Yearly Report 2011 – 2012

Inflation was only 2.9% in November
INflation increased only 2.9% in November, compared with same month last year, mainly due to cheaper petrol and medicines. This means that 5 million pensioners will not have their pensions increased next year, since the November inflation figure is used as index for this purpose, and if it is less than 3% inflation, there is no increase.

Retail trading fell 7.2%
Retail commercial turnover fell 7.2% in November, compared with the same month last year; the 17th month of shrinkage. Sales of food products fell 4.1%, non-food products 9.8%.

Onions cost 1,100% more
Onions increase in price 13 times from farmer to consumer.  Due to the low price paid to the farmers (8 cents a kilo) many do not bother to harvest them and thus onions are being imported from countries where production costs are cheaper.  The same goes for olives, Spanish farmers are paid 36 cents a kilo, whilst customers are charged 3.87€ and carrots, produced at 19 euro cents sold in the shops for 95 cents.

Wealth of Spanish shrinks.......
From the start of the crisis in 2007,  Spaniard’s wealth per head has fallen from 105 to 100 points, which ‘average in’ the Euro Union.   Luxembourg is on top of the list, with 271 points;  Romania and Bulgaria at the bottom, with 44.   Spain comes 13th in the 27 EU countries.

…....but not for all
Executives in banks which have received public money to survive, must reveal publicly what their salaries are before the end of 2011. Some have refused to do so, whilst others have not.  Rodrigo Rato, Chairman of Bankia, received 2.3 million euros, and Jose Luis Olivas, who had to retire from his Vice-Presidency in the same entity due to the scandal of Banco de Valencia, got away with 1.6 million.

Owner of Zara has 24,000 millions
Amancio Ortega, the owner of the Zara chain of woman's clothes shops, with 24.000 million euros is the richest person in Spain.  Runners-up are the family Del Pino with 4,100 million, Rosalia Mera, the ex-wife of Armancio Ortega, with 3,305 million, the Entrecanales family have 2,454 and the March brothers 1,699 million.
In a year where the Ibex stock exchange lost 13%, the ten richest people in the exchange increased their fortunes by 8%.

Corruption in Spain
In the last produced World index on corruption, Spain moved one place, compared with last year, from 12th to 13th place. However, the country scored 6.2 points out of a possible  10, a 0.1 point improvement.
New Zealand is number 1 with 9.5 points, Somalia is last, with only 1 point.

Exports up 46% from 2004
Spain has increased exports by 46% since 2004.  In the first 9 months of 2011, the country exports 158.000 million euros worth of goods, but even so, their share of international commerce fell from 1.98% in 2004 to 1.60% in 2010.  The reason: the strengthening of the emerging countries in world trade over the last decennium (China, India, Brazil).

Labour costs hit 2,456,9 Euros
According to the national office of statistic, labour costs per month per worker hit 2,456 euros in the third quarter of 2011, up 1,5% from the same time last year.  1,800 euros is paid in salaries, 574.60 comes from social security payments.  The hourly cost increased 4.8%, due to a reduction in the number of hours effectively worked and an increase in vacations and fiestas.   After deducting vacations and fiestas, the working week is effectively 28 hours.

Spanish engineers learning German
In the first half of 2011 a total of 7,257 Spaniards emigrated to Germany to find work. In Germany there are 73,000 job vacancies for engineers.   Medics and mathematicians are also welcome.  German language courses at the offices of the Goethe Institute in various cities in Spain are fully booked, thus many unemployed Spaniards are going directly to Germany to learn the language.

Economic activity shrinking
Official figures on the economy report an increase of 0.4% in the third quarter and an estimated fall of 0.2 in the last quarter of the year.  However, several qualified observers doubt the official figures.  The American economist Nouriel Roubini phrased it like this: “Spain is returning to recession, if it ever went out of it”.

Agency Fitch expects economic growth of only 0.5% in 2012. The foundation of the saving banks Funcas predicts a growth of 1%.
The Zapatero Government foresaw growth of 2.3% !

Lights out in many town halls
Many municipalities have difficulties paying their electricity bills.   Electricity companies, complaining that they owe in the region of500 million euros, after the summer, as a warning to all of them,  cut off supplies to some municipalities.
Some of the town halls without lights are Coin in Malaga, Huelva and Priego in Cordoba, Las Palmas on Gran Canaria, Jerez de la Frontera, Llera in Badajoz, Creixell in Tarragona and Badalona in the province of Barcelona.

Court refuses action against rating agencies
The National Court has reassessed the appeal against the decision of the Anti-Corruption court in favour of the rating agencies. The leftist federation Izquerda Unida and two associations presented the appeal because they considered the ratings of the Spanish economy false and based on privileged information.
The decision of the National Court is final and cannot be appealed.

High deficit for 2011 expected
Director Angel Laborda in Funcas expects a deficit in the public administration for 2011 of 8% of Gross Interior Product, instead of the 6% projected by the government, making an adjustment of 4.4% necessary for 2012.  Instead of a 16,500 million euros savings for 2012, as projected by the new government, an additional 40,000 million will be needed.

In-law of King prosecuted.....
Ińaki Urdangarin, married to Princess Cristina, has been accused by the courts for the activities in his foundation Noos, where he is supposed to have siphoned off  important sums of money collected from private and public entities, especially in the Valencia Region and the Balearics. The governments of the two regions paid out hundreds of thousand euros.
King Carlos has denounced the activities of Urdangarin as improper, and stressed that all must be equal before the law.

….and Minister Blanco
The infamous Minister of Development in the outgoing government and peddler of Spanish properties on road-shows in Northern Europe, Jose Blanco, is being prosecuted by the Supreme Court. He is accused of having taken significant sums of money, via a relative, from a contractor to speed up contracts affecting his company.

Town hall of Gandia owes 300 million euros
The auditing company Deloitte has found that municipality in Gandia, Valencia has debts of 300 million euros.   Debts to banks amount to 141 million, to suppliers 62 million, other financial commitments amount to 32 millions and the debts of the municipal companies are another 65 million.
In the town with just 80,000 inhabitants, 82 new workers were employed between 2007 to 2010.

Wine exports up 26.8%
In the first 10 months of 2011 the wine export from Spain increased 26,8%, to 1,813 million litres, however, since most of the increase ‘bulk wine’ the average price fell 5.9% to 99 cents per litre. The export of bottled wine from registered wine districts increased 20.7% in volume and 20,.1% in value, whilst sparkling wine increased 21.3% in volume and 16.4 in value.
Most of the increase in bulk wine went to Italy, China, Russia and France.

Evictions Increased by 14.2% in Third Quarter
Eviction procedures presented in the Spanish courts in the third quarter of
the year totalled 10,869, an increase of 14.2% over the same period last year, but less than the 16,464 evictions between April and June.
The same data shows that in the first nine months of the year there were 42,879 foreclosures, a figure much higher than the 34,459 recorded for the same period in 2010.
By region, Valencia with 2,797, recorded the most foreclosures in the second quarter; the least recorded, 45, were in La Rioja.

The Economy
On its Last Leg
We have a new year and a new government, but Spain’s economic situation remains the same, or it may even be worse !
Unemployment reached 4,422,359 at the end of 2011, an increase by 7.86% over the same time a year ago.
The public deficit for 2011 was 8%, exceeding that predicted by the previous government by 2%.
The Social Security System ended 2011 with a deficit of 668 million euros; the previous government had expected a surplus.
The number of companies suspending payments to suppliers totalled more than 6,000, up 12% on 2010.
The 'country risk' of Spain was 385 points in the first week of 2012 and the Ibex was down to 8,289 points.

Valencia Government illiquid
The Valencia Government was unable to repay a loan from the Deutsche Bank of 125 million euro due at the end of last year and could not find any other bank willing to bridge the gap.  The regional government had to ask the national government for assistance to avoid a scandal, which could seriously damage the financial standing of the country.  It seems however, that the national government has refused to give the free-spending Valencianos extra funds or a guarantee but that they have persuaded a bank to give them a new short term loan. The Valencia leaders have had to present a plan for cuts of 1,000 million euros in their public sector sending.

Banks saved from worthless 'building land'
On the very last day of 2011, the Government passed a law, extending for one year, the possibility to allow banks to classify as ‘building land’  land that has not been urbanised as foreseen in the plans, which otherwise must have been redesignated to the category of 'suelo rustico'.
This amounts to a gift of 33,344 million euros to the banks, in the aftermath of the property bubble, when dumb banks granted enormous sums in loans to reckless promoters who bought up agricultural land, made urbanisation plans for thousands of dwellings (including golf courses) paid the mayors for getting them approved and were given thousands of millions to finance the construction.......
The banks accepted the land as guarantees for their loans, and when the bubble burst and the time schedules foreseen in the urbanisation plans had passed, were left with worthless land on their books. Bankia has 5,100 million euros worth of such land on their books, Banco Santander 4,301 million, Caixa Catalunya 3,347 and La Caixa 2,611 million.
Banco de Espańa has calculated that the bad loans, advanced by the banks to the property industry, amount to 176,000 million euros.

And now, paying back the debts
Several of the countries in the Euro Zone have to refinance huge sums in 2012, amongst them Spain. In 2011 the country had to refinance 40,000 million euros. However, the need for new financing is 255% greater in 2012, at 142,174 million. With a high country risk and subsequently high interest rates, this is like rolling a snowball down hill, until it is so big that it cannot be controlled anymore.......

The new Rajoy Government
Before Christmas, the winner of the national elections in November, Mariano Rajoy from the Partido Popular, was appointed prime minister and formed his government, presented a very sketchy government program in Parliament and won the backing of an absolute majority. This is important since it will not make it necessary for him to seek difficult compromises with the smaller, mostly nationalist, parties.
Soraya Saenz de Santamaria (a young woman) is the ‘strong man’ in the Rajoy government.  She is Minister of the Presidency, First Vice President and Government Spokeswoman, in addition to being President of the regional government in Castilla – La Mancha.  At 28 years of age she became Leon’s Chief Attorney General, went into politics in 2000 and very soon became the right hand and associate of Rajoy.
The appointment of Luis de Guindos as Minister of Economy was a surprise (even though he had worked in the department in the Aznar government) as he was the President of the infamous investment bank Lehman Brothers in Spain and Portugal a few years before the bank went bankrupt.
Another negative surprise is the appointment of Jose Manuel Garcia Margallo, a personal friend of Rajoy, as the new Foreign Minister.   He is from the Valencia Region and has been a member of the European Parliament since 1994, and in that capacity, did what he could to suppress the petitions of European citizens against urban planning abuse in Spain, and voted against the Auken report, which won overwhelming support in the Parliament.   Beware of  Señor Margallo !
Cristobal Montoro has been appointed Minister of Finances and Public Administration and will have the necessary, but difficult task, of forcing the regions to reduce their formidable spending. The fact that most of those regional governments are from his own party, does not make the task any less difficult.
New Minister of Justice is Alberto Ruiz Gallardon, the young and brilliant Mayor of Madrid.

Cutting expenses
The new government is busy cutting expenses and increasing taxes, after finding a deficit of 8% for 2011, 2% over the previous government’s expectation.  By the end of last year decisions had been taken to cut spending by 8,900 million euros and to increase  taxes by 6,275 millions, and more are to come !
Included in the savings measures is freezing the salaries of the public employees and restricting the number of new bureaucrats, as well as increasing their short work-week from 35 to 37.5 hours.   Subsidies to the public television are cut by 200 million euros, the same as for the railways and the political parties will see their income from the State reduced by 20%.
The subsidies to the private concessionaires of the motorways will be cut, as well as the  funds for investigation and development. The finances promised by the previous government to a number of regions will be suspended.

Taxes increasing
The Government has decided to increase the Income Tax general tax rate for the years 2012 and 2013, by three quarters of a percent for lower income earners, up to 7% on incomes over 300,000 euros.
The tax on savings will be increased by 2% to 6%.
The IBI tax (Local Rates) on property will be increased for 50% of all dwellings, i.e. those with the highest value at the moment. In many municipalities the dwellings of foreign owners will be in the upper half.
On the other side, the deduction in Income Tax for those buying a permanent dwelling will be maintained, as will the reduced IVA on the purchase of such dwellings.

The battle with the Regions
To reduce public deficit this year the Government has to get the regions to see the light, a difficult task.  The demand of the Finance Minister that the regions must be given 'approval' by the central government before deciding their budgets, is being met with resistance in some regions.  The Basque Government refuses this control completely, as 'an attack on the self government of the Regions.'   Catalonia has called the measure 'unacceptable and intolerable' whilst Andalusia has promised to 'defend its autonomy'.  The Valencia Government, on the contrary, has welcomed the measure, a move much encouraged by their need for government assistance in saving them from going broke.  


Communities of Owners:
Crisis hits Communities
We are receiving an increasing number of letters on the impact which the crisis is having on many Communities of Owners. The following two cases describe the experiences of many.

Case 1
Mrs. Campbell is the owner of a 4th floor apartment on a Costa del Sol development which was to have consisted of several apartment blocks, a group of dwellings and some commercial premises. Only Mrs. Campbell’s apartment block has been completed, following which the promoter went bankrupt and has not completed the infrastructure. The sewage was to be treated in a sewage cleaning system but at present goes to a drainage hole, which is fast filling up, in a nearby ravine.  Missing also is the swimming pool and the tarmac on the dirt road entrance to the block.
There are 3 owners living permanently in apartments which they bought on plans. Another 10 apartments were sold to non-residents who intending selling or letting their units when the development was finished.  Five apartments and four commercial units remain unsold in the name of the development company of the promoter.
Mrs. Campbell has confronted the promoter, asking when the infrastructure is going to be finished but he only shrugs his shoulders, pointing to the bankruptcy of his company and his personal bankruptcy. He also refuses to do anything about a Community of Owners, saying it was never set up and for that reason he will not pay any Community fees for the upkeep, or even cleaning of the entrance hall, staircase, corridors or lift.
When she saw the Mayor of the municipality and described her situation, she was told he (the mayor) knew it only too well, that the municipality had no money or obligation to finish the infrastructure and that Mrs. Campbell was in reality living illegally in her dwelling, since no 'certificate of occupation' had been issued for the apartment block, due to the missing infrastructure.  He also warned her that the town hall may demand that the owners pay part of the costs, since they had legally replaced the promoter by taking title to their apartments .......
Indefatigable Mrs. Campbell has also visited a lawyer, who told her that many were in the same situation; that nothing could be squeezed out of the bankrupt promoting company, since the bank had first priority on the unsold units and that the best thing she could do was to wait for the crisis to end (!).

Case 2
Mr. Olsen is the non-resident owner of an apartment on the Costa Blanca in a block of 12 apartments which has been completed but where 4 of the owners refuse to pay any Community fees, 'because they bought for rental purposes and had no intention of using their units. So far, the remaining owners have paid for everything.  A lawyer had assured Mr. Olsen, who is the elected president of the Community, that he could for a fee take the matter to court and have the judge force the recalcitrant owners to pay, 'since he was a good friend of the judge.'   Mr. Olsen is in doubt as to what should be his line of action because he is not sure that all of the owners would pay the of the lawyer’s steep fees.
Our conclusions
The second case is relatively simple.  We recommended Mr. Olsen to go to another lawyer, one not trying to earn additionally on his presumed friendship of the judge and get a more modest price for what is really a simple legal action.  However, before doing so he must have a clear mandate from a General Meeting of the Community (it need not be unanimous) reflected in a record written in Spanish or translated into that language by a certified translator, that he, as the elected President,  is given the mandate to take the following owners (names and number of apartments) to court for outstanding community fees (years and sums) asking that a seizure (embargo) be imposed on their apartments.
The law on Communities is quite clear and firm when it comes to the obligation of owners in a legal Community to pay the fees agreed by a legally convoked General Meeting and the possibility to enforce a seizure (embargo) to be placed on their property to enforce payment.
However, Mrs. Campbell is in a worse mess. It is true that an owner cannot live in a property without a 'certificate of habitation' having been issued. Also that such a certificate should not be given by the municipality before the essential infrastructure foreseen in the approved architect plans is in place.  Moreover that a promoter protected by a legal bankruptcy is out of his squeeze.
However, a good lawyer should investigate if the bank has taken title or possession of the unsold apartments and commercial units, in which case it becomes responsible for the Community fees and eventual costs of terminating the infrastructure, according to it’s share in the Community. Moreover, the municipality had the legal obligation to demand from the promoter a money guarantee for the proper termination of the infrastructure before giving him the building licence. Did they get that guarantee and where is the money now?
To the question of the Community of Owners: In the title deed of Mrs. Campbell, as well as in the other owners, is a declaration of work done, and the subdivision of it into joint and private part, to be managed in accordance with the Law on Horizontal Property. That is the legal constitution of the Community! Whether meetings have been held or a board elected is not decisive. That means the promoter (or the bank) must pay the Community fees for his shares, or the community can follow the same procedure as we describe for the second case.

The property market – still shrinking......
In December 2006, five years ago, we wrote:
The most important consideration for a foreign owner is the marked change in the property market, which has seen a drop in sales of properties to foreigners of between 50 and 70% and also an important reduction in the number of Spanish buyers. Our members have been warned of such a development.  We shall try to assess if this trend is temporary, or if it will continue and deepen……..

In the report of 2008-2009, we wrote:
How long will the crisis last? It is anyone’s guess. The Spanish Government predicts we shall see a turn-round at the end of 2009 but with the Government’s bad prediction record, this must be seen more as a vain hope, or an intention to swing the mood of Spanish voters (European elections in June 2009).  
In the Report of last year, we wrote:
Promoters and sales agents are hoping that the drop in sales is temporary, and that the market will recover.  We do not share their hopes. The high prices do not allow for any value appreciation and have driven investors into the stock market or to other countries where property and life is still cheap. The massive construction program with building cranes everywhere is not attractive to retired people seeking tranquillity.  The urban planning abuses against small landowners, promoted by the LRAU and LUV-laws, have scared many buyers away. Greed and corruption has damaged the reputation of the country.  Spain has lost much of its attraction.
All signs point to a deepening and prolongation of the crisis in the Spanish property market.
At the risk of being boring, I have to repeat the same message in this year’s Report.  The property market is still shrinking, and the sale of properties in Spain to foreign buyers has statistically vanished, in spite of great efforts to stimulate sales, on behalf of promoters, sales agents, banks and even the government.

Here are the facts:
The colleges of architects approved plans for building 5,871 dwellings in October. Over the first 10 months of 2011, plans for 68.264 dwellings were approved, 10.2% less than at the same time in 2010, an already bad year
Alicante Province has 11.7 unsold properties per 1,000 inhabitants. The average for all provincial capitals is 8.1 unsold dwellings
It is expected that only 200,000 dwellings were  sold in 2011, down from 412,000 in 2007
Prices for dwellings have continued to fall during 2011, compared with the already fatal 2010, in spite of promoters and banks doing their best to keep them up to defend their balance sheets
The statistical office of Spain reports that prices for new homes fell 7.4% in the third quarter of 2011, compared with last year, and resale dwellings 9.6%
The Guardian reports that property prices are down, as much as 40%, on the Balearic Islands
- The number of mortgages agreed in October 2011 fell to 22,193, 43.6% less than the same month in 2010, and the least since 2003   

The Economist claims that Spanish homes are 43% overvalued
Ernst & Young states that, any significant recovery in Spanish building activity looks far off because house-prices are still probably over-valued and they expects them to continue  falling for at least the next 3 years.
In a study conducted by Bankinter it was found that at least 30% of the 700,000 homes Spanish holiday homes in stock will never sell at current prices and recommends the banks that have repossessed them to halve their asking price to get things moving

Banks trying to sell 80.000 properties
Banks and saving banks fear the new stress test and the order from the Bank of Spain that they must reveal the number of properties on their books, and are now feverishly offering a substantial number of properties for sale, both on their web pages and in their local offices.
BBVA is offering 13,500 properties on www.bbvavivienda.com but only 3,100 are owned directly by the bank or its property company Anida. The rest belong to promoters, but have been financed by the bank, with mortgages up to 100% over 40 years!
Santander is trying to sell 2,700 properties, 1,000 owned by the bank or their property company Altamira.  On their own properties they offer 100% financing.
La Caixa has 6,500 properties for sale, 4,000 owed directly by the bank and with financing at 100% over 30 years.
Banco Popular is trying to sell 6,000 properties, 3,500 are dwellings, the rest garages and storage rooms.
CatalunyaCaixa want to get rid off 8,000 properties, most of them in Valencia, Madrid, Barcelona, Murcia and Almeria.
CAM is desperately trying to sell or let 6,200 properties. 1,500 of them are in Alicante Province, 1,130 in Valencia and 600 in Murcia.
Bancaja has 18,300 dwellings for sale, more than half of them in the Valencia Region. They are offering mortgages with no payments the first 3 years.
Banco Sabadell has 4,000 dwellings for sale, 3,000 still owned by strangled promoters. They are also offering mortgages of up to 100%.
Banesto has on their web page www.casaktua.com 5,500 properties, 4,400 of them dwellings.  600 of them are offered at more than 50% discount
The cheapest of the dwellings offered for sale by Santander is in Castellon at 40,000 euros.
The lowest price from La Caixa is in Figaredo (Asturias) at 12,600€.
One can buy a property, which needs restoration, from 7,000 euros from BBVA in Pumarin (Asturias).
The cheapest Banco Popular offer is a dwelling in Enix (Andalusia) at 40,293 euros.
The lowest price from CAM is a dwelling in Orihuela for 95,800 euros.

Our black paint was ‘rose tinted’
In evaluating the situation of the property market in 2008, we wrote the following:
'The normal demand (meaning young Spaniards wanting to set up a home of their own, employees getting a job in another area from where they are living, parents going into retirement, leaving their permanent dwelling to the children and buying another for themselves) may not be able to absorb more than 200,000 dwellings in 2009 and a similar number in the following years.
This means we may have a prolongation of the present situation in the property market for several years to come. Even if the demand rises to 300,000 dwellings per year, mathematically it will take 18 years to dismantle the enormous surplus the boom has produced. Only if we get a 30% drop in prices very soon, and the government forces the banks to give reasonable and safe mortgages to buyers, can the “recovery period” be shortened.
You may think we are enormously exaggerating and viewing the situation overly dark, but remember two things: From 2004 we have consistently been correctly predicting things to come and the situation is at present even darker than we predicted. Moreover, we are now into a worldwide economic crisis, much deeper and stronger than the last Spanish property crisis (from 1989/1990 to 1996) when prices fell 50% and the drought of new buyers lasted 5 years.'
When the final figures for sale of properties in Spain during 2011 comes out sometime in 2012, we expect the figure to be between 200,000 to 300,000.
That means our 2008 warning has come true.
However, we are now down to the rock bottom we described in 2008. The yearly sale
of dwellings in a country with 47 million inhabitants can hardly go below 200,000.  But the huge stockpile (officially recognised as 700,000 new dwellings, in addition to some hundreds of thousands held by the banks and at least a million dwellings bought by private investors during the boom and owned by foreign owners wanting to sell) is not diminishing, and is hanging like a millstone around the market’s neck.
The many brash intents by remaining promoters, despairing banks and fumbling national and regional governments have not had any impact on this stockpile.  It is time they see the truth and take the following urgent measures:
a)Accept the conclusions of the 'Auken-report', approved by an overwhelming majority in the European Parliament and specifically aRemove all legislation and practices that open for abuses of foreign property buyers
b)Find solutions to the problems of the groups of foreigners already abused
c)Install functioning systems of information to foreign buyers and owners
2. Slash sales prices 50% from the 2007 level.
Spanish property price trends
Posted on 20th December 2011 by Mark Stucklin.
As we near year-end, a round up of “expert” opinions on Spanish property
price trends
Juan Enrique Varona, a professor at the University of Cantabria, says prices
are between 15pc and 20pc off the peak, and need to fall to 35pc off.
“Prices have not fallen as much as they need to,” given the market situation
he says. “Demand is very low,” whilst supply is “out of all proportions.” As
a result, “we still don’t know what the market prices for housing will be.”
Angel Cano, a director at BBVA, one of Spain’s top-2 banks, says prices will
fall between 5pc and 10pc over the next 24 months, but not to the same
extent all over the country. …......
Nicolás Llari de Sangenís, a director of property consultants CB Richard
Ellis España, says that the housing market will take “5 years to return to
normality............
Ratings agency S&P say prices will continue downwards, with no recovery in
2012.
Carlos Ferrer-Bonsoms, Director of residential property for agents Jones
Lang Lasalle, says prices have already fallen 35pc to 40pc since the peak,
and could fall another 15pc in areas of over-supply before they bottom out.........
According to the international firm of auditors Ernst & Young “Any
significant recovery in Spanish building activity looks far off, because
house-prices are still probably over-valued and we expect them to continue
falling for at least the next 3 years.” They believe Spain is already in
recession and won’t start growing again until 2012.
Property prices in Madrid have fallen 44.8pc since the peak in 2006,
according to a new study by Spanish estate agents Tecnocasa. Most experts
agree that prices have fallen more on the coast than in Madrid, so the price
of holiday-homes on the coast has probably fallen by 50pc or more.
On the subject of land values, Mikel Echavarren, head of Spanish property
consultants Irea: ….. “The market for land has disappeared. There are
almost no transactions between genuine investors. Land has reached a market
value of zero, or even below.” Below zero means you would have to pay
someone to take the land off your hands.

UN: Recession - Stagnation
The U.N. Conference on Trade and Development says the outlook for the world economy is very bleak. UNCTAD warns Europe is facing a full-fledged recession next year, and the best the United States and Japan can look forward to is a period of stagnation.
The U.N. Conference on Trade and Development is urging nations to move away from austerity measures toward policies aimed at stimulating growth. UNCTAD Director on Globalization and Development Strategies Heiner Flassbeck said that unfortunately, all governments in the world have decided to do just the opposite.
He said political leaders are choosing restrictive fiscal policies over economic stimulus measures. He warned this decision is creating a situation in which everyone is in danger of falling into recession.
" There is everywhere a slowdown, at least, if not an outright fall of industrial production and things like that. So, there is no escape," said Flassbeck. "If the three big developed regions are not able to stimulate the economies, then we will all fall into a deep recession or at least a permanent stagnation… and deflation where you never get back on growth, on a growth path."  
Flassbeck notes Japan’s economy has been in a deflationary situation for 20 years. He said it has resulted in two lost decades.
The UN economist said private consumption is the most important overall component of growth in Japan, the euro zone and the United States. He added there will be no revival if consumption cannot be revived in these areas.   
He said there appears to be a political consensus that fiscal policy should stay on an austerity path. Some politicians, he said, erroneously argue that the only way to regain confidence is by cutting deficits.  
"But, the fact of life is that we will not cut public deficits. It is only an attempt to cut public deficits. Governments are too big. They are just too big just to cut their expenditure and expect that their revenues will remain as they were before. They will not. They will fall. Revenues will fall and with falling revenues you will see that you cannot reduce a deficit. And, if you cannot reduce a deficit, you cannot regain confidence.  So, the whole idea is flawed from the very beginning," said Flassbeck.
UNCTAD economist Flassbeck said it will take a bit longer for the recession to hit developing countries. But, when it does, he said there will be severe consequences for the developing and least developed countries.
He said nations apparently have not learned the lessons of the 1930s when recession was in full bloom. He said it is frightening to see that nations cannot agree upon a coordinated plan of action for stimulating world growth.

El Pais reported
Bleak 2011 to end with worst home sales and construction data in decades
Transactions, housing starts, completions and prices all slump in the worst year of the crisis
LUIS DONCEL - Madrid - 27/12/2011
Two decades after the Queen of England spoke of her annus horribilis, players in the Spanish property market could rightly avail themselves of the expression to describe this year.
If 2008 and 2009 were depressing enough, while 2010 saw something of a timid recovery, the figures for 2011 represent some of the worst on records for veterans of the sector. Regardless of whatever aspect you choose to look at, be it the number of house or land transactions, housing starts and completions and mortgage lending, all of the indicators show the worst figures since records were first kept. What's more, a recovery is not in sight, with experts predicting an even worse 2012.
"Everything will depend on lending and the labor market, and in neither case do we expect any good news soon," Julio Rodríguez, the former chairman of the state mortgage bank Banco Hipotecario, says.
While credit flows to all sectors of the economy have dried up, the drought is particularly marked in the case of real estate. The number of home loans and the amount of money granted were at rock-bottom levels in the first nine months of the year.
The Spanish Mortgage Association (AHE) warned a few days back that mortgage disbursement is likely to end the year at only 90 billion euros, a fall of 30 percent from a year earlier. "Even in the few cases where there is demand, there is no funding available for developments. For example, despite the fact there are people in the Madrid district of Valdebebas interested in buying subsidized housing, there is no credit available for cooperatives," says economist Julio Gil.
But the most eye-catching figure is that of building permits granted for new homes. In the first 10 months of this year, housing starts amounted to only 83,000, not only a ridiculous figure when compared to the height of the boom in 2006 when there were 865,000 starts, but also if one bears in mind that this is the lowest number since 1960 when architects started to record the number of permits granted."
This year saw a plunge in the construction of protected housing compared with a slight pick-up in the free market. The austerity drive embarked on by the regions points to this trend extending itself over the course of the next few years as the research department of BBVA predicted in a recent report. If during the excesses of the boom Spain had over one million housing units under construction at one point, the figure for this year is 150,000 and is expected to fall to about 115,000 in the second half of next year, according to a report by consultant Horizone.
Not only will construction continue to slump, house prices, which are already at levels last seen in 2005, will continue to fall. Compared with the slight increase seen in home purchases last year, transactions for this year are on course to fall by around 30 percent.
"In addition, of the some 350,000 agreed sales expected for this year, many of them are still pending funding from financial institutions or real estate developers that are not able to provide it. They count as transactions when strictly speaking they aren't," the economist Julio Gil says.
Among the reasons attributed to the weakness of sales - apart from the habitual ones such as the shortage of credit and high unemployment - is the government's decision a year ago to withdraw tax breaks on mortgage payments on the main residence for all those with annual income of over 24,000 euros.
This produced a mini-bubble in house purchases at the end of 2010 before the fiscal incentive was withdrawn at the start of this year. The incoming Popular Party government has announced it plans to reintroduce this tax benefit, and will impose a super-reduced value-added tax rate on the purchase of new homes of four percent, compared with 8 percent at present, measures that could stimulate sales.
The new Public Works Minister Ana Pastor, whose portfolio also includes housing policy, has made reducing stockpiles of unsold new homes one of her priorities. There is an estimated glut of 700,000 unsold units that the domestic economy will take years to run down.
"In order for this to be the case, we need policies that stimulate demand such as those announced by the government. But we also need incentives on the supply side, and that requires a far-reaching overhaul of legislation governing urbanization," says José Manuel Galindo, the chairman of APCE, which groups together the country's real estate developers.
The sector helped drive the Spanish economy and was the main reason why the country's unemployment rate dropped to 8 percent, and also the main reason why it now stands at over 21 percent. Four years into the crisis, the construction sector has witnessed the destruction of 1.5 million jobs and prospects in this respect remain far from bright for next year. Consultant Horizone estimates that the downturn in the home-building segment of the market will see the loss of 200,000 jobs next year.
Four years into the crisis, with the proverbial light at the end of the tunnel still unsighted.
"The market for land no longer exists"
Things have gotten so bad that hardly anyone cares a damn about the fact the price of urban land has fallen 40 percent over the course of the past four years. People who know the sector well agree that this figure is practically meaningless. It's simply a question of the market for land having virtually ceased to exist.
The land held on the balance sheets of Spain's banks has become one of their biggest headaches. According to figures from the Bank of Spain, financial sector players at the start of this year owned land initially valued at 30 billion euros. As in the case of all the rest of the indicators for the property sector, this year promises to see historic lows for land transactions.
The figures for the first three quarters of the year, point to the number of transactions for the full year coming in at only 16,000, less than a fifth of those that took place in 2004.
Even these paltry figures are open to question. "The transactions that are taking place at present are for the most part cessions made by real estate developers to their creditor banks. Practically none of them are in the free market. Market pricing has collapsed," says economist Julio Gil.
Not only are prices and the number of transactions going through falling, the size of the plots of land involved in those transactions is also shrinking. The little more than five million square meters of land sold in the third quarter of this year represented the lowest amount in eight years. This was reflected in the value of land the transactions that took place in the quarter, which amounted to 638 million euros, compared with 4.6 billion during the height of the boom.
L. D.
Experts warn of worse financial crisis in 2012
A combined bond rollover of $6.5tr can trigger a storm
By Himendra Mohan Kumar, Staff Reporter
Published: 00:00 December 25, 2011
Abu Dhabi: A new global financial crisis is in the making and could unleash its fury as early as 2012, a year when bond rollovers in the US, Asia and Europe worth a combined $6.5 trillion (Dh23.87 trillion) are due, experts warn.
The Eurozone sovereign debt crisis has entered a critical new phase with France's prized AAA rating being downgraded by Fitch and the spectre of more sovereign downgrades looking imminent by the beginning of next year.
As borrowing costs increase in the euro area amid slowing economic growth, the 17-member currency union teeters on the brink of collapse. Analysts fear there will be catastrophic consequences for the global economy should the Eurozone break up.
So far, the efforts to tackle the Eurozone crisis have been half-hearted at best, leaving more questions than answers. The worst-case scenario in Europe includes sovereign debt defaults, probably starting with Greece early next year, which may trigger credit default swaps (CDS). Should this happen, the most natural outcome would be a frantic sell-off in riskier assets worldwide. The spectre of a global inter-bank crisis, wherein banks stop lending to each other, also looks a possibility, given their heavy exposure to toxic assets, including sovereign debts of peripheral euro nations.

From Sofia Echo: Greek troubles not ended
When Greece’s technocrat government was formed, some in the media rushed to proclaim the Greek political crisis over. Not so, however, no more than the country’s economic crisis.
Austerity and fund-raising measures are being put in place but privately and publicly, questions are being raised about their effectiveness.
Already, the International Monetary Fund (IMF) has cut its growth forecasts for Greece, in spite of the austerity measures.
Earlier in December, IMF managing director Christine Lagarde, even as the Fund announced that the completion of the latest review had enabled the disbursement of funds for Greece to go ahead, said that Greece had substantial achievements to its credit, but "the programme is in a difficult phase".
This she described as "structural reforms proceeding slowly, the economy weak, and the external environment deteriorating. This has warranted a substantial downward revision to the medium-term outlook".
Separately, economists see Greece’s economy as shrinking by a possible more than six per cent this year and by three per cent in 2012.
Leading Greek daily Kathimerini reported that the troika – the European Commission, the IMF and the European Central Bank – would be asking for further austerity measures, of about two billion euro, if Athens wants its new 130 billion euro loan deal to go ahead.
Hard times
The impact on households is severe.
Ahead of the Festive Season holidays, a survey by Greece’s National Confederation for Commerce found that 25 per cent of Greeks had too little money to buy basic foodstuffs.
Ninety per cent had stopped spending on clothes and footwear, eighty per cent had stopped spending on leisure activities and 75 per cent found themselves unable to put aside money for savings.
Statistical agency Elstat, reported by local media, said that more than 400 000 households were without income because of unemployment and 60 000 had applied to be declared bankrupt, unable to keep up accounts payments.
Selling off
Meanwhile, privatisation procedures have begun.
The current plan envisages sales of state assets to bring in 50 billion euro by 2015.
The fund in charge of the use of state-owned property has an initial three major packages. The first includes 29 airports, the second involves 12 ports – including those at Thessaloniki and Piraeus and the third involves state-owned land suitable for building developments.
Other items on the list, further down the line, include state stakes in the natural gas company, the national oil company, the football betting company, horse-racing betting company, among others.
Politics, politics
Provisionally, the current administration headed by Prime Minister Lucas Papademos is meant to remain in place until fresh parliamentary elections around February 19 2012, but there have been hints that the technocrat government may remain in power longer, to make progress in negotiations with the troika and to try to get the country on to an even keel.
That does not mean, of course, that politics is on hold.
To say that a challenge is expected to former prime minister George Papandreou’s leadership of the socialist Pasok party is an understatement. The question of leadership elections was to be discussed at a high-level meeting of the party on December 21, while some senior members already have been positioning themselves for a bid.
One is Michalis Chrysochoidis, who has publicly attacked the Papandreou administration’s failure in office.
The complication in this expected socialist leadership race is that three of the people named as potential challengers – Chrysochoidis, Andrea Loverdos and Evangelos Venizelos, currently hold posts in the Papademos administration.
According to Kathimerini, there was speculation that a leadership challenge and a possible cabinet reshuffle were "inextricably linked".
The paper quoted government spokesperson Pantelis Kapsis as declining to be drawn into a debate about the likelihood of a reshuffle, but said that Greeks should expect "significant developments after the holidays".
Venizelos is seen as a strong contender in a socialist party leadership contest. Long a political rival of Papandreou, he was only narrowly defeated in his previous formal challenge for the leadership in November 2007.
Meanwhile, should the resignations go ahead, it would mean that three cabinet posts – development, health and finance, the last-mentioned being the portfolio that Venizelos retained in the current cabinet – would require replacements, just at a time that it seems that what Greece needs, at very least, is continuity and stability.

Milton Friedman
Never a fan of the Eurozone, predicted it would collapse in 10 years.  Now entering its 13th year, the currency union is facing its most critical challenge,  the Nobel -winning economist may turn out to be right on everything except the exact timing of the dissolution.
The reason?  European leaders continue to miss the mark in their assessment of the root cause of the continuing crisis. To paraphrase Bill Clinton:  It's the debt, stupid.
Earlier this month, European lawmakers held the latest in a string of emergency summit meetings to deal with the worsening crisis. Many billed it as the last chance to save the euro. If this is the standard by which the outcome is to be measured, the meeting was an abject failure.
The plan of action European officials positioned as the salvation of the euro consisted of an agreement to draft a revised treaty giving central European Union authorities greater control over how sovereign nations manage their budgets. The participants also agreed that EU central banks would lend another €200 billion ($262 billion) to the International Monetary Fund. This money would then be used by the IMF as part of the European Stability Mechanism to support the handful of countries struggling to remain solvent.
The first measure is unlikely to ever be ratified as an EU treaty in the face of British opposition. And the alternative fiscal compact that the other EU members are now trying to create is proving legally tricky, even before it runs a gauntlet of political challenges. This leaves the €200 billion loan to the IMF as the only probable legacy of the summit meeting. Unfortunately, it's not enough to address the issue.
Greece illustrates the problem.  As the poster child for Euro Zone fiscal incompetence, it owes all by itself roughly €350 billion in sovereign debt with about €200 billion of this owed to banks and other financial institutions. (The remainder is held by the International Monetary Fund and other countries.) But only €130 billion has been committed to helping Greece. Even if all €200 billion were committed to Greece alone, it would not cover the debt it owes. No matter how one slices it, that nation is headed for a partial default and the future remains very much in question.
Until the debt is addressed, the EU is simply throwing good money after bad. The reason is that even if EU leaders seem unaware of the debt, markets are not. And markets are forcing indebted nations to pay ever higher amounts of interest to service that debt.
In its most recent bond offering this past Wednesday, Greece was forced to offer yet another euro-era record yield of 6.47 percent on five-year bonds. By contrast, German two-year debt sold at just 0.29 percent. In 2012, Greece has over €50 billion in maturing debt that will come due, €17 billion of which is in the form of interest payments.
Other, much larger Euro Zone countries face similar challenges. And if the EU can't come up with enough money to bail out a tiny country like Greece, there's no way it can do it for a big one like Italy or Spain. The resources simply are not there.
The only way out is to “reset” the debt by forcing these countries into default. This approach also makes it possible to redirect the bailout fund money to the bondholders, thereby softening the blow to the financial system.
Forcing the default of one or more Euro Zone countries is a drastic move, but it is necessary to safeguard the remaining members. Under the current approach, even the strongest economies will eventually be bled dry as investor confidence deteriorates and bailout costs rise.
Whether  governments have the political will to act in such a decisive manner is a different matter. Nevertheless, the realization is dawning that in the near future, the Euro Zone will be a different place than it is today. The question is whether this change will be the product of reasoned policy for the betterment of all, or a collapse that a wise economist predicted years ago.

Have the lessons been learned?
We are in the middle of a serious crisis, which, so far, has lasted five years. It has wrecked a substantial part of the Spanish economy; sent tumbling into bankruptcy or passivity tens of thousands of companies; made almost 25% of the workforce jobless; created a generation of young people where 50% cannot find employment; worsened the economical situation of 90% of Spanish families; emptied the coffers of the town halls; brought the regional governments to the point where they cannot pay their bills; and the nation staggering under enormous debts, to be paid by future generations..........
Foreigners in Spain have seen their investments loose 30, 40 or 50% of their value.
Many have left the country and almost no new ones are coming.  Others want to leave, but cannot find buyers for their homes who are willing to pay a price that makes a new start possible in the seller’s home country.

How could it happen?
Over the last decennials, the so called market forces have been freed from all restraints, the 'Reaganomics' preaching that the markets were able to heal all their problems and that governments should not intervene in economic life.  World ‘finance capital’ organised itself into entities (funds, investment banks) not much interested in productive investments, but in transactions, financial products, and even bets pro or contra sovereign governments or currencies, in a hunt for maximum profit for the few.
Hardly anyone is denying the enormous responsibility of ‘finance capital’ in provoking the present crisis. Today the politicians are busy trying to harness some of the wild horses and place modest taxes on some of their transactions, but as usual are running several paces behind the fast moving capital managers.
There are literally armies of well educated and well paid financial and legal experts sitting in the offices of central and regional governments, paid to advise the sometimes very dumb politicians, so how could it be that none of them whispered some warning words in the ears of the decision takers?  

What will happen 2012?
The good news this year ¡s that it will not see the end of the world, as some, based on the Maya calendar, has predicted !     
But if the world’s politicians do not take the right decisions, there is a certain chance (maybe 1 in 3) that Europe and USA will enter a financial and social crisis, in certain aspects similar to the one the world remembers as ‘the crisis of 1929’ and following years.
For the same good reason there is a 1 to 2 chance that the Euro Zone will collapse this     year or at least change its current form as certain member states are forced to leave
Spain will go into a more profound recession as Mariano Rajoy uses the axe on public works and infrastructure investment. The economy may shrink 2% to 5% during 2012
As a result of the cuts and the recession, unemployment will go above 25%
In the desperate search for more income for the state, the regions and town halls, many taxes and charges will increase, and new ones will be invented
Spain will have increasing difficulties in finding new money to repay soaring public debt and subsequently the ‘country risk’ will rise and Rajoy may be forced to ask for a rescue package
Whilst the recession continues to affect the middle class in the rest of Europe, very few new buyers will be found by promoters and the banks for property in Spain
The banks will be unable to rid themselves of the millstone around their necks (meaning unsold property) and some of them will not survive the year
The rise in unemployment, and worsening conditions for those in work, will bring hundreds of thousands recruits for the movement of the 'indignados', which will spread throughout  Spain and will become more radical.

Our recommendations:
If you use your home in Spain for less than 30 days a year, consider selling it at any price and using the interest on the proceeds for hotel holidays in Spain (no personal or property taxes or charges, no Community fees, no electricity bills, no repairs, no insurances......).
Reduce your accounts in Spanish banks to the bare minimum. Place your money in a country with a stable currency (Swiss Francs, Norwegian Crowns...) in an account with an interest rates as high as inflation and in a bank that does not fleece its clients with all kinds of charges.
If you are resident in Spain, consider becoming a non-resident to avoid the burdens the government must this year place on its citizens to save the country going broke.