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Market Report – 1st Quarter 2018

This is our 17th Quarterly Report. We have kept it brief and specifically relevant to the locations where the clients of the Survey Spain Network are most active. As part of the research, we have identified a number of wider and national property comments.

independent property valuations spain

The Overall Market – Increasing optimism with the first quarter being better than last year’s.

  • Generally, the agents we’ve talked to have been upbeat regarding sales and the future market. They all report that new properties are selling well, but that older, ‘classical’ properties are struggling, and prices continue to drop for those, except in the best locations. 
  • We have recently been asked to value a property on the beach side of Marbella’s Golden Mile. The purchasers intend to demolish the nearly 1,000 sq m property and build a new style, which illustrates the premium that can be gained for new. However, given that new build licences in Marbella are taking up to 2 years to be granted, due to the continuing planning hiatus, extensive remodelling would appear to be the better course as licences for that are understood to be available within 3 to 6 months.
  • As stated in the last few Reports, despite the comments above, we are still concerned at the amount of new construction being carried out, all along the Costa del Sol, with the probability of much of it coming onto the market at approximately the same time. 
  • There is still a considerable gap in price between the equivalent new and resale properties, which means that most purchasers of new property are going to be finding themselves in immediate negative equity. However, it appears that the presence of new materials and design is sufficient to encourage buyers to succumb to the superior marketing and elect for the new property. They are also being encouraged to view these properties by incentive furniture and other packages and agents encouraged to bring their clients by higher than standard agency fees.
  • Along the Costa del Sol, several agents report that they are finding that many older properties are coming onto the market due to families growing and spreading, leaving largely unused the increasingly elderly parents’ holiday or retirement home. The elderly owners prefer to have the money available to live on and are either going back to their countries of origin or renting smaller, ideally single floor homes and thus joining the already crowded rental market.
  • The market for inland properties is reported to be beginning to pick up at last. Again, the properties must be exceptionally located and to have no planning or building problems. In addition, increasing relaxation of the Regularisation (DAFO) possibilities for properties built illegally, is making it possible for all the paperwork to be brought up to date and owners able to live or sell with confidence that there will be no further fines or demolitions. 
  • Two agents have stressed the importance of having all the paperwork up to date, no matter how legal the property is. One agent instanced the situation where the historic title documents gave a size less than one-third of the actual size. It took 6 months and some costs to correct the situation, even though it wasn’t contentious and only the administrative bureaucracy had to be gone through. By that time the potential buyer was long gone and the property was being shunned as a ‘troublesome’ property by agents showing properties in the area. Unfortunately, this is a situation that we have found when valuing a number of mortgaged properties and could delay debt recovery and make it costlier in the event of a bank requiring to liquidate the security.
  • Brexit is now less than a year away at 29th March 2019. The reality of the change that is coming and the dashing of hopes of a change of mind by the UK will be increasingly concentrated into this short period.  Agents report that whilst there has been a slow down by some UK buyers, there has also been an increase in those wanting to make the move before the transition period starts.
  • Any slacking of demand by UK buyers has been ably taken up by other Northern European nationalities, with Estepona town alone seeing the opening of 4 or 5 specialist Nordic estate agencies to cater for demand from those countries.
  • The Spanish demand continues to recover, with many buying investment properties and the traditional town nucleus continuing to expand and new suburban areas created. As the local economies expand, so new buyers and especially tenants arrive to fill the employment opportunities created.

Pending legal changes that could affect property values?

This will be included when appropriate. However, we stress that we are not lawyers and thus can only comment to the best of our knowledge.

We are not aware of any new legislation directly affecting the properties. However, as local legislation can be created by the various government authorities in which the properties lie, there may be relevant legislation of which we are unaware.

Analysis of Statistics

  • Survey Spain is recording prices and valuations throughout our Network. Due to the limited number of properties and the even fewer number of reliable sale figures, we are only able to provide a meaningful analysis of prices and values for some Municipalities this quarter. However, as before, we have commented on the majority of the areas, with the opinion sourced from our valuers, agents and other sources in the areas.
  • Where we have insufficient information, we have combined information into larger areas.
  • As requested and also as this is the area with most activity, we have been able to provide more information on the Costa del Sol market.
  • Note that the rates per square metre may be averaged from a small number of properties in some cases. We have continued to supply these as we believe that they will show a trend over a number of quarters, whilst the variation between one quarter and the next may be ‘out of step’ with the perceived trend 
  • It should be borne in mind that we have few valuations of new property, with the majority being resales.

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House Price Index Tracker Analysis

spanish house prices january 2018

Spanish Property Insight’s house price data graph above is a fascinating study of the vagaries of statistics. Of little use to individual homebuyers in specific locations, each index provides a general indication of where the compiler’s data shows the market has been and based on that, others make interpretations of where it’s likely to be in the future. Let’s look at these indices in turn.

Fomento – (Ministry responsible for planning and implementing Govt policy on Public Works and Transport) – presumably they will get their statistics from the other government agencies, being principally the tax authorities who are fed the information from the Registrars and Notaries. Thus, their statistics should follow these two. Their graph looks pretty constant with fewer fluctuations so perhaps it’s their statistical technique that is levelling it out.

INE – the National Institute of Statistics states on their website that one of their objectives is to provide an element of comparison between EU member states. The stated source is Notary information, so it should mirror the Notaries’ graph. Unfortunately, it does not. Perhaps, once again, there is a levelling out due to statistical methods and possibly also lagging information being received from the Notaries.

Title Registrars – this will record the actual price stated on the Escritura’s (title deeds) that are recorded in the local Registry. Unfortunately, this will not record the undeclared payments that are reputed to occur in many transactions. As I’ve stated in earlier articles, as the money-laundering regulations bite, there is less undeclared, which would give the impression of house prices rising even if it was a steady market. The Registrars graph still shows a gradual and steady pattern, though significantly different from the first two above.

Notaries – Now we are getting closer to the frontline of the property market. One would expect their graph to be very similar to the Registrars as the Registrar only receives the information via the Notary. Perhaps there will be a time lag due to some Notaries working faster at transferring information than others or their being complications requiring confirmation of unrelated matters, which again may delay the passing on of the information to Registrar. This could also be due to timing of titles being put forward to be registered, perhaps linked to tax dates and the like, and not even those of only Spain as the buyers and sellers come from all over the world. However, comparing the two graphs, they are wildly different, with the Registrars’ much more steady record being at considerable variance to that of the wildly fluctuating Notaries’.

Idealista – (resale asking prices) – this is a commercial multi-listing organisation. Private vendors can place details of their properties on the website for free, whilst estate agents have to pay for their bulk entries. They state that they have more than 1.5 million properties for sale or rent, but there appears to be no effective control to avoid duplication and encourage accuracy. Working as we do with estate agents’ online details, we know that one property can be entered three or four times, all with the same photographs, but with widely different floor areas, accommodation, description and prices. Some of the properties will have been on the website for many years, showing historic prices, whilst others will be short-term and regularly updated. As one would expect, this graph fluctuates, but not quite so much as the Registrars’ and Notaries’. There are significant dips and rises that are not reflected in any other graph, which may be is a result of them concentrating on resale prices and not new build.

Tinsa – this is one of the largest firms of mortgage valuers (tasadores), regulated by the Bank of Spain, and working on behalf of many commercial banks and lenders. To have a mortgage registered it is essential to have a Tasador valuation linked to the document. The tasadores obtain their information from the market, through multi-listing sites such as Idealista, Fotocasa and the like, but principally from their own statistical records, being previous valuations in the area. Whilst helpful for maintaining consistency in values, it does mean if there is any error that it will tend to spread through the valuations in that locality. In addition, as it’s much easier to access lists of valuations within one’s own organisation than to carry out searches through estate agent and lawyer contacts, and general Internet searches, there is probably a bias towards using their own figures, sometimes without checking with the market. In addition, the tasadores are obliged to put forward their value net of all selling costs, which can be 10 to 15% of the registered sale price, and this can be the reason for so much frustration and disappointment when buyers are seeking maximum mortgage finance depending upon a generous valuation for the property. Tinsa’s graph shows variation, but not nearly as marked as the Notaries or, interestingly, Idealista’s from whom they will get some of their market knowledge.

Making sense of it all

So how do statisticians employed by banks, governments, EU, IMF, etc provide accurate analysis of the property market in Spain? A graph line combining all the ones above, would undoubtedly show that there is a marginal upward trend from the depths of 2014 to today. That’s really all that one can ascertain from it. For homebuyers and sellers wanting to know what the current market value of an individual property in the local market is, the graphs are of little use. Yes, some of these organisations provide local statistics, which will be more helpful, but again they will be subject to all the vagaries mentioned above. The only way to really know on any particular day is to check what is actually on the market and have sufficient expertise and individual knowledge to be able to compare one unique property to another. That’s why property valuation is described as part art and part science, with valuers having to be psychologists ascertaining the mood of individual buyers and that which is ‘created’ by the particular property and its immediate environment.

Property developers and investors and, indeed, local authority infrastructure planning officials have an even more difficult time making sense of things due to the considerable time lag between initial conception of a project and it being supplied on the market. The former don’t know what is being planned by others in the same physical market area as their own proposed development, and thus there can be wild excesses of supply, such as can be seen to be happening now in some areas on Costa del Sol. The infrastructure planners know the applications that are being made but have no control over what will arrive the next day and only limited powers to control the market. Local and national politicians, who create the regulations, do have these powers, but they are also responsible for the finances of the government, which, in many local, provincial and regional areas are principally dependent upon construction licenses. Some, such as in the Balearic Islands, have been able to regulate construction and thus control the market, but this has been largely perceived as due to political dogma rather than a desire to genuinely provide a logical market serving everyone.

First published on Spanish Property Insight,

Inheritance Tax Andalucia 2018


euros_1693423bAfter almost 40 years of uninterrupted socialist government, the PSOE finally lost its majority in Andalucia in 2015, although it was able to hang on to power in coalition with Ciudadanos, the new centre-right party of Spain.

In return for approving the 2018 budget and propping up the minority government, Ciudadanos has just forced the PSOE to accept a substantial change in ISD.

The Impuesto sobre Sucesiones y Donaciones (ISD), Spain’s inheritance and gift tax, dates back to a 1987 law that replaced similar law of 1967. Since 1987, apart from some relatively insignificant tweaks, the law has remained largely untouched, including the tax rates and bands. Inflation has reduced the real value of money by 180% since 1987so, over the years, the real cost of ISD has doubled.

Because the authorities often assess tax on the theoretical value of a property and because properties have been difficult to sell in recent years, many families have simply had to give up inheritances because they can’t pay the tax.

In recent years the tax has been fully devolved to the Autonomous Communities (Andalucia, Cataluña, Madrid etc), which has seen this already unfair tax become ridiculous because regional variations are now extreme. For example: Madrid has virtually eliminated the tax by providing a 99% exemption for families but The PSOE in Andalucia, boasting its left-wing credentials, actually increased tax rates for the wealthy. They improved exemptions for modest inheritances between family members but the rules were so badly drafted that they caused even greater unfairness.

The press releases published on 20 September 2017 announce that the general exemption to ISD will be increased to 1€ million per person. The general exemption for inheritances between close family is currently only 15,956.87€.

It is important to know that ISD is payable by the beneficiaries of inheritances, not the estate of the deceased as happens in the UK and other countries. Consequently, in the case of Wills that are designed to spread assets among several family members, each family member will be entitled to their own 1€ million exemption.

The devil is in the detail and we must await the release of the text of the new exemption before celebrating too much. We have to make sure that there are no snags that the politicians sneak into the text to limit the exemption unfairly, as has happened in the past.

An example of such political trickery is that Andalucia currently boasts an exemption for close family inheritances of up to 250,000€ when the beneficiary’s pre-existing wealth is less than 402,678.11€. However, exceeding either of these limits by just one Cent disqualifies the beneficiary and results in only 15,956.87€ being exempt.

Caution aside, this could turn out to be very good news indeed for people wanting to invest and live in Andalucia as ISD has always been a significant disincentive. There is also talk about getting rid of Wealth-tax, which would make Spain a truly attractive country for new residents.

This article was written by Spence Clarke & Co., Chartered Accountants, Marbella, Málaga

For a guide to the current ISD system see:

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Exchange Rates Impact on Property Budgets

Survey Spain - Bank Lending Upside DownThe current market value of a property is just that: it’s what someone will pay for the property at that particular moment. In addition to the normal vagaries market, of increasing and decreasing supply and demand and changes locally, we are increasingly finding that there can be radical changes ‘overnight’, as exchange rates fluctuate significantly.

Looking at the UK market, the loss in value of the pound and the parallel apparent increase in euro economies, have combined to reduce the exchange rate significantly, with it being above 1.40 euros to one pound within the last two years, whilst now it’s down at 1.09 Euro to one pound, a loss of almost a quarter. Despite previous concerns about the long-term survival of the euro, forecasts are that there should be parity soon with the pound, perhaps going even more and the euro becoming the strongest currency. Looking at currencies of other buyers in Spain, the fluctuations of the Nordic countries have been smaller, whilst of course, others such as Russians have seen the value of their home currency half compared with the euro. All this uncertainty will be having a profound effect upon the property market.

British expats who depend upon sterling income from pensions or the like will be finding that life is becoming increasingly expensive here and may well be considering that they have to go back to the UK to survive financially. However, to balance that, the value of their property here in the Eurozone is increasing relative to sterling. With property values appearing to have peaked in the UK, the sale of their euro property will move them up to a higher price bracket back in the UK where they will be able to live in the same currency as their income. Perhaps they will consider renting in the UK and keeping and renting out their property in Spain in the hope of value is continuing to rise here. Continue reading

Quarterly Market Report – Spring 2017

q-reportThis is our 14th Quarterly Report. As part of our research we have identified a number of wider and national property comments.

The Overall Market – Concern as to amount of new construction.

  • As reported last quarter, building activity is undoubtedly continuing and increasing, and the concern is that we may be heading for another ‘bubble’. Yes, there is demand, but there is also a substantial amount of existing property on the market. As always, developers have the selling advantage of larger marketing budgets to bring in the buyers, but we are seeing signs of some discovering that all is not as fast as they expected, with ‘free’ cars being offered to buyers and 10+% commission offered to agents. See the article “Are we heading for another Bubble” in
  • As before, Brexit, and its effects upon the UK buyer and existing British residents, is still an unsettling force, with other EU nationalities becoming increasingly frustrated at the disruption it is causing. However, there are still many UK buyers.
  • The EU and UK have now put forward their proposals for the other’s residents in their countries. Whilst there is a general agreement in principle, there are many details still to be clarified, especially for what happens with expatriates who arrive after the as yet unspecified ‘Specified Date’. See the article “Is the future becoming a little clearer”.
    • In that I state that it is my opinion that those residents here before the Specified Date, assumed to be March 2019, will have special rights of residence, but others arriving after that date will be treated in the same way as all those of other non-EU nationality.
  • The reduction in UK buyers is adequately being replaced by those of other countries, with Nordic, German, French and others being active in the market.
  • As stated before, the market dependent upon Gibraltar, both due to proximity and business, is undoubtedly the most nervous of all. We are seeing prices and values dropping in this area, counter to most of the Costa del Sol.
  • Tourism is still very strong, with record numbers being expected over the summer. Hopefully, there will be enough water freshwater for them all!
  • The requirement for licences to legitimately offer individual properties to let, is likely to reduce the number of buyers who are depending upon rental income to afford the running and finance costs of their purchase. This will especially be the case should there be publicity of draconian fines to people discovered to be acting illegally.
  • In the background, there is the thought that if interest rates should rise, many owners may find that they cannot afford their second property in the sun and that there could be a significant increase in properties being offered for sale.

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Are we heading for another bubble?

Construction on the Costa del SolA recent article in Spanish Property Insight stated, “Building land market comes back to life, but recovery is patchy and town planning an obstacle”. Yes, only by looking round the skyline it’s good to see cranes moving to create buildings where people want to live and holiday. Yes, it is patchy, because the builders want to build in the ‘safest’ locations, where people want to live and holiday. There are still shells of developments in poorer locations, far from beaches and social and retail facilities, which were never going to be popular. Developments started there because builders were lent money to build, they were the only sites available and speculative buyers were lent money to reserve them. However, when the crash came, these buyers couldn’t sell on at a vast profit, especially considering the costs of purchase and sale. Too late they found they couldn’t rent the houses as nobody wanted to live there. Also, the costs and taxes on income made it impossible to cover all the running costs. So, they pulled out of the purchase and the whole deal collapsed leaving banks with empty shell apartments in a failed development.

The failure wasn’t of the building; it was of the location. Now we are seeing a rush to buy building land again, in poorer locations because the price is low. Then marketing starts, convincing naive buyers that they should be paying high prices for new, unsnagged properties. People buy new when, with internet research, they’ll find better existing properties, in better locations, as that developer had the pick of those.  Continue reading

Is the Future becoming a Little Clearer?

Brexit2-300x250With Brexit, we are all in the same boat. Writers based in Spain have the same concerns as readers, but with a slight advantage in that we focus on its effect upon our specialities. Mine are pre-acquisition building surveys and valuations, the latter being principally as an expert witness for UK and other countries’ courts regarding divorce, tax, inheritance, and other disputes relating to the value of properties in Spain.

When the Brexit result was announced, everyone, including many Leave supporters, were in shock. “What have we done?” and “How will it affect me?” For a year, we haven’t had an answer to either of those questions. Now, the UK government has put forward how they will treat EU nationals within the UK, assuming that similar arrangements will be made for UK nationals in Europe.  Continue reading

Building confidence in Spain

Despite the recovery of the market, there are still some huge differences between what was loaned in the good times and the market value of the property now.

220px-nordiske-flagBuilding activity is increasing. Many new individual villas, though the financial rationale of those is uncertain as there are still so many available for sale, with those having had the choice of the best sites in the past.

New flatted developments are also being created with the developers presumably been reassured by the appropriate percentage of reservations off plan.

Older ‘skeleton’ developments that were not completed during the last boom are being acquired and completed by new developers.

‘No sign of housing market overheating’, says Bank of Spain. Generally, that is probably the case. However, in certain popular areas there must be a risk that everything is proceeding along a very similar course to before the last crisis. Continue reading

Quarterly Report April 2017

q-reportThis is our 13th Quarterly Report. It is originally prepared on behalf of a Bank for which we carry out many Revision Valuations, which are now required very 2 to 3 years as Banks must update the value of the assets that they hold as security for loans. So, if you have a mortgage, don’t be too surprised to see a valuer photographing your house from the street as he/she is only carrying out a ‘walk by’ inspection and valuation. Despite the recovery of the market, there are still some huge differences between what was loaned in the good times and the market value of the property now.

As part of the research we have identified a number of wider and national property matters.

The Overall Market – Increasing divergence of markets.

  • Building activity is undoubtedly continuing and increasing.
    • Many new individual villas, though the financial rational of those is uncertain as there are still so many available for sale, with those having had the choice of the best sites in the past.
    • New flatted developments are also being created with the developers presumably been reassured by the appropriate percentage of reservations off plan.
    • Older ‘skeleton’ developments that were not completed during the last boom are being acquired and completed by new developers.
  • ‘No sign of housing market overheating’, says Bank of Spain. Generally, that is probably the case. However, in certain popular areas there must be a risk that everything is proceeding along a very similar course to before the last crisis. There is increasing demand from many nationalities, with the Nordic buyers still prominent. However, the statistics show that there has been a significant drop in acquisitions by UK buyers, presumably linked to Brexit.
  • A useful source of current statistical analysis of the source of buyers can be found at
  • Having said that, we have noticed no reduction in the number of building surveys that we are being requested to carry out by UK potential buyers. These are almost exclusively of existing properties, some of which are in good locations. Buyers report that they are still able to negotiate reductions from asking prices and we refer you to the statistics below.
  • The uncertainty caused by Brexit is principally to the UK market, but this is spilling over to other nationalities, equally uncertain as to what its effects are likely to be on the EU as a whole and Spain in particular.
  • The market dependent upon Gibraltar, both due to proximity and business, is undoubtedly the most nervous of all. The effects of Brexit will be a radical and far-reaching, but everyone has to wait until the UK/EU negotiators finally agree their deals. The attitude of Spain with regard to sovereignty will be significant.
  • Comments by Ryanair and other airlines that the ‘Open Skies’ agreement will no longer apply to UK flights to the EU and thus they will be reducing substantially, is also causing concern. Ease of communications has been one of the major factors for UK buyers in choosing Spain as a place to purchase property.
  • With Easter marking the start of the main tourist season, it is to be expected that the authorities will be working strongly to enforce their rental licence requirements, which exist now in the majority of Spain. Properties that have a rental licence should have an increased value, but yet we are not seeing many being marketed with that as an asset.

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Recap of Legal Actions in Spain against Banks & Others

352089_1280x720This article written by Lawyer Raymundo Larraín Nesbitt, gives a complete overview of the recent court cases in Spain which may award non-residents with unexpected huge windfalls.

Several key court rulings have hit the Spanish headlines over the last months raising huge waves which ripples we continue to feel every day in the shape of glossy newspaper and radio ads soliciting litigation clients. Lawyers have all too eagerly witnessed the recent snowball of landmark rulings which have opened up new venues to litigate that were previously barred to us.

To laymen, these rulings mark an inflection point allowing them a golden chance to claw back lost off-plan deposits from developers, undue interest rates pocketed by lenders, overcharged taxes from town halls and even from the Spanish Tax Office itself. Most of this money was written off years ago, by those affected (in the majority UK nationals). These new rulings have tipped the scales, turning legal outcomes upside down enabling successful litigation (and payback, which is really what it’s all about).

The best way to go about it is to simply provide a brief overview of all the ongoing court cases, one by one, giving the likely success odds, timeframe to claim and the amounts claimed back. I close each one referencing my own articles on a matter for those that seek more information. I only list those likely to affect my readers/clients i.e. non-residents.

There are more court cases than the ones I collate below, but these overwhelmingly affect Spanish nationals (e.g. preferentes) so I will purposely leave them off the list.

It should be noted that the following blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. Continue reading