Spanish property and on the need to drop property prices at a faster pace. These are the main points that we want to highlight:In the course of the last two weeks, the national and international economic climate has put additional pressure on the reliability of the
- The European Central Bank increased the interest rate to 1.25%. The Euribor index is already above the 2% barrier and some experts predict that by the end of the year it will be at 3%. With the official unemployment rate climbing and an official figure of 4.3 million jobless people, the rise of interest rates makes it much more difficult to handle mortgage repayments month after month. It is said in the property business that the Spanish property market is on the verge of a second wave of repossessions.
- The Spanish Banking system shows signs of being unreliable once again. Recently, the saving bank CAM has asked for a Government bailout of 2.8 billion Euros after the merge of three saving banks in ‘Banco Base’ broke down. The odd thing is that the Bank of Spain (authority that guided the reform of the Banking system and banking rules) did not notice or make clear the serious state of CAM to the other joint partners. Probably the deputy governor of the Bank of Spain thought that with the merge things would get better, but he did not consider that the other partners in the joint venture (Cajastur, Caja Cantabria y Extremadura) would refuse to join CAM once they find out the real figures.
- At the end, taxpayers will pay the bill (€2.8b) of this bailout plus the €5b that the Government will spend in the Portugal rescue.
- By the way, CAM commercialises its properties in the UK through the estate agent Connell. It might be a good opportunity to ask for lower prices since CAM needs urgent liquidity.
- It is said that the Portugal bailout will be followed by Spain. The Spanish government will start a new stress test on 24 banks and savings banks in order to calm the markets.
- Prices still falling in Spain and the average in Q1/2011 is -2.2% according to idealista index. The most notorious figure according to the idealista index is that in the main capitals, Madrid and Barcelona, the prices have dropped to levels of 2004. In the case of Madrid, the average is 3,629 €/sqm whereas in Barcelona it is 3,907€/sqm. Repossessions have risen and prices are still dropping.
CONCLUSION: The same as usual. Everything relates to price. If you are willing to buy, we advise to put an offer in at 20% below the asking price (at least). We have read in the national press that a few Spanish state agents are suggesting to set an offer in at 10% below the asking price. I guess this is a partial point of view since they still work on a commission basis. Do not be shy and pull the price down.