Who to believe? In the news this week, one commentator declares the Spanish property industry bankrupt. At the same time, a developer in Almeria has raised prices as a "signal that things are getting better".
In
Spanish Property Industry Bankrupt?, we read that developers have raised the cost of credit for the entire nation and that Banks are buckling under the weight of their toxic real estate assets.
Compare and contrast:
Spanish Developer Increases Prices where we read that one developer in Almeria has increased property prices by €30,000 per unit to "give a signal to people that things are getting better and they should have faith in the situation".
Personally, I think that sounds like hogwash, and their justification that: "Almeria is one of the up-and-coming areas of Spain so it's not as overbuilt" is too broad a statement to warrant any credibility at all.
As I mentioned
last week, I actually do believe that things are picking up in Spain - perhaps not for any sound economical reason - but this kind of baseless hype does Spain's faltering recovery no good at all.
World attention has been focused on Greece and the possibility of it defaulting on its sovereign debt. Now that the EU has gone in mob-handed to sort out the Greek situation, attention has passed to the next most risky countries on the list. Enter Portugal & Spain.
The situation in Portugal is undoubtedly worse than in Spain - but the Portuguese economy is so much smaller than that of Spain. This leaves Spain as the most significant European economy at the most risk of being unable to balance its books.
Unfortunately, the policies of Mr. Zapatero have failed to inspire confidence. Spanish policy is being seen as all 'bark' and no 'bite'. Mr. Zapatero's refusal to deal with Spain's labour and government inefficiencies is further damaging Spain's international reputation - and credit rating.
If this is the first Property Pulse newsletter you've read, you might be wondering "What's this got to do with the
Spanish property market?" The short answer is: Everything.
The Spanish property market is, not surprisingly, dominated by Spanish buyers. 90% of properties sold will be sold to Spaniards and, even though the remainder will involve foreign buyers, the market is geared around and driven by Spanish buyers.
4 million of the country's workforce are currently out of work. Spain is still in recession and nursing a huge hole in the public purse from a prolonged bout of spending designed to promote growth.
While that tactic has worked elsewhere in Europe, so far it has only served to slow Spain's slide further into recession - with a 'recovery' hoped for sometime later this year.
The net effect of all this doom and gloom is that the majority of Spaniards are unlikely to take any kind of financial risk - risks like moving home or upgrading to a more expensive property.
Spanish first-time-buyers have, quite literally, no way of getting on to the property ladder in Spain. Hence there is very little movement in the domestic Spanish property market.
So, the demand for housing is suppressed, and the domestic buyer sets the benchmark for property prices in Spain.
This is where foreign buyers of Spanish property can benefit from the inherent weaknesses of the Spanish economy - and the relative strength of their own - particularly other Euro countries such as Germany, France and the Netherlands.
That's why keeping an eye on Spain's policies, its economy, its unemployment rate, its bank rates, foreign exchange rates and all the other financial indicators is a smart thing to do if you're thinking of investing in a Spanish property. And that's what we do here in the Property Pulse newsletter.
Martin Dell, Kyero.com
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