The Latest Spanish Property News from Kyero.com

Question: “I was in Denia this week to see what I can afford to buy in the North Costa Blanca, from Denia south to Albir and I found that property prices have fallen but not enough. Can you give me your opinion as to whether house prices will fall more or have they bottomed?”

Answer: As you can see from our analysis of asking prices for property in Denia, prices still seem to be increasing slightly.

If you look at a breakdown of asking prices by different sizes of property, you can also see that the increase is pretty uniform in all sizes of property.

However, I don’t believe that houses are being sold at these prices – not in any significant quantity, anyway.

Most sellers aren’t reducing their asking prices because they aren’t in any real hurry to sell. They’re happy to wait and see and are perfectly prepared to hang on to their property until the market bounces back. If, in the meantime, someone makes them a decent offer, they’ll consider it. They’re more fishing than selling. This is true throughout Spain, not just in Denia.

The prices of many new-build properties are reducing, although, not all developers are advertising their discounted prices. In these cases, the best course of action is to demonstrate to the developer that you’re a serious buyers and negotiate hard. You should definitely be prepared to walk away if the developer can’t get close to your target price.

For resale properties, you’re definitely looking for a motivated seller – someone on a timeline to sell, for whatever reason. The risk of paying too-higher-price at the moment is simply that. In time, the Spanish property market will bounce back and property prices will genuinely increase and any excess you paid for a property will be absorbed. The problem comes when circumstances change unexpectedly and you don’t have the luxury of choosing the timing of the sale of the property.

What price is the right price to pay? Even though the asking prices on Kyero.com haven’t decreased much, you can still use them as a benchmark. For example, last year in Denia, the average three-bed house was being advertised at between €303K and €310K. Assuming these prices were already inflated by 10% to provide some haggling space, these properties were probably actually selling for between €273K and €280K.

Now, factor in a 20-30% discount and you’ll be looking for 3 bed properties for sale in Denia between €191K and €224K.

Now, just because properties are listed in this search, doesn’t make them a bargain. In most towns, there are good developments and areas and bad ones. This is where your own detailed research must take-over so that you can compile a reliable first-hand opinion of what prices should be in each area. There’s no real way of short-cutting this process – other than to take the risk of paying over the odds.

Finally, don’t let the temptation of a bargain cause you to shortcut your common-sense. Always use an independent solicitor and get an independent structural survey completed. Even with a new-build property, a survey makes sense because a builders guarantee is worthless if they’re no longer in business to make good on their promises.

Industry ‘experts’ believe that house prices will continue to be suppressed in Spain for a while yet. Some predict a turn-around in 2009, others say it won’t be until 2011. Either way, I think it’s safe to conclude that prices still have some way to move yet. However, this won’t dramatically change the need to continue looking for motivated sellers and developers.

Martin Dell, Kyero.com

A further update on the Spanish Law of Vicios Ocultos, courtesy of Campbell Ferguson of Survey Spain

There is no standard contract for selling and buying resale properties, and there could be different ways of trying to avoid the responsibilities of vicios ocultos. Wording of this kind could be added to a sales contract:

• El vendedor queda exonerado de los defectos/vicios ocultos que pudieran existir
• El comprador conoce y acepta los defectos/vicios ocultos

Unfortunately, in either case, it’s not certain that these would be accepted by a consumer court.

Also, when dealing with newly built properties, the responsibility of the developer/contractor/designer is for 10 years for structural defects, 3 years for installations and 1 year for finishes.

The clock starts ticking from the date of the final completion certificate, CFO. This is important if a building has remained unsold for some time or if it is being sold again ‘as new’ by an investor. The date of the CFO, (which I understand to be the architect’s certificate and not the first occupation licence LPO), is therefore very important.

Remember: this doesn’t constitute legal advice on the part of Campbell or Kyero.com because we’re not qualified to do so. Please use this information responsibly and seek professional legal advice.

Recently, a friend of mine returned to the UK to sell his house after having rented it out for a number of years. To his dismay, he found his house in a sorry state of disrepair and the whole street bristling with ‘For Sale’ signs. A lost cause? Within three weeks, he had a full-price offer and, within two months, the purchase completed without a hitch.

Having visited the house a while ago, I know that it was nice – but no nicer than the other 20 identical houses for sale in the same street. Of course, I wrote to him and asked for details of his secret house-selling trick, and last week, I received his reply. I think it’s worth repeating here because it might help you to sell property in Spain – even at the moment. Are you ready to learn his secret?

“No tricks, I’m afraid – just a bit of old-fashioned marketing (the real kind: thinking about the market). The estate agent thought that our likely purchasers would be either a first-time-buyer / young couple, or a recently separated woman with young-ish kids. We guessed that either of these would be busy types (couple both working, a singleton with kids to get to school, and a job).”

“We also thought that we’d be selling to a woman so we: replaced the kitchen and all the appliances; repainted the inside and outside of the house; replaced all the carpets, reinstated the third bedroom and swept the chimneys. We figured that it would be essential that our buyer be able to complete on a Friday, move-in over the weekend and have the kids ready for school on Monday.”

“We left the garden ‘to do’ other than planting some border flowers – which came out on the same day that our recently separated mother with her two kids, aged 7 and 10, moved in.”

Technically, my friend didn’t stand a chance to sell his home quickly and at full price because there were so many other houses available (which weren’t selling) and the market was worsening by the day. However, by thinking like a buyer and thinking about the buyer, he was able to make his house the ‘one’ that got sold. If all his neighbours had taken the same approach, there’s every chance that he wouldn’t have made the sale – but they didn’t.

My guess is that his neighbours reasoned something like this: “It’s a bad market so I don’t want to invest any more in this property than absolutely necessary. If I get a buyer who’s serious, I’ll take care of the bits and pieces which need tidying-up then.”

If I’m right, their attitude of happy mediocrity made my friend’s house stand out like a beacon so that it was the only possibility. In fact, the others probably excluded themselves quite quickly for this particular buyer – under time pressure to complete and move in to a fully functional family home.

Now, your ideal buyer will probably behave differently because they’re probably buying a second home. If you’re currently trying to sell a property in Spain, have a serious chat with your estate agent. Ask him or her who ‘normally’ buys properties like yours in your area and for what reason. Get a handle on your pool of potential purchasers – where do they come from, what concerns them, what’s important to them?

If your estate agent can’t help you with this – find another estate agent and repeat the process until you’re confident you have a working profile of who might be in the market for your property. Now, that you know what’s important to potential buyers, look for the common themes in terms of what needs doing to distinguish your property from all the rest. It might be some basic decoration, or something to do with the outside space, or whatever. You’re looking for the handful of things that all of your potential purchasers will value.

At this point, resist the thinking, “Hmm, I don’t really want to throw more money into this property, especially now when the market’s so bad”. You certainly don’t want to be splashing home improvement money about with abandon but if you’ve done your buyer analysis correctly, these are the tweaks which will allow your property to rise to the top of the pile. Houses ARE being bought and sold – and yours could be one of them.

Once you’ve completed the home improvements, make sure that all of the marketing material is updated to reflect these new facts. Take new (and professional) photos, speak directly to the needs of the buyer you have identified.

Shouldn’t your estate agent be doing all this FOR you? In my opinion, they should be doing this WITH you – but I’m confident that if you initiate this conversation, you’ll quickly find out whether or not you’re with the right estate agent.

Either way, if you actually have a stab at thinking like a buyer, you can’t help but improve the odds that your property will be the one that’s purchased – because most sellers will do absolutely nothing at all – just like the neighbours of my friend – you know, the one who sold his house.

One last thing: Reading the comments at the bottom of this article entitled 25 tips to sell your home in a downturn, clearly, the price must be right too.

Martin Dell, Kyero.com

European expatriates in Spain's Valencia region who were under threat of losing free access to healthcare have won a partial reprieve. Restrictions announced last month on the right to state healthcare provision were aimed primarily at non-working expats below pension age.

From June 5, foreign nationals not contributing to the Spanish social security system lost their right to healthcare in the region unless they had one of two forms:

• the E121, issued to British men at 65 and women at 60; or

• the E106, extending access to state health services for up to 2½ years after an individual ceases working.

However, the British Embassy in Madrid advised individuals affected to buy private medical insurance.

Consternation was widespread because some expats would not have budgeted for health cover before moving to Spain. But greater concern was felt by those who could not get private cover because of an established chronic ­illness, such as heart trouble, diabetes or asthma.

The situation broadly ­paralleled that in France last year, when President Nicolas Sarkozy made private insurance mandatory for expat early retirees.

The move prompted an outcry from the expatriate community, threats of legal action and diplomatic exchanges between London and Paris.

Mr Sarkozy got his way in the long term, but those already in the system were allowed to continue.

Valencia too has moved to compromise. It is offering early retirees continued access to its hospitals and clinics in exchange for a monthly ­contribution. Crucially, there will be no discrimination against those with pre-existing­ conditions.

In addition, Valencia has deferred implementing the plan until January 15 next year. Anyone holding a health card, or SIP, due to expire before the January deadline will have it extended.

Valencia in essence will be running a premium-based state medical insurance scheme for certain expat ­categories, but without penalising sufferers with chronic diseases.

The big unknown is the size of the monthly contribution, a premium by another name. However, the British Embassy said it had been assured that the sum would be "reasonable and affordable".

The embassy emphasised that expats who had other means of accessing the health system would be excluded from the new arrangements.

Its statement said: "Anyone who renewed their SIP card before June 6, 2008 will have the full 12 months' cover until the card expires - eg, if you renewed your card or joined the scheme in May, you will have cover until May 2009."

The embassy said the regional government believed that about 1,600 Britons were affected.

Chris Barkell, the marketing director of insurer Exeter Friendly Society, which is active in the region, was not surprised by the crackdown.

He said many non-working expatriates under retirement age were not contributing to the health ­system and were gambling on using a European Health Insurance Card (Ehic). "They have been on a free ride," he said. "The Ehic is intended to cover emergency medicine only."

Full story from telegraph.co.uk

Spain's finance minister Pedro Solbes has stunned the markets with an admission that his country faces the worst economic crisis in its history as the full effects of the property crash spread through the economy.

"This crisis is the most complex we have ever lived through given the plethora of factors on the table at the same time," he told Punto Radio in Madrid, breaking with past efforts to put a reassuring gloss on events.

Mr Solbes said the Madrid bourse had suffered an "earthquake", crashing 27pc since the start of June. He blamed the toxic cocktail of high oil prices, the global credit crisis and the sharp slowdown in the key export markets of North America and Germany.

The comments follow this week's bankruptcy of Martinsa-Fadesa, Spain's biggest corporate failure. The property developer - with an empire of housing estates, hotels, shopping malls and hotels - collapsed after failing to refinance €5.1bn (£4bn) of debts. The company's demise was a textbook story of aggressive over-expansion at the top of the cycle, driven by high debt gearing. It has €11bn of assets.

Mr Solbes has pursued a rigorous "no bailout" policy, saying Martinsa-Fadesa took "excessive risks" and must now face the consequences. He has reportedly clashed with cabinet colleagues, who are now searching for any means to stop the downward spiral in the economy.

El Pais reports that house prices crashed by 20pc in the second quarter compared with a year earlier, based on 183,000 completed transactions.

The Martinsa-Fadesa collapse has sent tremors through the whole property and construction sector. The share price of giant developer Sacyr has halved over the past month.

The two banks with most exposure to the Martinsa-Fadesa are Caja Madrid, at €900m, and Banco Popular, at €400m.

Goldman Sachs has issued "sell" recommendations on a clutch of Spanish banks, including Bankinter, Banco Popular and Banco Sabadell, warning that the sharp turn in the credit cycle could prove worse than the recession in the early 1990s. "The consumer is more leveraged today than in any of the previous cycles," it said.

The ratings agency Standard & Poor's has not yet taken a decision on whether to downgrade Banco Popular and Caja Madrid.

In reality, this is unlikely to be the worst economic crisis in Spain's history. Philip II defaulted on his sovereign debts three times in the 16th century after he bankrupted the Spanish Empire to pay for his Counter-Reformation wars against Protestants. He crippled the Italian banking system in the process - much to the benefit of London and Amsterdam.

Full story from telegraph.co.uk