By XMas real-estate prices will go down

[PeterHeirman]

Mr de Guindos predicted that the €100bn in bank rescue funds would become available by early November, once the banks' restructuring plans are unveiled in the middle of this month.
http://www.breakingnews.ie/business/100bn-enough-for-spanish-banks-565549.html
http://news.yahoo.com/spain-sees-125-billion-enough-banks-130137785--finance.html

So if the banks get their money half of November then they need to recalculate the real-estate values and publish them. That will take a while being a huge administrative work. So by Xmas prices will be published/available.

The question is: how much depreciation is €100Bn as it has to be distributed over at least one million properties (some say 1.8million) - if all gets into real-estate (which I doubt).
In any case a significant drop in real-estate prices is to happen within 3.5 months.

[dagwood]

The one thing that brings real-estate prices down is supply and demand. At the moment there is plenty of real-estate for sale and not much demand because banks aint lending. Also rember when the value of property falls the value that banks put on the property at the lending stage also falls which in turn means the banks will need another bailout. Its one hell of a merry go round. Most of this was caused by the overvalueing of property and the 140% loans.         Any property is now only worth what someone with CASH is willing to pay for it.   

[fifi]

All of the  official Spanish housing figures are  currently based on asking prices and not on selling prices. This suited the Banks balance sheets when they were trying to cover up their debt. Revaluing the bank stock does not necessarily mean a massive drop in  selling prices although prices are expected to continue fall a little.


The new figures when they are published will probably be more realistic and reflect current market prices.

[dagwood]

The banks believe we are all Gobsh1ts. And the way we all went mad borrowing they may well be right

[fifi]

Im one of the worst offenders....definitely worthy of being called one so Dagwood.

[dagwood]

No not you FiFi, but the Doctors,Solicitors,Judges,TDs etc. that jumped on the bandwagon because all their friends were at it and not a clue about what they were getting into. Im a Mortgage Broker as well as a Life and Pensions advisor and I can tell you it was pure Greed that put the prices crazy. Thank God almost all of my clients are managing ok and I was not too popular when I refused to do some of the things I was asked to do.I would be told so and so can do such and such. My answer was go and see so and so. Thats my rant for today.   

[PeterHeirman]

The people with cash will be waiting until the price drops to a bargain level. These people have savings which holds them back from spending it foolishly.

Real estate price should be:
long term monthly rent x 12months x 12
Bargain price:
long term monthly rent x 12months x 10 and less
Overvalued
long term monthly rent x 12months x 15 and more

There are still countries with high saving levels or money to spend:
- Swiss (typically buy on Mallorca)
- Norwegians
- Germans
- Denmark
- Belgians (amongst the people with the highest savings in the world per capita)
- Russians - but Fuerte is a bit far way for them

Change in real estate prices will come down inevitably as all markets are self regulating.
People with savings have more time and are under no pressure than those with credit, mortgages and loans.
The Spanish real-estate brokers will have to learn a new business: the buyer decides on the price. They will need to look for customers and sell instead of waiting at their office until an eager buyer shows up.
Cash is King.

[HH]

If there is anyone out there - echo, echo echo ....

We will consider any reasonable offer!!

http://www.goldacreestates.com/Property/Dream/ES.FU.VI.RS.AP.1001

[dagwood]

Peter you are 100% spot on and the sooner these so called "experts" get this message into their thick sculls the better for all of Europe. And as for the Banks dont start me. They treat their customers like potty poo poo on their shoes.

[kevin2003]

Real estate price should be:
long term monthly rent x 12months x 12
Bargain price:
long term monthly rent x 12months x 10 and less
Overvalued
long term monthly rent x 12months x 15 and more

How did you come by this formula Peter?

[MinRich]

Holiday homes were only ever bought by the very wealthy , lesser well off tried to compete and thought they could get their holiday home paid for by renting it .
Same throughout Spain . The UK has had issues toowhere people were chasing a big profit and failed dismally.
Properties around the waterfront in Ipswich Anchor street IP3 0BU and nearby (do a rightmove.co.uk search on sold prices) were bought in 2005/6 and sold recently at a loss of 50% !
All leasehold , buy to let etc !
Some are selling for around £80k (very recent sales not on rightmove.co.uk ) when bought for £240k !

Update ! One of these aparetments bought for £260k in 2006 sold for £90k yesterday !

[PeterHeirman]

Kevin:
This formula is well known:
http://www.investopedia.com/terms/p/price-to-rent-ratio.asp
and has been around since long.

The price-to-rent ratio provides a comparison between owning and renting properties in certain cities. The ratio uses the average list price with average yearly rent on two-bedroom apartments, condos and townhomes that are listed on www.trulia.com, a real estate search website. The price-to-rent ratio is calculated by dividing the average list price by the average yearly rent price, as follows:
Price-to-rent ratio = Average list price / (Average Rent * 12)
Trulia establishes thresholds for the ratios as follows:
    Price-to-rent ratio of 1 to 15 = much better to buy than rent
    Price-to-rent ratio of 16 to 20 = typically better the rent than buy
    Price-to-rent ratio of 21 or more = much better to rent than buy

[PeterHeirman]

In any case there are fewer and fewer buyers:
June shows 14.4% decrease in property sales
http://realestatemarbella.wordpress.com/2012/08/09/june-shows-14-4-decrease-in-property-sales/

The people with money / cash are standing on the side lines until the price becomes a bargain.

@Goldacre - your property is still way overvalued even with the €21000 decrease.
€275,000 for 125m2 = 2200 €/m2
Start thinking in the order of €1000/m2 and less: these are one brick thick walls with no insulation - maybe some roof insulation but thin compared to UK standards - no double glazing - any heating (real heating? not just an electric heater in the bathroom or one stove in the living room).

Time to become reasonable GoldAcre. Try to understand the golden times are over and the current buyers do not resemble those you have known in the past.

[PeterHeirman]

S&P says average Spanish property prices to drop further
June 18, 2012
http://blog.arribaestates.com/index.php/sp-says-average-spanish-property-prices-to-drop-further/

Just comparing Spanish property prices to the level of people's incomes and the cost of renting, housing prices needed to decline by nearly 25 percent to return to long-term averages, it said.

And that's for the main land on the continent.
Where and who will be the buyers of the properties on the Canary islands ?

House prices fell by an average six percent a year from 2008 to 2010 before slumping by nine percent in 2011, it added.

it should take four more years to balance supply and demand, it said

So people with cash have 3 to 4 years time to buy.
However people with credit, mortgages don't have 3 to 4 years time.

Moreover all those Spanish people that:
- are unemployed will need to sell their second home.  25% is unemployed
- have unemployed grown-ups (50% unemployed) need to sponsor/feed/house their kids - so selling their second home is a feasible option
This will dump even more houses/condos on the real-estate market - especially in the tourist areas.

@GoldAcre: be wise and revise your price before you have to dump it on the market.

[PeterHeirman]

It will be much later as politicians don't want to cooperate
http://www.reuters.com/article/2012/09/24/us-spain-bailout-pressure-idUSBRE88N0BD20120924
Facing an important regional election on October 21, Prime Minister Mariano Rajoy is in no rush to yield to nervous pleas, from France, Italy and indeed Ireland, that he request a rescue deal that might dampen investors' concerns about their own debt.

It will be carnival before prices sink.

[PeterHeirman]

By then price will go rock bottom fast
http://www.telegraph.co.uk/finance/financialcrisis/9559991/Debt-crisis-Spain-will-need-extra-bail-out.html#disqus_thread

[PeterHeirman]

Spanish home prices posted the biggest annual decline on record in the first quarter 2012 as the euro area's fourth-largest economy sank deeper into recession and banks reined in lending.

The average price of houses and apartments declined 12.6 percent from a year earlier, the most since the measurement began in 2008, the National Statistics Institute in Madrid said today in an e-mailed statement. Prices dropped 5 percent from the previous quarter.
http://www.bloomberg.com/news/2012-06-14/spanish-home-prices-16th-annual-decline-on-deepening-rece.html

If credit and mortgages are unavailable only people with savings can buy which limits the number of potential buyers significantly.

[PeterHeirman]

Video explaining the crisis:
Simiocracia ("Simiocracy") by Aleix Saló - English subtitles - Subtítulos en inglés
Simiocracia ("Simiocracy") by Aleix Saló - English subtitles

Martinsa Fadesa: the largest bankruptcy in Spanish history

[pestcatore]

Vince Cable  [though not much of a reliable soothsayer it must be said] seems to agree   http://money.aol.co.uk/2012/09/24/cable-warns-of-currency-collapse/

[PeterHeirman]

The main problem is that Spanish Government and their banks want to delay the €100Bn (or €60Bn) ECB injection. The €100Bn won't be enough as the regions of Spain are more endebted than the €100Bn and the Banks need money for their overpriced almost worthless real-estate in their books.

The longer they wait the bigger the downfall will be.
Due to the current actions 2013 will be a year of false hope and the real downfall will be in 2014.
Then the problem arises if anyone still wants to buy any property in Spain as it will almost start to look like an third world country - like it was in the sixties.

[Voldermort]

The biggest problem for this PP lot in power in Madrid is their overly nationalistic outlook. With that comes masses of latino pride, which they cant easily swallow. Hence the procrastination. Add to that the fact that Catalonia, the industrial powerhouse of Spain, is having early elections demanding independance from Spain itself, and the financial demands from the bankrupt regions,which all serves to destabilise the markets.

    I think anyone buying property anywhere in Spain at the moment would be wise to hold off for a year and see exactly what happens. Rent now and pick up the bargains later. And there will be some 

[PeterHeirman]

@Voldermort - Thanks for the advice - We'll wait a year.
Looking at the charts and comparing with Ireland it will take throughout 2013 and maybe even throughout 2014 before reaching the bottom.
We have cash - they have debts. We're not in a rush and the world is bigger than Spain for buying a second property.
Wondering when the Spanish property owners will start to panic. They will panic one day when reality takes over from their pride.