The markets where the biggest proportion of vendors decided to drop prices were Madrid (9.3%) and Barcelona (7.4%). That means vendors in Spain’s two biggest markets are becoming more focused on finding a buyer.

- Asking prices were down just 0.5% in Q1 over Q2, to 2,374 €/m2.
- Prices rose in 5 regions: The Balearics (+2,4%) Galicia (+1,6%), Castilla y León (+1%), The Basque Country (+0,9%) y La Rioja (+0,6%).
- Prices rose just by 2 €/m2 in Barcelona, to 4,084 €/m2. Even so, prices there are still below where they were 5 years ago in Q1 2005. They are down 16.4% from the peak of 4,888 €/m2 in Q1 2007.
- Madrid fell 0.4% in Q1, to 3,831 €/m2, 11.2% below the peak of 4,315 €/m2 in Q2 2007.
- Valencia fell 0.7% to 2,335 €/m2, 18.4% below the Q2 2007 peak of 2,861 €/m2

Sellers in Tenerife and the Canary Isles are  also following this trend to ensure a quick sale.

The tax authorities have minimum prices for residential properties.When you buy a second hand home you have to pay a property transfer tax (PTT), established by the Autonomous Communities, which comprises 7% of the sale price which appears in the title deed. Although this is normally straightforward, there has been a recent increase in the number of cases where purchasers have received a tax demand from the tax authorities for an amount which is higher than the PTT they have already paid.

This is particularly true when a homebuyer has bought a home at a low price - a bargain price. The reason for this is because the Autonomous Communities have several minimum-price tables, which are used to calculate the minimum PTT that the purchaser has to pay when they buy a house. The purpose of these tables is to prevent the fraudulent practice of registering a purchase price in the title deed that is lower than the real sale price. As a result, the tax authorities have a reference minimum price for each residential property, and consequently a minimum tax amount. This is not a problem if the purchaser pays more than the minimum tax, but if the tax authorities think that the purchase price has been too low it uses the tables to claim outstanding tax.

So, anyone who buys a second hand home, and is not familiar with all the procedures, may find themselves in the situation where, after having paid the taxman 7% of the property’s purchase price, they receive a tax claim from the tax authorities informing them that they have to pay additional PTT. The amount in question will be 7% of the difference between the purchase price that appears in the title deed, and the price that the tax authorities consider to be the minimum price of the property, plus the interest due for late payment.

For example, if you buy a home for 200,000 euros, you have to pay 14,000 euros as PTT. If the minimum price of your property, according to the tables of the tax authorities, is 300,000 euros, the minimum PTT is 21,000 euros, which means that the taxman will send you a tax claim for the difference: 7,000 euros plus interest.

For this reason, if you are thinking about buying a property whose price, perhaps due to the crisis, has dropped significantly, you should find out its minimum price in the minimum-price tables in order to know how much tax you will have to pay, and to avoid any unpleasant surprises or tax claims at a later date. The minimum prices are usually below the sale price, but in some areas where home prices have plummeted as a result of the crisis, it is increasingly common for this not to be the case.

It is therefore extremely important that before executing the title deed for the property, you contact the tax department of the Autonomous Community where the property is located to find out what the mini

Beware too good a price in Tenerife or Spain may increase your tax bill

mum price of the property is, according to the tax authorities´ tables. This will enable you to find out how much tax you will have to pay, and allow you to plan your finances accordingly. In particular it will save you from being subject to unpleasant surprises in the future in the form of a tax claim from the tax authorities.

If the purchase price that appears in your title deed is less that the minimum price given by the tax authorities, and you pay less PTT than is due, the tax authorities will send you a tax claim informing you that you have to pay the difference. After you receive the notification, you will have a limited period in which to appeal, and present your arguments to justify why the property’s purchase price is less than the price that is given in the minimum-price tables. Typical grounds for appeal are that the purchased property is in poor condition, or that it has a sitting tenant (which lowers its value). You can also provide a valuation report from an independent expert that shows that the market value of the property is less than the value assigned to it by the authorities. However, it is extremely unlikely that your appeal will be accepted, and that you will not have to pay “extra” tax, as this only happens when there are extremely strong grounds. Therefore you should not count on the appeal being accepted, as the tax authorities “accept” that you have purchased a bargain-priced home, but they will tax the sale using the property’s minimum price in the event that the sale price is lower.

Buying overseas property bank on the agenda for Brits

A new report has illustrated just how disallusioned we are with ol’ Blighty - a third of all those considering buying property abroad are looking to emigrate permanently.

According to Primelocation International’s MyHomeLife Panel, 33 per cent of people looking to buy an overseas property are hoping to make their purchase into a more permanent home by emigrating to the new country.

Forget holiday homes - these buyers are looking for a forever home, far away from Britain. The main motivator behind their search was found to be this desire to build a better life elsewhere, revealed the research.

The trend outlined is particularly remarkable given that overall interest in international property is at record levels.

Just 23.7 per cent of respondents were on the hunt for a holiday home and a mere 12.4 per cent were searching for an investment property. A further 15.3 per cent of respondents were foreign buyers looking to purchase a UK property.

Ann Wright, International Development Manager at Primelocation International, said, “With the government warning of a period of austerity following the emergency budget, it is understandable that more people than usual would dream of emigrating away from the UK. However the fact that a significant proportion are actively searching for international property in a bid to make that dream a reality, comes as quite a surprise.

“Furthermore, the fact that barely one-fifth of those searching for international property agreed that the difficult economic climate has affected their intention to buy abroad suggests that poor financial prospects for the future are a driving factor behind Brits’ desire to emigrate. “With many in Britain now set to have to work longer before retirement, those who can afford to move abroad may feel they will not only have a better quality of life, but also benefit financially from leaving the UK. These potential buyers may well offer a small boost to international market activity over the coming months,”

So keen are people to make their new life a reality that, despite the uncertain economic outlook, barely one-fifth of respondents their intention to buy abroad had been affected by this. Just 9.8 per cent of people said that they were ‘having to be realistic’ and ’search for property in locations that they would not otherwise consider, due to affordability constraints.’

If you are one of the hoards hoping to kiss goodbye to Britain for good, check out properties for sale all over the island of Tenerife

The Spanish Government illegally charged British people more than double the amount of Capital Gains Tax, (CGT) they owed on their properties between 1997 and 2006. The poor Brits who had chased the sun to Spain in search of sea and sangria were forking out a whopping 35 per cent under the ‘non-resident’s income tax’ bracket. Spanish nationals residing in similar homes were paying the proper rate - just 15 per cent of any capital gains. The overcharging is estimated to have raked in more than £350 million for the Spanish Government.

In 2009, following much outcry from British owners of Spanish properties and an expose by a group of Spanish lawyers and a UK based currency specialist, the European Court of Justice (ECJ) ruled that the tax contravened European Community Treaty rules against discrimination. They agreed that any UK or EU citizen who sold a property in Spain between 1 January 1997 and 31 December 2006 could claim back the excess charges.

Now, those affected by the illegal CGT charges have just a month left to make their claim or face losing out on the chance to get back what is rightfully theirs. All claims must be finalised and settled by the end of October this year - as August is considered to be a holiday month in Spain, sellers have just one month left to kick off their claims, which can take up to three months to be realised.

The average amount of money being recovered is around £15,000, so it is more than worth checking if you are eligible for a refund. More than 500 British families have already been successful with their claims.

Even if you have tried previously to recoup the money and not been successful, lawyers are saying that a second try is most definitely worthwhile as some of the rules governing eligibility have changed - indeed, the European Court of Justice have recently opened new legal actions allowing claimants to make a second attempt.  The industry  estimates that there are still thousands of Brits who sold Spanish properties during the eligible time period who haven’t come forward. So if you bought a property in Tenerife, the Canary Islands,  or mainland Spain, get that claim in pronto!

A good time to buy property again in Tenerife, Spain and the Canary Isles.

Is now a good time to buy property in Spain and Tenerife? The current Minister of Housing says yes, the former Minister says no. 

Beatriz Corredor, the current Minister for Housing, recently said in an interview with the Spanish daily El Pais that now is an “optimum” time to buy a home in Spain. “We have a huge selection, low interest rates…..The fiscal and financial situation means that now is an optimum time (to buy).”

True, she was talking about primary residencies, not holiday homes. Even so, I’m sure she would argue that now is a great time to buy any kind of property in Spain. She was responding to the following question from El Pais:

“Your predecessor María Antonia Trujillo told El Pais on Wednesday that she wouldn’t buy a flat now, that prices should fall from the peak between 30% and 50%….What do you make of her comments?” Her predecessor  doesn’t think this is a good time to buy. “I’ve been looking to buy for three years. I would not buy now,” she told El Pais, also saying she hopes prices correct (by up to 50%) “as soon as possible”. Trujillo, who was Housing Minister from 2004-2007, is free to speak her mind, unlike the current Minister, whose job it is to talk up the market.

So, who is right? Corredor, the current Minister, or Trujillo, her predecessor? Is now a good time to buy a home in Spain? There is no doubt that now is the best time in years for cash buyers. Prices in coastal areas have fallen by up to 50% (or more), there is more choice than ever, and cash buyers can find good value for money (and a lot of over-priced rubbish too).  The economic situation is still dire, and prices might fall even further, especially for Spain’s glut of undesirable property. We  don’t think prices for prime and A-grade Spanish property are going to fall much further, so Corredor is probably right if you look just at these segments. Trujilllo may be right when it comes to the rest of the market.

The worst time to buy was during the boom, when prices went through the roof, quality crashed through the floor as the economy strained to build too many houses, and every cowboy ever born jumped into the business looking for easy money, financing wasn’t a problem then.

Are cash buyers looking for prime and A-grade property in a better position now? Certainly, so if you are planning that purchase in Tenerife, Spain or the other Canary Isles, now may well be THE time!

Appropriate dress required when off the beaches in Spain

British tourists face fines of nearly £250 for failing to cover up their bikinis or bare chests on the streets of a popular Spanish seaside resort.
The resort of Salou on the Costa Dorada, south of Barcelona, has become the first place in Spain to ban shirtless and bikini-clad tourists in a bid to clean up its reputation, which has been badly damaged after becoming a haven for drunken British students.

In a set of new by-laws passed by the town council those who flout the ban could be fined between €100 (£81) and €300 (£245). Those caught drinking alcohol on the streets or having sex on the beach could also be prosecuted and beachwear will be banned from all but beachfront bars and restaurants.

“We want to ensure that Salou has a good image,” said the mayor, Pere Granados, explaining the move. Earlier this year locals complained about the drunken behaviour of British students who flocked to the resort for the Easter holidays. More than 5,000 British students aged between 18 and 23 crowded into the town 70 miles south of Barcelona to attend “Saloufest” an annual party organised by university sports clubs. Residents complained of “streets running with vomit” after scantily clad students spent their nights binge drinking and indulging in “anti-social behaviour”. Paramedics treated at least a dozen tourists for alcohol induced illnesses and several arrests were made, including one student accused of raping another.
The event caused an “anti-British backlash” that pitted Spanish families taking an Easter break by the sea with businesses reliant on tourism to survive.

The bikini ban signals a growing unease in Spain against those sunburnt northern European tourists who offend the local population by walking in the streets, dining in restaurants and even doing their shopping in little more than beachwear.

“It is not normal to go the market with your packet on show or round the tourist sites in a thong.” said Alberto del Hierro, councillor for Tourism in Salou. “One shouldn’t be allowed to walk the streets or enter public buildings in unseemly apparel. It gives the city a low-class look.”

Earlier this year the regional capital Barcelona stopped short of introducing a similar ban but has embarked on a campaign urging tourists to dress appropriately when away from the beach. Posters showing a stick figure couple in swimming costumes with a red line across it have been plastered at sites across the city ahead of the summer season and hotels, bars and restaurants in the tourist areas have been asked to display the signs. “We want to make people understand that it’s an attitude that we don’t like,” said a spokesman for Barcelona city hall. “It’s not banned or punishable but it’s something we don’t think is polite.”

It might not be too long before a similar stance is taken in Tenerife and the other Canary Isles.

Real estate in Spain, Tenerife and the Canary Isles still undergoing a recovery

The Bank of Spain (BoS)  says the real estate sector in Spain, Tenerife and the Canary Isles,will remain in recession until mid-2011 at least.  Spain’s economic miracle of the last decade was largely built on an unsustainable bubble in the real estate sector. When that bubble burst, as it did in 2008, it sent the Spanish economy into a tailspin. In a new report released last week the Bank of Spain now says the real estate sector won’t start to recover until mid-2011, casting doubt on recent press reports suggesting a housing market recovery is already underway. Cheap credit sent property prices and housing starts through the roof. It was never going to last for ever, but the credit crunch made sure that it came to a particularly brutal end. When credit crunch struck, the house of cards collapsed. The BoS says that the “correction” is not yet over . “Residential (housing) investment will continue contracting until the middle of 2011,” says the report. In 2007 it peaked at 7.5% of GDP, way above the OECD average. Next year the BoS forecasts it will fall to 4%. At that point, residential investment as a percentage of GDP will have fallen below the minimum it reached in 1994, during the last recession.

All of which is bad news for the Spanish economy, dependent as it was on the real estate sector for jobs and growth. “The housing market adjustment has sever macroeconomic implications in the context of the recession,” says the BoS report. As a result of the property crisis, the sector has shed 2 million jobs. The BoS says that, by the time this drama is over, the property crash will have reduced the Spanish economy by 5.4% compared to the end of 2007.

Cheaper mobile phone costs when visiting Tenerife, the Canary Isles and Spain

Travellers to Europe, including Tenerife and Spain, are less likely to incur hefty bills for using their mobile phones abroad, under new regulations that have come into force. A new maximum charge of 32p per minute, down from 35p, will apply to all calls made while travelling within the European Union, while mobile phone operators are now obliged to place a €50 (£41.50) cap on all data roaming charges, unless specifically requested not to do so by the customer.

A mobile phone user’s network must now send a warning to the customer if they approach the data-roaming cap, and automatically cut the mobile phone’s internet connection if the cap is reached. While the cost of downloading data remains the same, the change should prevent travellers unwittingly running up huge bills for using the internet.

The charge for receiving calls while abroad has also been cut, to a maximum of 12.5p per minute, down from 15.5p.

The changes follow repeated calls by the European Commission for mobile phone networks to reduce their charges, and frequent reports of holidaymakers returning home to discover mobile phone bills totalling hundreds, or even thousands of pounds.

“Mobile phone companies were given ample opportunity to act on the cost of using phones in another EU country,” said Labour MEP Arlene McCarthy, who steered the law through the European Parliament. “In the end it has taken EU action on every issue - calling, texting and now data roaming - to bring prices down.”

However, about 60 per cent of Britons still believe the data-roaming cap should be lowered, according to a recent survey. “The EU roaming cap is a positive step to prevent enormous bills on returning from abroad,” said a Budgetplaces spokesperson. “But our research shows that UK travellers believe that the €50 cap is still too high.”

Tourists return to Tenerife as the pound increases in value against the Euro

British tourists are being wooed back to the Continent with more for their money.  As sterling rose this week against the euro to its highest level since December 2008, giving British travellers up to 10 per cent more for their money than last summer.

“Holidaymakers can now expect to get more for their pounds travelling to one of the Eurozone countries than anywhere else,” said Sarah Munro, head of travel money at the Post Office.

Given the continuing concern over the future of the euro, the pound could strengthen further, while reports suggest that hotels and restaurants on the Continent are attempting to attract holidaymakers by reducing prices.

“Our research also shows that prices have plummeted in some of the most popular resorts - especially in Spain and Portugal, where restaurants have slashed their prices,” Ms Munro said.

The total average cost of several holiday essentials, including drinks, sun cream and a meal in a local restaurant, has fallen by 42 per cent in the Algarve, for example, and by 40 per cent in Spain, according to the Post Office. Similar research released this week by Thomas Cook also suggested that mainland Spain offers particularly good value for visitors from Britain.

“Exchange rates have a huge impact on where Britons choose to travel,” said Francis Tuke, a spokeswoman for Abta, the travel association. “The weakening of the euro will undoubtedly encourage us to return to the Eurozone.”

She added that hotel prices had fallen in Spain during the past year and that travel companies expected rates to fall in Greece.

Cheapflights.co.uk, the price-comparison website, has reported that searches for flights to Eurozone destinations increased by 6 per cent during May compared with the same month last year.

Euro loans helping with purchase of Tenerife and Spanish property

Overseas mortgage specialist, Conti, is convinced that UK overseas property investors who took out euro-denominated mortgages earlier this year are already seeing the benefits. Such a move would not only have allowed them to take advantage of cheap interest rates, but could potentially save significant sums of money if sterling appreciates against the euro over the next few years, as experts predict.

For example, an investor taking out a euro mortgage of €250,000 in February 2010 for a property in Spain, based on the exchange rate at that time of around €1.1 per £1, made a commitment of around £227,000 to pay off the loan.

The exchange rate has since improved to around €1.2 per £1, reducing the cost by £18,000 in just four months.

If the rise continues in favour of the pound to €1.3 over the next two years, the borrower would only have to find around £192,000 to repay the mortgage, reducing the cost by £35,000 in sterling terms, although mortgage costs and notaire fees need to be factored in.

Conti’s operations director, Clare Nessling, comments: “Even cash-rich buyers could consider taking out a euro mortgage until the exchange rate improves, at which point they can pay it back and ultimately reduce the price they pay for the property.”