

In the past week Astroc, a property company based in Valencia, saw its shares fall by 65% in what looked like a response to tighter planning regulations in the region. The worries have spread to other property groups, where shares have tumbled by more than a fifth since April 17th. Having been floated last May, Astroc's shares had risen tenfold before the crash. Share prices of other leading property companies, such as Colonial, Metrovacesa, Fadesa, Urbis and Inmocaral, also soared last year. Worries spread wider into construction stocks such as Ferrovial, Acciona, ACS and Sacyr Vallehermoso, and banks such as Santander and BBVA, knocking the Ibex stockmarket index off by 1.7% in the week up to April 25th. On that day it was partially pepped up by reassuring noises from government officials and bankers.

Helped by low interest rates since it joined the euro in 1999, Spain has been erecting houses at an astonishing rate. Last year it built 800,000, reckoned to be more than France, Germany and Italy combined. Economists in Madrid forecast that the house-building boom will keep slowing until the new-build rate more closely matches the rate of new household formation, around half a million a year. House-price rises are already slowing, albeit not brutally. They peaked at about 18% a year in late 2003, and are now running around 7%, with some expecting them to slow further. Around the outskirts of Madrid there are new property developments where work appears to have stalled. The Bank of Spain has said in recent years that house prices were 35% overvalued.

Ever since the collapse in subprime lending in America there have been fears that the contagion would spread to those European economies, Spain and Ireland, which have been most heavily dependent on property and construction for their recent growth. But Spanish bankers like to point out that their lending conditions are more rigorous than America's. Credit evaluations for mortgage applicants are often methodically carried out using tax returns.

Whatever happens to the Spanish housing market, which is roughly half of the total construction work in Spain, the effect on the big building contractors should be limited by their recent strategies. Firms such as Ferrovial and Acciona have been diversifying into other sectors and markets overseas. Acciona has moved heavily into energy, while Ferrovial has gone into services, buying for instance BAA, owner and operator of London's airports. However, like Spanish homeowners, many of them are up to their necks in debt.

Source Citation: "The pain in Spain; Spanish property." The Economist (US) 383.8526 (April 28, 2007)
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rffrydr · Posted: Mon May 07, 2007 4:57 pm Post subject:

Holding up well:

http://stockcharts.com/h-sc/ui?s=$ES30&p=D&b=3&g=0&id=p93226479834

Spain is subject of Special Report this weeks' Economist:

http://economist.com/business/displaystory.cfm?story_id=9112308

Diversified or re-Empired?
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Today is the Tomorrow you worried about Yesterday!

Geoffrey · Junior Poster Joined: 06 Apr 2006 Posts: 35

From the Economist article:

“It is all very well being the Florida of Europe, but it would be nice to be the California as well.”

So the having the rampant speculation of Florida isn't enough, they want California's as well.

The Spanish property market does seem to be following the American model of weakness showing up first in the builders, like TOL and KBH in late 2005. Could mean the lenders have a year to go.

RYAN · Newbie Joined: 28 Dec 2006 Posts: 1

Geoffrey · Junior Poster Joined: 06 Apr 2006 Posts: 35

I just spent a week in Spain. Construction cranes are everywhere. I don't think I passed even the smallest hamlet without at least four or five of them. They seem to use them for as little as two stories though so the sight of them might exxagerate the extent of building activity.

HenryTo · Posted: Thu Jun 07, 2007 5:45 pm Post subject:

An update on the aftermath of the Spanish Housing Boom:

Ghost Towns Appear in Spain as Decade-Long Boom Ends

http://www.bloomberg.com/apps/news?pid=20601109&sid=ar3L878k5YM4&refer=exclusive

rffrydr · Posted: Thu Jun 07, 2007 10:45 pm Post subject:

rffrydr · Posted: Fri Apr 04, 2008 7:44 am Post subject:

Apparently home ownership is in the Constitution:

http://www.bloomberg.com/apps/news?pid=20601109&sid=ao4F2HvP_rWo&refer=home
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RClemente · Newbie Joined: 28 Apr 2008 Posts: 1

Hi Folks:

I'm in the middle of a bubble, and don´t know what's better for me. What do you think about my own case....

I'm a spanish guy, 28 year old, and a little bit dissapointed with spanish situation of buying a home in madrid (country capital).

My problem is, i've been earning money since 18 years old, now i will have a baby in 6 months and i need to buy now or wait until bubble explodes ? what's best for me?

Good-keyfacts for trying to buy:

- The home i've found was priced on 300K , and i got 250k final price. It's a very nice place to live, and the house is like i always wanted, and cheaper than everything i seen, They need to sell fast because they have bought a new one.
- If i do this NOW the spread is between 0,25 / 0,37 + Euribor (i guess it's lower than some years ago) so it's a good spread for the mortgage
- If euribor low down, my spread still will be good, and my month cash will still be good
- If i want to morgage in the future, i will not have benefits of my 28-years-old

Bad-Keyfacts for not buy and think on renting:

- The prices are higher (even a 50k discount is less than the "theorical" prices that it can reach on the near future)
- My monthly economy will slowdown (even stop at all :-S)
- Government now benefits renting also, so we can assume that in a monthly basis

Other things i should consider:

I will have a baby in 6 months
I should leave my house in more or less 5 months
I want to own a house better than rent one

Well, more or less that's the situation. What do you thing i should do? buy or rent?

If there is a financial country problem will affect Spanish Central Bank reserves and that will have impacts on the country everywhere. In the case i don´t buy waiting for a better moment, ¿Can that crisis affect to my own money resources on the bank? ¿Will be that money on risk?

¿It makes sense buying now a house with a short-price (for today's prices) and shortest known euribor spread for the mortgage?

Thanks for help me !!! i will appreciate any comment, i don´t know what to do. Thanks for your reply's

rffrydr · Posted: Mon Jun 02, 2008 1:02 pm Post subject:

Yes, you might be denied a loan in the "better priced" world to come. And you plan on settling down, right? Most mainstream housing turns over here in less than seven years. Not a bad rental situation. Key is the deposit. Can you save more renting? Anyway, alot of individual factors best discussed with your freinds in you locality.

What housing bubble? --Or, what housing bubble to come?

http://www.economist.com/finance/displaystory.cfm?story_id=11412518
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LaBelleInvestor · Newbie Joined: 14 Jul 2008 Posts: 14

http://www.economist.com/world/europe/displaystory.cfm?story_id=11670664

There is an image in this article that is worth the click alone.

- La Belle Investor
http://labelleinvestor.blogspot.com/
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http://labelleinvestor.blogspot.com/