Costa Brava Real Estate

Spain’s Socialist government kept a gag on any discussion of the housing slump in the run-up to the general election on March 9, but now it has secured re-election, the trickle of bad news has become a flood.

Builders are going out of business because real estate developers — whose sales have slumped — cannot afford to pay them. The number of construction groups filing for protection from creditors shot up 87 per cent in the last quarter of 2007, compared with the same period in 2006, according to the national statistics institute.

Some of Spain’s biggest real estate groups, including Colonial, Fadesa and Habitat, have been locked in negotiations with creditors to stave off bankruptcy.

At the height of the 10-year construction boom, Spanish and international banks lent billions of euros to these companies to finance their expansion at home and abroad. In a downturn, real estate groups will be under pressure to write down the value of assets on their books. The Bank of Spain, the financial regulator, is also obliging banks to set aside more provisions against loans to builders and real estate developers.

The question now is how deeply the real estate slump will affect the wider economy.

Dominic Bryant, an economist with BNP Paribas, says Spain is more vulnerable to a housing crisis than other European countries because of the size of its construction sector. “Housing investment equals 9 per cent of [gross domestic product], more than double the average of some developed economies and much higher than the 6.3 per cent of GDP seen in the US before the collapse of housing investment,” Mr Bryant says. Investment in the rest of the construction sector accounts for another 9 per cent of GDP. Construction employs 13 per cent of the workforce.

At the same time, the international credit squeeze has dried up foreign funding for Spain’s spending spree, much of it on housing, and this has transformed a soft landing for the construction sector into a crash.

“A sharp slowdown is clearly under way in Spain,” Mr Bryant says. He estimates economic growth will slow to 2 per cent in 2008 and 1 per cent in 2009, from 3.8 per cent last year.

But if house prices start falling — as Asprima, the association of real estate developers, predicts they will — the contraction will be still sharper.
- Source: The Financial Times, Mar. 28, 2008

MADRID, Spain — Home sales in Spain fell 27 percent in January compared to a year ago, the government reported Wednesday, releasing more bad news from the country’s once-booming real estate sector.

The National Statistics Institute said the number of mortgages granted in January also plummeted — by nearly 26 percent compared to January of 2007, in the biggest such drop since 2004.

Fueled by rock-bottom interest rates, the construction sector had been a driving force behind more than a decade of economic growth in Spain. Housing prices rose 17 percent in 2004 and 9.1 percent in 2006. But the sector started to cool dramatically in 2007.

Interest rates have jumped three points in as many years, there is a glut of housing on the market and banks spooked by the subprime crisis in the U.S. are now much tighter when it comes to lending.

Housing prices in major cities are now falling.

In Barcelona, for instance, they fell 0.5 percent in the first quarter of this year, declining for the fourth straight quarter, according to a study released Wednesday by idealista.com, a major Spanish real estate portal.

Prices are also falling in Madrid and Valencia, and the downward tendency will intensify over the course of this year, the study said.
- Source: BusinessWeek, Mar. 26, 2008

MADRID: Spain’s embattled real estate sector received more bad news Friday when it was announced that property sales were down almost 14 per cent last year, with the sharpest decline in the fourth quarter.

“In 2007, the total number of property transactions was 788,518, a drop of 13.93 per cent over 2006,” the CRE, an organisation that collects data on property transactions, said in a report.

The largest drop was in sales of older homes, which saw a decline of 15.05 percent, compared to 12.41 percent in new properties, it said.

In the fourth quarter, the decline was even more pronounced, with transactions plummeting 21 percent from 203,993 in 2006 to 161,906 in the same period in 2007.

The figures are further evidence of the slowdown in the property sector in Spain after years of growth during which millions of new homes were built and prices rocketed.

The government announced in January that property prices rose just 4.8 percent in 2007, down from 9.1 percent the previous year and the lowest increase since the boom in the market began 10 years ago.

The property sector has been the driving force behind Spain’s economic development in the past decade and contributes 7.5 percent to the country’s GDP, according to a study by the BBVA bank. The construction industry also employs 13 percent of workers.

The low interest rates that followed Spain’s membership in the eurozone in 1999 fueled the housing boom as Spaniards took out mortgages to buy homes for the first time or to trade up to a larger house.

But the market has begun to stagnate due to rising interest rates and the international lending crunch that has hit Spain’s credit-fueled expansion.
- Source: Reuters, Mar. 14, 2008

MADRID, March 11 (Reuters) - One of Spain’s biggest private savings banks has slashed lending to property developers which are caught in a looming housing crisis and barely able to sell land or property, its head of property lending told Reuters on Tuesday.

Jose Aguilar Martin, head of real estate at Seville-based Cajasol, said the bank was not lending to firms building holiday homes on the coast nor to property developers planning to build in areas designated as ‘rural’.

Cajasol’s tougher policy towards property firms is further evidence that Spain’s unprecedented construction boom has come to a shuddering halt and of the dire financial straits in which many indebted firms find themselves.

“Real estate on the coast (for second homes) is not being financed, or at least only under very tough conditions. There’s no foreign market, the domestic market is really down and there’s no investment market either,” Aguilar said on the sidelines of a property sector conference in Madrid.

“Promoters don’t have income because they are not selling houses, simple as that,” said Aguilar, adding it was practically impossible for indebted property developers to sell land either.

Several Spanish property developers have filed for creditor protection in the last few months, while Barcelona-based Habitat last month staved off bankruptcy at the eleventh hour by refinancing 1.6 billion euros of debt.

Around 65 percent of loans made by Cajasol are connected with the property market or mortgages. Spain’s 45 ‘caja’ savings banks, partly owned by regional governments, have assets of just under 1 trillion euros and make around half of all mortgages in the country.

Aguilar said some 90 percent of property companies borrowing from Cajasol had asked to refinance loans since the property downturn began last year, though he stressed Cajasol had not lent to a handful of well-known developers whose debt woes are mentioned almost daily in national newspapers.

Cajasol’s non-performing loans are likely to “almost double” in 2008 compared to 1.17 percent of all loans last year, he said.

All Spanish banks have said their level of bad loans will rise this year as the economy slows and as individuals and companies have difficulty meeting interim payments.

Other speakers at the conference also painted a grim picture of Spain’s real estate sector, which accounts for around one fifth of Spanish GDP and jobs.
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Aguilar said it was simply too risky to lend to developers who could spend seven or eight years getting permission to build on ‘rural’ land in a market where sales had plummeted and promoters debt levels were rising fast.
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Across Spain, unemployment is rising faster than anywhere else in Europe. Consumer confidence is at its lowest level since Spain’s last housing crisis, in the early 1990s, according to Eurostat and Bank of Spain data.
- Source: Summarized from a report by Reuters, via The Guardian, Mar. 11, 2008

For everyone, whatever their likes and tastes may be, whatever their idea of enjoying themselves, the Costa Brava is par excellence the perfect place.

This delightful coast on the Province of Gerona has some of the most beautiful sites nature has to offer in every respect, but where its land and sea come together it is outstanding. This is stated continually by so many of the tourists, both national and foreign, who visit this region of incomparable beauty, with its mild climate.

That’s a portion of a quote from a best-selling Costa Brava Souvenir Photo Book sold throughout Catalunya. As if you needed any reminders of how beautiful the Costa Brava really is.

Of course you don’t. Of course you do!

Either way, take a look at this Costa Brava Photo Blog. You’ll find gorgeous photos of beautiful spots in places like Portbau, Cadaques, L’Escala, Llafranc, Calella, Palamos, Platja d’Aro, Tossa de Mar, Lloret de Mar, Blanes, and more…

Don’t you wish you could fly (back) there today?

Better yet, don’t you wish you could move to Spain?