Monthly Archives: March 2010

Residential property price changes in the Canary Isles and Spain.

March 27, 2010 – 5:38 pm

Prices in Spain, Tenerife, the Canary Isles and the Balearic Islands. Having improved for four consecutive months since September last year, prices on the coast decreased by 8.2% over the 12 months to the end of February, and by 8.9% in the Canaries and the Balearics. So since the peak of the market in December 2007 prices are down 15.7% nationally, 22% on the Mediterranean coast, and 16.8% in the Canaries and the Balearics, based on Tinsa figures.
 
But the latest figures from the National Institute of Statistics, which are based on actual sales figures supplied by lawyers, show that property prices fell by an average of 4.3% last year and by just 10% since the peak, seemingly backing up the trends identified by Tinsa. They also show that resale property prices fell 3.5% last year and actually rose by 0.1% on a quarterly basis in the last three months of the year.
 
The Spanish government claims there are signs of recovery. The latest figures from the Ministry of Housing shows there was a small rise in property sales in the fourth quarter of 2009. ‘The transactions in the fourth quarter represent a rise of 4.1% with respect to the same period last year, this being the first year-on-year rise since the fourth quarter of 2006,’ it said in a statement.
 
But like the Tinsa figures, when the data is put into a wider context the picture is not quite as rosy. The government figures show that there were 413,112 transactions last year, a fall of 19% compared to the previous year, and 46% down on 2007. Even the fourth quarter sales were down 33% compared to the same period two years ago.

Property price changes in Tenerife,Spain and the Canary Isles.

Property price changes in Tenerife,Spain and the Canary Isles.

Residential property fell nationally by 5.5% over the 12 months to the end of February, according to the latest real estate price index.There is a degree of stabilisation, with the index remaining the same as the previous month, said appraisal company Tinsa. But the headline figures hid the fact that in some markets prices are still falling considerably.
 
A closer examination of the Tinsa figures, which are based on valuations not sales, shows a different story for real estate on the Mediterranean coast,

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , , , | Comments (0)

Spain’s risk assessment downgraded

March 21, 2010 – 3:56 pm
Spain's risk assessment downgraded.

Spain's risk assessment downgraded.

Ratings agency Standard & Poor’s has downgraded its risk assessment level for Spain’s banking sector, warning of “high credit losses” during the country’s recession. The move leaves Spain’s banking sector on the same level as that of United States and Britain. “We believe that Spanish financial institutions are likely to operate in a difficult economic environment over a prolonged period,” it said in a statement.

“Spain’s financial system is likely… to suffer high credit losses during the recession, owing to the corporate sector’s high indebtedness, rapid credit expansion, and financial institutions’ meaningful exposure to the Spanish property sector.

“Problem loans will likely peak in 2010, according to our estimates, with higher-than-historical average credit provisions continuing through 2011,” the agency said. As a result the agency has downgraded its Banking Industry Country Risk Assessment (BICRA) rating for Spain “to Group 3 from Group 2,” it said.

The BICRA incorporates Standard & Poor’s “view of the strengths and weaknesses of a country’s banking system compared with those of other countries, according to a scale that ranges from Group 1 (the strongest) to Group 10 (the weakest),” it said. “Today’s revision reflects the greater weight we now attribute in our BICRA for Spain to the risks we see arising from the country’s deteriorated economy,” said Standard & Poor’s credit analyst Elena Iparraguirre.

But she said the Spanish financial sector “faces the difficult economic environment from a sound position… thanks to its robust regulatory and supervisory framework, resilient operating profitability … and the industry’s strong retail banking segment.”

Spanish banks got off relatively lightly from the subprime mortgage crisis in 2008 as the country’s strict regulations meant they did not invest heavily in the high-risk loans that hurt financial institutions elsewhere. S&P said Spain’s economic risk score, a subcomponent of the BICRA, remains at ’3′.

The Spanish economy, the fourth largest in the eurozone, has been mired in recession since the end of 2008 as the global financial crisis hastened the collapse of its once-buoyant property sector. The recession sent the unemployment rate soaring to nearly 19 per cent in the fourth quarter.

The agency last December lowered its credit rating outlook on Spain to “negative” from “stable,” warning that the country faced a “prolonged” period of sluggish economic growth.

Last month, it warned that Spain could fail to meet its target of cutting the public deficit to within the EU limit by 2013 due to its “weak economic growth prospects.”

Spain’s problems have also triggered concerns that it could follow in the shaky footsteps of Greece, whose budget crisis prompted the European Union to place it under unprecedented scrutiny.

By Angela | Posted in Economy, General, Inspirational, Miscellaneous Articles, Property, Tenerife, Uncategorized | Tagged , , , , , | Comments (0)

Tax breaks available in Spain and Tenerife

March 20, 2010 – 8:20 pm
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Tax breaks available in Spain and Tenerife.

Special Spanish tax breaks mean that it’s not just the football stars such as Ronaldo and Kaká who pay far less taxes. All foreigners who work for Spanish companies can also apply.

David Beckham has the looks, the talent and – perhaps most importantly – the bank balance to make many green with envy. But it seems David Beckham’s good fortune where money is concerned improved when he signed for Real Madrid. His transfer to the Spanish giants Real Madrid was not just a great move as far as his footballing career was concerned. In fact he left Manchester United just as the Spanish tax system was changed to benefit foreigners in an effort to draw more highly-paid professionals to these shores.

Designed to be part of the government’s budget for the 2004 financial year it came into operation on 1 January 2004 and basically allowed foreign employees to be treated as “non-resident” for tax purposes even though they were living and working in Spain. In simple terms a foreigner since then is entitled to cut his rate of income tax from a punishing top rate of 45 percent of his earnings to just 24 percent overall.

Former prime minister Jose Maria Aznar’s conservative government altered the tax laws to make it more attractive for foreigners to live here and to help companies that employ many workers from abroad – who are often paid high wages. This law has helped the highly-influential and affluent bosses of most of Spain’s biggest football clubs as it leaves them with substantially lower wage bills and hence even bigger spending power to bring more stars to their domestic game.

Without a doubt, the law change was engineered to help football clubs to reduce their wage bills as it was reckoned if the players were paying much less tax, the cost to the clubs would be lower. Though it might seem like these pampered prima donnas on the football pitch are having it all their way, it is not just a perk for the rich and famous. Sources from the Spanish Treasury Department emphasised that even though the new tax rules were principally brought in to help footballers, the tax change applies to anyone who is working here as a professional.

This tax provision is therefore available to all foreign professionals, from the executives with multinationals to researchers or any other salaried expat who works for a national company.

There are a few qualifications to which foreigners have to submit however:

  1. They cannot have worked in Spain for 10 years before – a measure to stop tax cheats
  2. They must work on the payroll of a Spanish company, though this can be a subsidiary of another multinational
  3. The application is be taxed as non-resident must be filed with the Spanish tax authority within 6 months of taking up the position

Finally, don’t think that it always beneficial to claim for this special tax treatment. Though the overall rate of 24 percent is very attractive and significantly lower than the highest rate currently applicable, it’s only of interest to high-income employees. The downside of this non-resident regime is that the tax payer cannot claim the normal tax allowances and deductions applicable to resident tax payers so, as a general rule, it will only be of interest when the individual expects to earn in excess of EUR 70,000 -75,000 in a full tax year.

By Angela | Posted in Economy, General, Inspirational, Miscellaneous Articles, Tenerife, Uncategorized | Tagged , , , , , , , , , | Comments (0)

Spanish banks relaxing lending criteria

March 14, 2010 – 11:28 am

Spanish banks begin to relax lending criteria

Spanish banks begin to relax lending criteria

Spanish Banks are slowly relaxing their lending criteria, with one or two offering more attractive deals and higher LTVs. A spokesperson for Kyero explained: “Most banks use a debt / income ratio of either 35% or 40%, although we work with one bank that uses 50%. This really helps those clients who struggle to get mortgages elsewhere due to having a higher ratio of regular outgoings on mortgages, loans, credit cards etc. to net disposable income (the “debt / income ratio”).

“The interest rate is as low as Euribor (annual) + 0,66% (the lowest we have come across to date), with 0,5% bank opening commission and 0% redemption penalty for partial redemption”.

The eurozone base rate has remained at 1% for some time now, meaning that borrowing in Spain is still cheap. With the recovery in Germany faltering and ongoing problems in the so-called PIIGS group of countries (Portugal, Italy, Ireland, Greece and Spain), it is very unlikely that there will be a sudden hike in rates. This more relaxed attitude may help the property market in Spain, Tenerife and the Canary Islands.

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , , , , , , , | Comments (0)

This week’s exchange rate news

March 8, 2010 – 2:21 pm

The Pound has been falling at an alarming rate, following Friday’s weak GDP revision (showing last year’s economic contraction was even bigger than expected) and new worries about Quantitative Easing.

On Thursday, the Bank of England announced no change to interest rates.  In virtually all currencies, sending money overseas is becoming rapidly more expensive due to falling exchange rates. Remember that it is possible to secure your exchange rate up to 2 years ahead to avoid exchange rate risk

Exchange rate fluctuations in Tenerife caused by the falling pound

Exchange rate fluctuations in Tenerife caused by the falling pound

By Angela | Posted in Economy, General, Holiday, Inspirational, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , , , , , | Comments (0)

Weak economic growth in Spain

March 6, 2010 – 12:42 pm
Weak economic growth in Spain and Tenerife

Weak economic growth in Spain and Tenerife

Credit ratings agency Standard & Poor’s warned Spain that its weak economic growth prospects could undermine its plan to rein in its budget deficit, making a debt downgrade even more likely. Investors are increasingly worried about Spain’s budget deficit – and skeptical about the government’s ability to push through sharp cutbacks to right the situation.

The government has announced both tax rises and spending cuts – not all yet specified – to reduce its deficit back towards the 3 percent limit that euro rules prescribe.

In a statement, S&P said Spain’s deficit would likely remain above 5 percent of the country’s gross domestic product through to 2013 against the government forecast of 3 percent, and that as a result the debt burden could rise to above 80 percent of GDP by 2012.

S&P said it also expects much weaker economic growth than the Spanish government and that there was a “significant implementation risk” with regard to the current plan to reduce the deficit, which is estimated at 11.4 percent of GDP in 2009. Spain, which has still to get out of recession, is expected to grow by an average annual rate of 0.6 percent between 2010-13, according to S&P, way down on the Spanish government’s forecast of 1.5 percent.

S&P said it saw downside risks relating to the government’s revenue collection assumptions in particular, largely because Spain’s tax base is “highly sensitive” to domestic demand and has been sensitive to the real estate sector, which has collapsed over the last couple of years. “Neither of these sources is likely to be a strong contributor to revenue growth over the next several years,” S&P said.

S&P said it was maintaining its negative outlook on Spain’s double A+ rating, which it assigned in December, in the absence of “more aggressive and tangible actions” by the authorities to tackle Spain’s economic and fiscal problems.

“Any deterioration over and above our current expectations could put further downward pressure on the ratings,” S&P said.

By Angela | Posted in Economy, General, Health, Miscellaneous Articles, Property, Tenerife, Things to Do, Uncategorized | Tagged , , , , , , , , | Comments (0)

New mortgage lending still depressed in Spain and Tenerife

March 4, 2010 – 12:56 pm
Mortgage lending still depressed in Tenerife, the Canary Islands and Spain.

Mortgage lending still depressed in Tenerife, the Canary Islands and Spain.

New mortgage lending in Spain is still very depressed, according to the latest numbers from the National Institute of Statistics (INE).

According to the latest figures, for December and therefore the whole of 2009, new mortgage lending fell again last year, by 22% in volume terms (to 653,173), and by 34% in value terms (to 76.8 billion Euros). These are the lowest levels in both volume and value terms since the INE started publishing this data series in 2003.

The number of new mortgages signed has been falling now for 3 years, and the value of new mortgages has been falling even faster. That means there is less money around to spend on Spanish property, which puts downward pressure on prices.

Mortgage lending has been changing in percentage terms over the last few years – falling in both volume and value for the last 3 years, though the rate of decline improved slightly in 2009. That means it is still falling heavily, just not by as much as last year.

Over the last 2 years, new mortgage lending has been falling more in value terms than in volume terms. That means that the average mortgage value is also falling, as borrowers take out smaller mortgages. The average value of new mortgages last year was 117,688 Euros, down 16% on 2008.

Banks have tightened up their lending criteria, and now demand bigger deposits. But also because Spanish property prices are falling, so borrowers don’t need such big mortgages as before. New mortgage lending is down 51% by volume, and 59% by value, compared to 2006, when the market peaked. That is a massive decline in the amount of money around chasing property

By Angela | Posted in Economy, General, Health, Holiday, Inspirational, Miscellaneous Articles, Property, Sports Desk, Tenerife, Things to Do, Uncategorized, Weather | Tagged , , , , , , , , | Comments (0)