Monday, November 17, 2008

Property Blues

Recent news from the housing sector in Spain is pretty dire. Here’s a few pieces from the press.
Housing minister Beatriz Corredor said last week that property prices had fallen ‘at least 15%’ over the last year. ‘It is a reality that we cannot deny,’ she said.
The overbuilding during the past few years, the second-home market, the fall in the pound (to around 1.15€), the mortgage crisis, the scams and rip-offs and, of course… the endless amount of property on the market. There is anything between one and two million homes lying empty in Spain. I recently took the train down from Madrid past Seseña, where Paco el Pocero built 13,500 apartments that lie empty. No one can afford a new ‘legal’ and ready to move in home. Then there are many more which are amiably illegal – including between five and six thousand of them in Almería alone (!) – Mainly inhabited by Brits in the Alta Almanzora. The authorities (for which, read the Junta de Andalucía) say they are prepared to legalise most of these and say that just 5% will be un-saveable. That calculates to around 300 homes to be demolished… which in Spain pretty much means ‘without compensation’. The notoriety of which in the rest of Europe is, of course, doing little to stimulate the foreign pensioner house-buying market, which brings money and jobs.
In fact, some suggestions to legalise one’s home include making the home-owner pay for the ‘necessary improvements’ which include, as often as not, main lighting, sewage and pavements.
Mortgages are difficult as well, with some homes now having negative equity and payments rising almost ever month.
Here’s another note from the press – with property prices falling by a more believable 35%!
Fitch Ratings began to downgrade a clutch of Santander mortgage securities worth more than €4bn earlier this summer, warning that the bank's internal analysis points to a 35% crash in Spanish house prices. A large bloc of the securities is still stuck on Santander's books. (Bloomburg).
A British friend lives in Cantoria (one of those pueblos in the Alta Almanzora with many illegal homes). He has written to President of Andalucía Manuel Chaves as follows.
I belong to a group of mainly British third age people who bought houses in El
Fas, Cantoria. From all walks of life, most of us were very careful when we made the big decision to embrace the Spanish way of life and purchased our houses.
Checks were made on agents, Spanish solicitors were employed, notaries processed the escrituras, and we were constantly assured that all was in order and that our houses in Spain were completely legal according to Spanish law.
This is true – the general accusation that the British wanted to buy illegal homes (and save a few bob) is evidently absurd. He continues by saying that the Andalucian government must::
1. Take away the threat of demolition.
2. Allow us to gain mains electricity and water. We can then contribute to the local councils and pay our bills correctly as we would all wish to do.
3. Sequester the assets of the builders and developers who have acted illegally, and use this to carry out any further work to enable developments such as ours to become fully legal. Their assets are the result of criminal activity and within European law can be confiscated.
3. Further punish those responsible by applying the criminal laws of Spain.
4. Use any money remaining to compensate the victims (legal expenses, etc.).
Another Briton writes to The Economist this week and notes the following:
Well in our comparatively small urbanization the injured parties are British, German, French, Dutch and Irish. When we read that Spain has received €186 billion from the taxes of EU citizens and yet is happily complicit in their individual plundering we have a right to be angry. Angry with Spain and our respective Members of the European Parliament. While a united Europe may be a great idea at the macro economic level it will not survive if built on an indifference to the basic right of citizen to see their taxes having some minimum payback. (Hugh Doyle)
In Mojácar, the crash has been all too apparent. In the third quarter of this year, only one building licence was issued by the town hall. Of course, with the absurd plan of the Junta de Andalucía to starve the local towns in the Baja Almanzora so as to build a 35,000 home estate on the Llano Central (between Mojácar, Los Gallardos and Vera) it’s no surprise that the local towns are hurting. It’s also little comfort to know that nobody really knows who can do what. Of course, we do know who can get it in the neck when things go wrong. Ask the Priors.

I reprint the following from Per Svensson of Cuidadanos Europeos.
The urbanistic process in Spain.
It is a difficult task for a foreigner to understand the laws and rules for the process of urban development in Spain, especially since the Regional Governments have the right to pass their own legislation. However, the regional laws must base themselves on the national legislation and cannot go against it.
The basic law, when it comes to changing the designation of land for urban planning purposes, so that dwellings, hotels or industry can be built on it, is the Ley de Suelo number 6 of 1998. This law, shortened in Spanish to LS, has been revised on several points and complemented by regional laws.
In LS 6/98 all land is classified under certain categories:
Suelo no urbanizable: Land with certain special protection, like natural parks, land that has been declared of special value for some reason, has natural dangers (flooding areas) or is public land (beaches).
Suelo urbano: Land that in the general planning is foreseen for construction and has the necessary infrastructure.
All other land that does not fall into either of the two foregoing categories, is classified as suelo urbanizable and it can be transformed into suelo urbano upon certain conditions.
It is the municipalities and the regions who decide which land falls into which category. The municipalities are obliged to make General Plans for their area (there are still many smaller town halls without such a plan) which must be approved by the regional authorities.
For buying or building an individual dwelling, obviously you must own or buy land that is classified as suelo urbano in the general plan and which has the necessary infrastructure (by being in a consolidated area such as a town centre or approved urbanisations). You can also buy and build on suelo urbanizable, for instance on farm land, but then there are important restrictions when it comes to the minimal size of such land required and how much of the surface you can occupy with construction. Construction on farmland may not lead to an area becoming a consolidated area, and should really be for farming purposes. In certain areas of Spain you will not be permitted to build a farm house without being able to prove your planned farming activity.

El País printed a gloomy article this weekend about how the ‘800,000’ Britons living in Spain are being forced to live on a reduced income. The article thinks we all want to go back home - an over-simplified view in my opinion. See ‘Clouds Form over the Retirement sun for the Britons’ One bar-owner from the Costa del Sol, actually an ex-bar owner – he lasted six months - says ‘I sometimes get the impression that the Spanish don’t want us here’. The article then quotes a British Labour MP, Denis MacShane, commenting on the increasing shortage of jobs in England and the wide destruction of income as saying ‘…in the current circumstances, I wouldn’t want to be a Rumanian, or a foreigner; not even a Brit living in Spain’. Returning to the Alta Almanzora, Judy Baker from Albox says ‘it’s a nightmare, I have electricity just six hours a day with a generator which costs me 90€ a week. I used to go down to Mojácar twice a week, but with the price of petrol and the fall in the pound I now can’t leave the house’.

Corruption is of course a problem. New rules from the Government regarding illegal builds are henceforth to be known as ‘urban crime’. Promoters and technicians will now face stiffer sentences and authorities and public officials will not escape severer punishment. Bribes carry six months to four years prison. Public officials can get up to six years.
Let’s see if that makes a difference.

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