Costa Brava Real Estate, Aug. 30, 2009 — While a number of European countries are slowly recovering from the economic downturn, Spain remains stuck in its worst recession in 60 years.
Recovery is expected to take years rather than months.
Officials say the worst is over, DPA reports. But high unemployment, high budget defitic and low consumer demand continue to contribute to the country’s financial crisis.
Until the summer of 2007 Spain was one of Europe’s economic success stories.
But an out of control construction boom resulted in what DPA calls ‘a spectacular meltdown.’
While Spain’s housing crisis started before the global credit crisis instigated by the greedy practices of U.S. banks, Spain’s credit-fueled consumer spending has also collapsed.
In addition, the number of foreign tourists is expected to decline by 10 percent this year — with many tourists opting for newly popular markets in former Eastblock countries where hotels and restaurants are, for now, relatively inexpensive. Spain’s hotel sector is fighting back with deep discounts and special offers.
Further aggravating the crisis is the fact that Spain relies heavily on domestic demand rather than on export of its goods.
Spain’s households are already consuming 6 percent less than just a year ago — the sharpest fall in internal demand of any Western European country. During the second quarter of this year, demand fell by 7.3 percent.
Consumer prices fell for the sixth consecutive month in August, but Prime Minister Jose Luis Rodriguez Zapatero’s socialist government insists the country is not entering a period of deflation.
The unemployment rate is 18 percent, almost twice the E.U. average, and is expected to grow over the next four years. One report says there are now four million unemployed Spaniards and over one million families with not a single person employed in the family.
Meanwhile government spending is soaring due to economic stimulus measures and the payment of unemployment benefits — at a time when tax revenues are down due to the recession.
The deficit is expected to be almost 8 percent by the end of this year, nearly triple the 3 percent set under European Union rules.
House Prices
House prices in Spain fell by 10.1 percent in June, compared to June last year, according to Tinsa. Headquartered in Madrid, Tinsa provides real estate consulting and appraisal services in eight countries, including the U.S.
The June decline was greater than the 9.8 percent drop in May. Tinsa says this shows that the decline in house prices continues. Figures accumulated since the record highs of December 2007 put the decline in home prices at 13 percent.
Housing prices along Spain’s Mediterranean cost, which has suffered from massive overbuilding, were down 12.3 percent.
Economic research house Variant Perception writes in a report titled, “Spain: The Hole in Europe’s Balance Sheet.”
“Spain had the mother of all housing bubbles. To put things in perspective, Spain now has as many unsold homes as the US, even though the US is about six times bigger. Spain is roughly 10% of the EU GDP, yet it accounted for 30% of all new homes built since 2000 in the EU. Most of the new homes were financed with capital from abroad, so Spain’s housing crisis is closely tied in with a financing crisis.”
The report further says:
In order to hide from the effects of the real estate crash, Spanish banks have been buying properties before the loans on them go bad and trying to dispose of them through their own real estate companies. They have also come to own dozens of thousands of homes through debt for equity swaps. Estimates put the value of property repossessed or swapped for debt by Spanish banks at about €16 billion.
Consider the following: Spanish banks are now running their own real estate companies and have websites set up to move their stock. Among selling points are: pricing discounts of 25-50%, financial terms of Euribor plus 0% over 40 years, and guarantees to re-purchase the property in the future.
• BBVA is selling its repossessions via Anida. http://www.anida.es/anida“>
• CAM has set up Mediterranean International to sell off the bank repossessions. www.mediterranean-international.com
• Banco Popular repossessions: Aliseda Gestion Inmobiliaria is owned by Banco Popular to handle the repossessions. www.gesaliseda.es/
• Banco Santander – sells through Santander Altamira Real Estate www.altamirasantander.com Reportedly they have already sold half of their homes through
generous financing terms, many to its own employees.• Banco Sabadell – sells through their property division www.solvia.es/GesPisSolWeb
• Banesto – Sells through a network of more than 20 real estate agencies, including Knight Frank International.
• La Caixa – sells through Servihabitat. www.servihabitat.com/svhPortal
• Caja Madrid – Sells through their website and the auction house Reser www.salaretiro.com/Servlet/RESER/Bridge/481_84900
• Bancaja – sells through its own website. Preference is given to existing clients, bank employees and their families.
• Caixa Catalunya – Sells through their real estate division Procam www.procaminmobiliaria. com/home_es.php
• CAM Bank – Sells through their real estate division Mediterranean Inmobiliaria.
- Source: Spain: The Hole in Europe’s Balance Sheet, Variant Perception
MADRID, Dec 18 (Reuters) - Spanish house sales dived by 36 percent from July to September compared to the same period of last year and housing starts sank by 49 percent, the Housing Ministry said on Thursday.