Let me take the bull by the horns from the start:
The demand for property in Spain is not recovering; Building activity is still slipping; The stock of unsold dwellings is increasing; Property prices are still falling; More and more property companies are going broke and The danger for the banks from the property sector is growing
“Take two!”
In the last part of the frenzied boom period property sales people told foreigners, interested in buying a dwelling in Spain, “Take two, one for your own use and another for letting or selling in a few years!” Many innocent investors followed the recommendations and are now desperately trying to sell both, and clear the mortgages. A few weeks ago we told our readers that a court in Spain had ruled that one is free from mortgage debts if they hand the property over to the banks. Now another court has found that is not correct, the full value of the mortgage must be repaid.
All Europe is now aware of the foolishness of the hype that property values could only go one way, Upwards! In every town and village in Northern Europe there are victims of the Spanish property scandal, who have lost their life savings. They are telling their stories to friends and neighbours, and often to the newspapers and TV.
Moreover, the economy has only recovered in one country, Germany. In most the economic problems from the crisis, for the state and for individuals, still remain. We remind our readers, in our Yearly Report 2010-2011 we said that the middle classes were the main foreign market for property in Spain; the group that has suffered most during the crisis.
It is pathetic to read, albeit less often, reports of local increases in sales (which are often only due to banks take over ownership of dwellings they financed to the hilt during the boom). All serious experts agree the number of normal sales of dwellings are still falling. The Research Company Acuña & Acosiados in a recent study said, “the real demand for new dwellings is very low, and until 2020 will not rise above 200,000…”
Minister as sales man
In April the Minister of Development, José Blanco, will visit the UK and other countries trying to convince the markets that it is now safe to buy a dwelling in Spain. He will be followed by a 'gang' of selected property developers, peddling their goods.
This is an extraordinary measure, which indicates how grave the Government now considers the situation in the property sector and its implications on the national economy. At the same time the Government and the Regions continue to ignore the criticisms and recommendations in the “Auken report” which was endorsed by an overwhelming majority in the European Parliament. The Minister would do well to stay at home, reading that report, intoning a “mea culpa,” finding solutions for the victims, and changing the rapacious property laws.
In the meantime, building activity is falling, month by month. The only good news can be found in the reduced number of applications for new building projects for dwellings, down from the 865,561 applications in 2006 to 91,662 last year. This means, in 2012 less new dwellings will be added to the enormous existing stock!
Stock is still increasing
The Government and the property promoters are trying to disguise the catastrophic situation in the property market by issuing different numbers for the dwellings 'in stock.' They normally refer only to the number of constructed dwellings which are for sale by the promoters and real estate agents, some 600,000 to 750,000.
Acuña & Asociados adds to this impressive figure; showing that the number of dwellings for sale, including those which are in construction, frozen or not started on land converted or in the process of conversion to building land, as 2.8 million.
Property analyst Verges comes to a similar conclusion, starting from a commercial stock of dwellings (meaning those completed and for sale) of 730,000, adding another 2.32 million dwellings (1.3 million in different stages of construction, 0.73 million with some sort of activity and 0.57 stagnant).
None of the analysts include in their figures the private dwellings owned by foreigners trying to get rid of their properties. There are half a million foreign families with dwellings bought in the years 2005 to 2008, which are waiting for an opportunity to recover the purchasing price and additional costs (and who may have to wait for a long time….).
Property companies collapsing
28,840 property companies are in process of bankruptcy. Hardly any of them still own any of the properties they constructed, most of which having been seized by the banks, leaving only the promoters as “caretaker owners” on behalf of the banks who are trying avoid saddling their balances with more bricks. The promoters have been waiting for more than 3 years for the market to come back, but they have waited in vain. They are now paying 50 million euros per day in interest on the loans of the unsold dwellings. The property sector has debts of approximately 400,000 million euros. Nobody, but nobody expects the debts ever to be paid.
The banks, especially the incompetent saving banks, are trying their best to:-
- avoid more promoters going formally broke, to avoid having to take over their properties, and
- keep the property prices artificially up, to avoid having to adjust downward the value of their assets. “The Economist” recently estimated that Spanish property prices are still inflated 43.7%.
Now the pressure is on the Spanish Government from the European Commission, to get clear figures of the property debts and the situation of the banks and the saving banks. The Government has had to act, getting the truth piecemeal out of the banking sector. The truth is bad, very bad. But if the value of land for construction is written down to zero, where it belongs, a number of banks (especially saving banks) will be bankrupt.
Soon the banks will have to face a new and more serious stress-test from the European Commission, different from the dilettante one of last year. The Bank of Spain estimates that the saving banks have 100,000 million euros in credits and assets linked to property promotion. That means 46% of all their problematic debts stem from the property sector.
The promoters and the banks would love to reduce the prices of their properties, hoping that some adventurous foreign funds or companies would buy them. But how can they sell bricks and building land at prices 70 to 80% reduced? That would reduce the value of their remaining assets by the same percentage! Instead they keep the prices artificially high, waiting for the miracle of the turning market, sending the Minister abroad as the 'sales manager.'
The situation of the foreign market for property in Spain? It has ceased to exist: A market consists of vendors and buyers meeting to make transactions. Today, there are only vendors.
How long still?
How long must we wait for the property market to return? The question must be answered; my estimate is:-
sales are so depressed that it can hardly be lower, a few sales can result in large 'percentage increases' due to pressure from the EU, promoters and bankers will soon have to reduce prices of their property assets and then find the first tentative buyers this may be the signal the promoters and the local administration have been waiting for to bless the country with another million dwellings the property market from the period 2004 to 2008 will not come back, since the middle classes in Northern Europe have been severely hit by the crisis.
Property expert Jose Luis Ruiz, well known author of the book “Adios, ladrillo, adios” (ladrillos are house bricks) has hit the nail on its head:
“Adios, ladrillo, adios”
Hundreds of corrupt candidates in May elections
We have received the following petition for and action against the many corrupt candidates in the local and regional elections taking place on the 22nd of May:
Dear friends across Spain,
Right now, political parties are drawing up their candidate lists for local and regional elections in May, but the lists could include hundreds of corrupt politicians.
Instead of presenting people with a track record of responsible public service, some party leaders are using legal loopholes to nominate candidates indicted for corruption-related charges. There are deep vested interests keeping dirty politicians in power, but if party leaders know our votes in May depend on cleaning up their lists -- we could force them to take action against corruption, and its disastrous impact on public life, our economy and the environment.
We don’t have a lot of time. Let’s send a clear message to all the parties that we don't want any more corrupt candidates on the ballots. Sign this urgent petition below for clean elections and bold action against corruption, and then forward this to everyone. The petition will be delivered to the media and all party headquarters before the final lists are announced.
http://www.avaaz.org/en/spain_clean_up_politics/?vl
This won’t be an easy battle. Corruption is entrenched in our political system: 8 out of 10 Spanish citizens think that our political institutions and representatives are corrupt or very corrupt. But its breadth and poisoning effects on public life are reaching alarming levels -- 2010 closed with over 700 ongoing judicial investigations into corruption cases such as bribery, misuse of public funds, and illegal party financing, involving thousands of public servants and officials.
Unfortunately the response from political leaders has been to protect their ranks against judicial indictments and indulge in the blame game with political opponents. The confirmation of Francisco Camps in Valencia and the current mayor of Grazalema as candidates in their respective parties is the most recent example of the lack of political commitment to combating corruption.
But public outrage is erupting, and in an election year we have our greatest sway over the political parties.
We've done it before -- last year Avaaz members in Brazil pushed through a law that stops corrupt politicians from running for office. Everyone said it was impossible, but it became the largest online campaign in Brazilian history, taking political power out of the hands of lobbyists and private interests, and giving it back to the people.
Let's build an unstoppable anti-corruption movement in Spain and make party leaders think twice before including corrupt candidates in the lists Now it's our time to turn the tide on corruption in Spain. Sign the urgent petition below and spread the word. Avaaz and Actuable will deliver the petition this week directly to the main party leaders.
http://www.avaaz.org/en/spain_clean_up_politics/?vl
Many of us believe that the time has come to defeat corruption in our country, and that Spanish society is ready to take action to ensure government serves the public interest, rather than the deep pockets of a few. The recent protests across the Middle East and in the Maghreb are a powerful reminder that, when we unite and fight for our rights, we can accomplish what at first seemed impossible.
With hope,
Luis, Grazi, Laura, Ricken, Alice, Benjamin and the rest of the Avaaz team
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