Red light for pension system
The Spanish Government's pension system is running out of money fast. It closed its accounts for 2010 with a meagre surplus of just 2,382 million euros, 71.9% lower than a year ago and the system has had to postpone payments of 8,000 million euros to companies providing services to it. The State's contribution now stands at 66,000 million yearly, and this is increasing by 9.5% per year.
Bernat Soria, the previous Health Minister, recently said, “If no new measures are taken, the National Health System will cease to be sustainable in five years.”
“Golden pensions” for parliamentarians
Members of Parliament have secured themselves pension rights far different from those enjoyed by normal citizens. After only 7 years in Parliament, they receive the maximum pension when they reach 65 years. If they retire at 60, they will receive the maximum pension if they have contributed for 40 years. The basic salary is 3,126 euros per month.
Construction of dwellings falls a further 34.5%
From January to November 2010, a total of 237,479 new dwellings were completed, a fall of 34.5% on the same period in previous years. We estimate the construction of those dwellings now completed started during 2008, the building licenses having been issued in 2007.
The number of new dwellings starting this year (measured by the number of projects approved by the Colleges of Architects) may be less than 100,000, thus, we are getting close to the point where the stock of unsold dwellings will cease continuing to increase.
The average price of dwellings in Spain fell 5% in January. On the Mediterranean coast, the fall was 8.4%.
Spanish Government owes 224,000 million euros
At the end of November last year the Government debts were 224.000 million euros (excluding the interest on loans) 7% more than at the same time in 2009 (and the debt has increased considerable since last November). Moreover, it does not reflect the increased debts of tax payers, only the total sum of taxes due. This is equivalent to 20% of Spain's Gross Domestic Product.
Careful with the electricity meter!
This year the Government will start an offensive against all forms for tax evasion, especially the owners of dwellings renting but not declaring the income or paying the taxes due. One of the methods to be used will be to keep track of electricity consumption in properties. Another will be to monitor adverts on the internet and in newspapers for dwellings being offered for rent.
The owner of the property is the one principally responsible, even if the letting is done through an agency.
Varying commissions in the banks
Banks may stop charging for saving accounts and debit or a credit cards, if your business with them is important to them, but if you are a retired person, just transferring your pension to Spain and paying electricity, community, water and taxes etc. with standing orders, and paying for shopping and eating out with a debit or credit card, the situation is different: You will be charged between 18 and 60 euros per year for maintenance of the account (meaning you pay for letting the bank use your money!). The Basque Caja Vital, the Mallorquin Caja Pollenca and the Sevillian CajaSol are most modest, with 18 euros, but with Cajastur, Banesto and Banco Popular you will be charged 60 euros.
- Deutsche Bank charges only 3 euros for a debit card.
With the online banks, Ing, Uno-E and Open Bank you may avoid paying anything for maintaining the account and having a credit or debit card.
High risk on property loans
Building Promoters and constructors have loans of 439,000 million euros with the Spanish banks and saving banks, which are causing them concern. The saving banks are owed 170,000 million euros in such loans; the banks 269,000 million. In the new Banco Caja Tres (the merged CAI, Caja Circulo and Badajoz) bad property debts represent 12.72% of their balance. In Unnim (previously Caixa Sabadell, Terrassa and Manlieu) the percentage is around 10.
Spain borrows at lower interest
Last week the Ministry of Finance managed to place 3 and 5 year bonds at a lower interest rate; the 3 year bonds pay 3.297%, the 5 years bonds pay 4.08%. Demand for the Bonds was higher than previously. The 'country risk' of Spain is now down to 200 points, from 300 points at the end of last year.
Different sentences on non-payment of mortgage
We reported on the sentence passed by a court in Navarra, that surrendering the property to the bank would end the responsibilities of the borrower. Now another court in the same region has taken different view: surrendering the property it is not enough, the bank also has the right to seize other assets of the mortgagor, up to a “sufficient amount” to cover the outstanding sum.
And different unemployment totals
Various parts of the Public Administration have different methods for measuring unemployment. The Employment Ministry talks about 4.2 million unemployed, not taking into account the long term jobless, young people who have not yet had a job and the unemployed who are taking courses to improve their qualifications.
The National Institute of Statistic (INE) maintains that the number of unemployed stands at 4.7 million, whilst AEAT (the tax agency) in the Ministry of Finance calculates the number of unemployed passed 5.5 million in 2009.
Property auctions up 11.2%
In the last quarter of 2010, the number of dwellings sold by auction, due to owners not being able to meet mortgage repayment, increased by 11.2% over the third quarter. With the result that just before Christmas 278,000 families lost their homes. The General Council of the Legal Power estimates more than 1 million people were affected, either as owners or people standing as guarantors.
Jumping the boarder – from Spain
Omar Chuick from Senegal came as an illegal immigrant to the Spanish town Ceuta four years ago. Last week he was arrested when he tried to jump the formidable boarder of the town, trying to get back to Morocco, heading for his home country Senegal.
Working for the right of vote
By Per Svensson
We are getting close to another election. In May all Spaniards and many foreign citizens will elect counsellors in thousands of Spanish municipalities. I invite our readers to come with us on a short journey on the work undertaken to establish European citizens' right to vote.
This is what I wrote in 1995:
“Early on it was clear that if foreign owners and residents were to be taken seriously by the politicians, it was necessary that we got the right of vote in the local elections. This possibility lay anchored in the Spanish constitution, stating that foreigners could have a vote in local elections, based on the law or on bilateral agreements with countries which gave their Spanish residents this right.
The struggle for the vote took place on 3 fronts:_
The first was to get the foreigners themselves to accept the necessity of taking part in Spanish society and to integrate. We had to debate with those who were saying they were only guests in Spain and thus could not demand anything. I was personally attacked in some foreigners' publications for my campaign, but our arguments won in the end.
Secondly, was to have the Spanish political parties and leaders accept our position. In summer 1987 I sent letters to all parties and to leading politicians, including those in the European Parliament, arguing for the foreigners’ right of vote. From almost all we got a positive reply; they were in agreement.
Then the time came for the third front: At the beginning of 1988 I wrote to the embassies of the Northern Europe countries which already granted voting rights to their Spanish residents. We proposed to them the opening of bilateral discussions to obtain agreements on our right of vote in local elections. The Dutch Government had already done so, several other countries followed.
But the Spanish government was in no hurry to ratify the bilateral agreements agreed with Holland, Norway, Sweden and Denmark. Nor did they rush to introduce the right to vote for all residents from the countries of the European Union, contained in the Maastricht agreements. The Government of Felipe Gonzalez ratified in 1992, but did their very best to sabotage our voting rights. The socialist party feared that the tens of thousands of foreigners in the tourist municipalities would vote for the conservative opposition. The municipal elections in 1995 passed without our participation, but with strong protests from Spaniards and foreigners.”
Eventually we were granted the right to vote and stand as candidates in municipal and European elections. After the European elections in 2004, I wrote:
The Europeans and the last European elections
“Since no organisation representing foreign Europeans presented: a candidate list, a program, or tried to mobilise the European vote or recommended voting for a particular party, there is no need to explain why there was so little participation in the elections by the Europeans with a right of vote.
If asked for an explanation, there were several:
-Voters participation in all European countries was lower than ever.
-There were no program-discussions by any of the parties in a language Foreigners could understand.
-The issues discussed by the parties did not concern/affect non-Spanish Europeans.
-Around 70% of non-Spanish Europeans had returned for the summer to their home country and the postal vote was too difficult to use.
The PP vote in “European Municipalities”
The theory that PP automatically attracts most of the non-Spanish European vote does not hold water. In some municipalities with good PSOE-mayors, a majority of the European will vote for that party (Finestrat). In municipalities where there are issues really affecting the non-Spanish Europeans, a PP mayor may well be ousted (Teulada).
Europeans arriving in Spain normally settle in coastal municipalities where there is no industry. PSOE is normally strongest in industrial cities (Elda, Elche, Novelda, Alcoi, Petrer). On the other side, Spanish voters tend to be satisfied with the local government attracting foreign investments.
The impact of the LRAU-issue
One tends to overestimate the importance and impact on voters that an issue, which one is very engaged in, has on them. But, in reality, for the majority of Spaniards and European voters, the LRAU and the abuses committed are not important, since they themselves have not been hit by it. Let us not forget that over the past 10 years more than 70% of foreign property buyers have bought apartments.
And even with the investigation of the EP into the abuses and the law, the matter never became an issue in election campaigns or debates and was only mentioned by small parties looking for niche-votes. The main issues in the Valencia Region were:- a stable economy with good income and low unemployment; the defence of the National Water Plan and the AVE; and basically a lack of corruption (with the Fabra case as the exception) coupled with energetic and competent regional, provincial and local leaders.
Abuses and politics
If one want to channel the energy derived from the LRAU-movement into the politics, this must be done on the local level and with a long-term strategy:
-The presentation of independent lists of Spanish and Europeans in selected municipalities where groups are active and can be organised active:
-The formulation of programs where the LRAU-issue is not the only one:
-Local groups must start taking a position on all issues affecting the population (water planning, roads and traffic, crime and security, better urban planning, moderation of Construction, honest and effective government, etc.).
It is not possible to start organising just a few months before elections. For the municipal elections in 2006, the time to start is now, and probably not in the form of a political party, but as a citizens group, taking an interest in local politics. Closer to the election the final decision on preparing lists or not, collaboration with existing parties or not, can be taken.”
The upcoming elections in May 2011
We are getting close to the municipal elections to be held on 22nd May, and the time limit for the foreigners to register on the voting census has already passed. There are two groups of foreigners with a right of vote: Immigrants from outside the EU and the EES. There are 350,000 of them that could have registered to vote but only 45,554 have done so, that is a poor 13.02%. Most of them come from Ecuador (22,213) and Colombia (11,195).
Among EU citizens, the picture is different: 40.9% of those with a right to vote have registered. The British have the best record, of the 182,798 who could register, 113,689 have done so, that is 62.19%. The Germans had 89.018 citizens that could register, 51.999 did so (58,41%). The largest national group within the EU are the Romanians with 394,437 possible voters, but only 102,182 registered. Another big group are the Bulgarian, 73,660 could register, only 19,183 followed the bugle call and did so.
Not all those registered will vote
It is clear that not all those who registered, will actually vote, however, as large majority of the immigrants will be in Spain on Election Day, since they are working, many may vote. For the non-Spanish EU citizen the picture is different. Many of them will go back to their home country at the end of May, and the postal vote is so difficult that hardly anyone will use it.
Another obstacle to the European vote is the lack of any good alternative. Voting for PSOE? Many will not give their vote to the party which for so many years blocked the European vote, nor will they want to give Prime Minister Zapatero a vote of approval for his policies both before and during the crisis. What about PP? Again, many Europeans will know that PP politicians have been implicated in many of the corruption cases and that they were the principal motor in the “urban abuses.” They will burn their fingers on such a list.
Independent lists?
Regrettable there are few municipalities with a viable independent list. Many of those who have complied such lists have used it as a vehicle for their own promotion and enrichment, not to defend the interests of the citizen. Often they side with one of the big parties after they have been elected, or they auction off their vote to the big party offering them most.
But in the places with honourable independent lists, with incorruptible candidates, like the CIBE list in Benissa, where stalwart Lisa Svoboda is playing a leading part, our best vote may be the independent one.
The final result will be probably be that only 20-25% of those with a right to vote will actually do so. Sad.
Spain: Brits head home
The global financial crisis has brought the return of the Brits abroad
By Jo Thornhill
It's what many of us dream about while we slave away at our workplace – a
relaxed retirement with a decent amount of money and lots of sun.
And more than five million Britons are enjoying this dream life, spending
all or part of the year safe from the lottery of the British weather.
But the global financial crisis has brought storm clouds and many expats are
heading home. We look at the reasons why:
Property crashes
Deborah Cassely moved to Spain 20 years ago with her partner, Andrew Walker.
For much of that time they ran a successful property development and
lettings business in Marbella on the Costa del Sol, where they had three
children - Jorja, now 18, Tomasz, 11, and Benjamin, 9.
The family thought they would stay in Spain for ever, but things started to
go wrong in 2008 with the onset of the credit crisis.
Spain's overheated property market began to collapse and inflation took
hold. Deborah, 45, and Andrew, 50, suffered a sharp rise in the cost of
running their household.
'Every time we came back to London to visit friends and family it seemed
things were cheaper than in Marbella,' says Deborah. 'The cost of food,
eating out - everything had really started to rise fast in Spain.'
The family finally decided to move back to their home in East Sheen,
south-west London, 18 months ago, where Jorja has enrolled in college and
her brothers are in school.
Deborah and Andrew had, thankfully, let their home. They now run a property
letting business in London and are doing well, but it is a different story
with their Spanish properties - their Marbella villa and a commercial
property in the town have languished on the market for almost two years.
And they are far from alone in quitting the Continent. Michael Derks, chief
strategist at currency trading company FxPro, says: 'It's not surprising
people are returning from Spain. Property prices are plunging, the pound has
declined against the euro and the labour market is dire. Unemployment in
Spain is 20 per cent.'
Charles Purdy, director at Smart Currency Exchange, which can exchange large
sums such as the proceeds of a house sale, has had a 50 per cent increase in
transactions linked to repatriations from the Continent.'We've seen a marked
increase in people bringing euros back to the
UK for conversion to sterling,' he says. 'For many Brits, particularly those
receiving a UK pension or relying on other income in sterling such as rental
income, their buying power has been badly eroded by the weak pound.'
Currency crisis
When euro notes and coins came into circulation in 2002, £1 was worth about
1.66 euros. It is now worth about 1.16 euros. At its worst, on the last day
of 2008, £1 was worth 1.02 euros.
To put this into context, someone who retired to Spain at the end of 2002 on
a UK pension of £10,000 a year would have received 16,600 euros. Today it
would be worth just 11,800 euros - a dramatic drop, and at a time when the
cost of living has risen sharply
'Those who are coming back to the UK and selling property or moving large
amounts of euros back into sterling must think carefully about how they will
exchange their money,' says Nick Jones, of currency exchange specialist
World First.
'Since it could be a large transaction, it pays to shop around,' he advises.
But you must be sure that you are dealing with a reputable company where
their cash is safe. The collapse of Crown Currency Exchange, where thousands
of customers lost money, has given cause for concern.
Tax and austerity
In some cases complex and onerous tax rules in other countries are driving
expats back to Britain.
As Continental countries struggle to manage deficits, often introducing
harsh new tax regimes, many expats find they are paying more tax - and
being chased more efficiently for it - than previously.
The UK, by comparison with countries such as Portugal, Greece or Spain, is
increasingly attractive.
Once the decision has been taken to return to Britain, tax is another area
where advice is needed, particularly if there are significant savings or
assets in bank accounts overseas.
In some circumstances it may be advisable for expats to close savings
accounts overseas before returning permanently to the UK, for example.
However-they need to seek independent expert advice to minimise their tax
liabilities.
Sliding prices:
While the financial crisis has been disastrous for many living or owning
homes abroad, falling property prices in Europe have thrown up
opportunities.
Property prices in Spain have fallen by up to 20 per cent since 2007 and are
expected to continue their slide.
Clare Nessling, operations director at overseas mortgage specialist Conti
Financial Services, says buyers are keen to snap up a bargain.
'Spain and France still offer opportunities and Turkey has also been popular
among those searching for a holiday home,' she says. 'The problem can
sometimes be in getting the funding, but banks are still lending, including
in Spain.'
Nessling stresses the importance of getting independent expert legal and tax
advice and valuations.
She recommends researching all the costs and taxes involved in the purchase,
including utility charges, and checking whether there is any responsibility
for previous owners' debts or inheritance issues. And never sign anything
that is not in English and you have not discussed with your lawyer.
Nessling says: 'You often hear nightmare stories about people who have
planning disputes over land in Spain, but this is nearly always because they
didn't get the right advice.'
Why maligned NHS and schools look more appealing from afar
However much Britain's public services are criticised, they draw back a
significant number of expats.
When retirees suffer ill-health, many decide they want to have access to the
NHS. This is largely due to the high costs of healthcare in Spain, France
and other popular retirement locations.
Schooling in Britain is also a draw. Paul Chipchase, an antiques dealer, and
his wife, Gemma Fernandez de la Vega, decided to move from Ventallo in
northern Spain to Lenham, Kent, so their sons, Guillon, 9, and Olivier, 5,
could attend a British school. They say the rising cost of living in Spain
was another factor.
Paul, 42, had lived in Spain for 13 years after meeting Gemma, 41, a book
publisher. The couple sold their home last November and are now
house-hunting in Kent.
'While we loved living in Spain and the children enjoyed their small rural
school, I was keen for them to be educated in England,' says Paul. 'They
have enrolled in the local primary school and so far are adapting well.'
The Spanish Property Crash - Was This What Was Really Happening?
Written by: Graham Hunt & Nick Snelling - Published on 07/02/2011 18:01:36 in Buying Process
What if I told you that you could earn millions without actually ever doing
anything for just a smallish investment? What if I told you that the victims
would be banks and nobody else? (well maybe just the odd foreigner)? What if
I told you that you could live happily ever after with no consequences?
You would probably tell me to 'pull the other one' wouldn't you - or words
to that effect? However, this may well have been the World of the Spanish
developer during the boom years.
Let me tell you more.
1) You come up with a plan to build a development of (say) 100 homes maybe
on rustic non-buildable land. To this effect, you set up a limited company,
an SL, with 3000 Euros in the bank and 500 Euros in notary costs (this is
important because limited companies have limited liabilities)
2) You ingratiate yourself with the local Mayor (I will leave you to imagine
how, but let's just say, for example, you offered him a cut of your profit)
3) You get your planning permission and, so far, your only cost is for your
brother in law, an out of work architect perhaps, to come up with some basic
drawings and urbanization plans. You cut him into the deal along with a
lawyer to draw up contracts.
4) You go to a bank and ask them to fund the development with possibly a
100% upside for you.
5) Your bank agrees and you get money from them to fund 70% of the cost of
the development (having overestimated the cost of course) with 30% of the
money up front to start work, 30% when the land is prepared and the
foundations in and 40% when the roofs are placed on the properties to finish
off the development.
6) Out of your first 30% you take your commission ie. your profit and you
start selling the properties off-plan to buyers desperate to get into the
hugely profitable real estate boom. Your profit works out as follows:
The estimated sale price of the property is 200k but that means nothing.
Your build cost is approximately 600 euros per square metre and your
projected homes are 120m2 with optional pools ie. they cost more. Build cost
is therefore 72000 Euros although you have told the bank it would be around
100k because you are going to use top quality materials - and you need to
add into this the land cost too. The bank gives you therefore 30k per
property to get started -3 million Euros.
Your only cost is your out of work brother in law and buying some rustic
land at a ridiculously low price and, probably at this stage, you have not
even bought the land but maybe you have paid 10% for the option and brought
the owner in on the deal.
7) You sit on the project until the rest of the money has "gone". Where does
it go? You decide that...as maybe you never intended building anything at
all.
8 ) The bank reposseses the land off the SL (which goes into liquidation)
and that land is now worth 60% less - because of the huge drop in land
prices due to the property crash. In any event, the land hasn't even been
re-zoned as urban because the Mayor is now in prison and it was rejected at
regional level because the land was in a national park! The bank then
(vainly) tries to recoup their initial outlay.
9) You are now relaxing in your Caribbean beach villa on your ill gotten
gains but your victim is only the bank (and maybe the whole Spanish economy)
Now If you really want to up the scummy 'human being' factor you take
deposits off people desperate to buy. A 10% or (let's say) a 20% up-front
payment would be nice and the bank funds the rest through a mortgage. Let's
assume you sell half (50 units) at 200k off-plan at a 20% deposit each time.
This amounts to maybe another 1 million in your pocket towards building
costs - of a building that is never going to be erected (or completed).
So, your profit is 2.5 million give or take from the bank, a million from
clients (albeit that 50 people will be searching for you through the courts)
- while the bank desperately tries to off-load the land or project to
another builder (having already lost 3 million).
Multiply this by the number of unfinished projects throughout Spain and you
have more than a slight problem for Spanish banks - and a lot of very happy
Caribbean real estate sales agents.
Conspiracy theory or did this really happen? You can be the judge...
Si (
No(
