This is our 9th Quarterly Report. We have kept it brief and specifically relevant to the locations where we are particularly active.
As part of the research we have identified a number of wider and national property comments.
- There are three items in the news now that are affecting demand and supply.
- Brexit and the Euro/Sterling exchange rate – The doubts as to the result and it’s after effects are undoubtedly causing UK buyers and sellers to hesitate. In addition, the fall in the value of sterling, from the 1.40’s to 1.20’s € euro in the last three months has made the relative costs of property here much more expensive for UK buyers – but of course better for those wanting to repatriate to UK. However, the latter will be concerned that there is more reduction in value to come and so may decide to hold onto euro asset until closer to the referendum in the UK on 23rd A recent letter received from a client confirms this situation – ‘We are concerned that if the UK leaves the EU, then we expect that property prices in Spain may fall considerably and, therefore, we should be grateful for your view as to what the property would be worth in the case of the UK leaving – and in the case of the UK remaining in the EU. If we go ahead with the purchase before the referendum, we are thinking that we need to cover ourselves regarding the price that we agree, to compensate for any likely fall.’ These particular buyer clients have agreed to pay the seller in sterling, which is to the client’s advantage as the exchange rate has changed.
- The risks associated with a change of Government in Spain – More than one client and acquaintance has stated that they will sell and move if a left wing Government should be elected. Again, the uncertainty could be causing buyers and sellers to pause until there is a result, which could be before the end of May or, with a new election, at whenever a new Government is established after the end of June.
- The Spanish banks are being obliged to update their valuation of assets practice to include regular annual or bi-annual valuations of each individual asset – This has seen Sareb, the Spanish bank rescue bank, announce a write down of their portfolio by more than 2 billion € euro, in addition to the 968 million € euro write down in the past two years. It may be that many private banks will have to do the same, which may result in them lowering the asking price for properties they are trying to sell, thus reducing the market level as a whole. The reduction of asset values also could reduce the banks’ ability to offer mortgages. It could lead to a downward spiral again. See https://www.sareb.es/en-en/press-office/news/Pages/Sareb-makes-an-additional-write-down-of-EUR-2,044-million-in-line-with-its-new-assets-valuation-accounting-standards.aspx The requirement for regular revaluations has also been quoted as one of the reasons for private equity firm Cinvin buying TINSA, the Spanish based tasadores.
most important is to keep your wits about you and don’t take anything for granted. Question all the time and ask again if you don’t understand the answer. Also ask the same questions of other people and get a feel for what’s right.
This is a brief summary of a report by an EU funded body into the issues surrounding the valuation of energy efficient sustainable buildings.
Whilst Spain may be behind UK in introducing the requirement for Energy Certificates for property, it gives us to benefit from their experience. Here is a recent article that was aired on the RICS Chartered Surveyor’s website. Author is a specialist in Energy Performance Certificates in England.
