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House prices down 35% according to Economy Minister

House prices in Spain have fallen 35% according to the Economy Minister, Luis de Guindos, based upon figures since the crisis started.

The main criticism, claims De Guindos, is that the banks only lend to buyers of their own re-possessed properties in preference to those seeking properties from other sources such as general estate agents and developers.

De Guindos has introduced new reforms forcing the banks to make bigger write-downs to bring price down further. These reforms appear to be having an immediate effect as would be buyers are now offering on average 30% less on asking prices.

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Spanish property market in 2011: another year up the creek

Spanish house prices fell for the 5th consecutive year in 2011, according to data from Idealista.com (based on asking prices), a leading property-portal.

The average asking price is now 20pc below the high reached at the end of 2007, and back to where it was in 2004, when the boom had run about half its course. The chart above illustrates this with data from Madrid (blue line) and Barcelona (orange).

But house-hunters are still not satisfied, according to Idealista’s ‘Demand Thermometer’. Potential buyers are looking for an additional discount of 21pc on average before they jump in.

As always, asking price reductions have not been uniform across the country: In some areas, like Lleida (Catalonia) and Puente de Vallecas (Madrid), asking prices are already down by more than 40pc.

As far as all other housing market indicators go, 2011 was another bad year, if not the worst since the crisis began (final data will not be in for a few months). Property sales, house building, mortgage lending and confidence all tumbled to new lows, whilst repossessions hit new highs.

Outlook for 2012

Property price falls accelerated towards the end of 2011, boding ill for 2012. Most market watchers expect prices to continue falling in 2012, as banks slash prices to shift their properties, and private vendors follow suit as the credit crunch drives down budgets.

I agree that 2012 will be another bad year for the Spanish property market as a whole, but I also think it could be the start of better times on the coast for 1) quality, up-market areas with diversified international demand and 2) low-cost property in well-consolidated areas. Bargain-hunters from non-Euro countries like the UK, Norway, Switzerland and Russia, will be on the prowl as a weaker Euro and falling property prices combine to attract the curiosity of investors.

But all bets are off in the event of a major macro-economic shock in 2012.

Source: Spanish property market in 2011: another year up the creek | Spanish Property Insight Blog.

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Income tax, IBI and motorway tolls go up but electricity, IVA and phone line rental frozen

Income tax, IBI and motorway tolls go up but electricity, IVA and phone line rental frozen

THE start of 2012 will see income tax increase and pensions rise by one per cent, but electricity, gas bottles and telephone standing charges will be frozen.

Young people between 22 and 30 years of age can no longer claim the 210-euro benefit for buying a first home, but those currently in receipt of it will continue to be able to claim.

The tax reduction on a first home will be reintroduced, and IVA will not go up, but income tax will rise.

Civil servants’ salaries will be frozen, and mains gas will increase in price.

Bottled gas remains at 15.09 euros and landline standing charges via Telefónica will stay at 13.97 euros.

Toll fees on motorways will increase by up to 3.2 per cent.

The percentage charged on land registry values for IBI, or asset tax, will rise, and the cost of postage stamps will increase by 2.86 per cent.

Rail travel will go up, but the exact figure has not been calculated so far.

Source: Income tax, IBI and motorway tolls go up but electricity, IVA and phone line rental frozen.

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Pound expected to strengthen against Euro

If you have savings in Euros, now might be a good time to get back into Pounds

The Euro Debt crisis continues to make the headlines as the single currency struggles to claw back any gains following the damaging reports and data released from Italy, Greece, Spain, Portugal, Belgium – the list goes on.

With France at risk of losing its ‘triple A’ credit rating and rumours of Greece withdrawing all together from the euro-zone, continued weakening of the euro currency is likely.

Brief respite came last weekend after reports in an Italian newspaper suggested that the IMF was preparing an aid package for Italy which, if true, could give some breathing space over the next 18 months as €600 billion is to be made available.

Deeper cracks in the Euro are expected, however, over the coming weeks as the next European summit is due at the beginning of December, this follows the news last week that Belgium, Portugal and Spain had their credit rating slashed and further sufferings from the European Debt Crisis were felt in Germany as they unsuccessfully tried to auction a quantity of bonds.

Still time to sell Euros below €1.20, but for how long?

Market buyers are looking to off load the Euro in a bid to protect themselves against further falls, putting more downward pressure on the Euro. That should lead to a stronger Pound against the Euro, as the pound enjoys somewhat of a recovery due partly to a shift in focus away from its own woes. But anyone buying Sterling today will still get rates of below €1.20 (0.8333) so there is still a window of opportunity for buyers.

Any Spanish residents who are looking at repatriating funds will be well placed to move sooner rather than later as it seems that the historically resilient Euro is showing some clear signs of weakness the likes of which, thus far in the world recession we haven’t seen before.

Many market analysts are predicting that 2012 will see a significant shift in the fortunes of the Euro, with €1.25 being suggested as an average mid-market price throughout next year.

This has important implications for British vendors hoping to repatriate equity to the UK after selling their homes in Spain. If the Euro does weaken as expected against the Pound, it might be better to reduce asking prices now to make a sale, rather than wait and get caught between a falling Euro and falling property prices.

British house-hunters in Spain in better position

The other side of the coin is increasingly cheap Euros for those with Pounds Sterling. The Euro weakness makes a refreshing change for potential buyers in Spain, and the days of €1.12 to the Pound (or below) are likely gone for the foreseeable future. If property prices continue falling, and the Euro loses ground to the Pound, Spanish property will look increasingly attractive to British buyers with funds in Sterling.

But volatility (big short-term swings) will play a huge factor in the markets moving forward, so be sure to consult a specialist currency broker before you buy or sell foreign currency.

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