Hi Albert

Although I certainly wouldn't claim to be an economist, there is some theoretical basis for what I say. I'd be the first to admit my arguments could be based on a poor understanding or knowledge but if I have the basics of supply and demand theory right then I stand by what I say!! After all, Spain is just as subject to laws of economics as any other marketplace.

However inadequate my economic theory, I thought that I had also supported what I said with some concrete examples such as the flats still standing empty after more than 5 months on the market. So its not an entirely theoretical argument.

I hear what you say about the cultural factors - I do understand as I know from my wife's (Spanish, property-owning) family that what you say is largely true... although we haven't yet been completely socially-abandoned since renting a flat! However, if people started losing their faith in the property market it might well affect their behaviour, just as it does everywhere else. If you KNOW that prices are heading South and there are better places to choose to invest your cash then you might be economically foolish to choose to invest in the falling market.

But you are right when you imply there are other reasons to invest in the place you live. It gives you some more freedoms (and responsibilities) and it may satisfy some peoples deep-seated emotional needs to feel they are in control. There are, I agree, non-rational factors at play.

But whether or not 4m people have come into Spain in the past 3 years seems relatively academic. I would guess that many of them are sharing ever-more cramped accomodation as they have very limited economic means. The London property market was "dragged up" by the enormous purchasing power of City players spending their inflated bonuses on the property market. A market built on the purchasing power of economically-challenged South American immigrants is probably a little more fragile.

The fact that banks lend in a market is proof of very little, I am afraid to say, other than their naked greed, IMHO. The only money they risk is their shareholders and their customers and in my opinion they do play fast and loose with it if they think they can make more money. Their opinions (and thats all they have to work off too) are often proved to be flawed. I would not invest in something simply because a bank risks other peoples money into a market. Banks simply blame things that they claim are out of their control (such as higher interest rates) for their reckless lending.

I am glad it makes economic sense for you to own your own place - you say you have noone to answer... to so presumably you have not had to borrow to buy? I borrowed in the UK, and when rates climbed I could neither afford the repayments NOT could I afford to sell and to realise the loss that my property would have produced - known as negative equity in the UK. I just think that your positive optimism is a little risky and needs to be tempered - believe me - you CAN easily lose money in property, wherever you are.

Great to chat like this!

All the best

Mark

Hi Mark,

Obviously your right, you just can't hop out of bed one morning and say "I'll buy a house", it’s not that easy. You have to go over the figures ALOT to see if the equity or the tax breaks are worth the investment. There are a lot of pros and cons with this decision and you have to be careful in choosing the best home that fits your needs.

As with all investments, there are a lot of risks involved with purchasing a home and nobody should do it without making sure they can afford it or have the necessary income to pay the bills.

You know, you’re also right, I'm too optimistic. Just hope I didn't lead anyone on the wrong track.

It's not offical yet but the Spanish housing collase has begun.It's not official yet but the Spanish housing collapse has begun.

I say that its not official because it won't show up in the statics for another few months but in talking to people who have bought or are looking for a place have all said the same thing.
It’s as if someone flipped a switch, the buyers have all disappeared. Nothing and I mean nothing is moving right at the moment. We were talking with a friend who lives in Manzanares El Real and she said there are a ton of places for sale and nothing is selling. Another friend who just bought a place in the south gave the owner a low ball offer (30% less than they wanted) and told him to call when he’s ready to met the offer, 3 months later they closed. Chris and I are noticing it in prices as well. We’ve been looking for a place north of Madrid in the mountains (one because it’s more reasonable and two we both love the area) and we seeing prices trend down. A few months ago the bottom price (2-3 bedroom) was around 250.000 depending on the area and now you starting to see prices closer to 220.00 or lower. In a few more months people are going to start getting desperate.

There are a few people still in denial (mostly those who make money by marketing places to Brits) but there is no question the bubble has burst. Generally there argument is that the Spanish are owners not renters and the British will always want to live in Spain.

While that is true the fact is Spain is way over built (by 100% or more) In the south building permits have dropped by 80%. As well Britain has its own sub prime problem which is just starting out. While your unlikely to see a housing collapse you will see a slow down in the economy, already foreclosures (or declines can’t remember) are at record levels. Britain is heavily indebted and it’s only going to get worse. Put all that together and I can see a 30% plus drop in prices. Unfortunate that will mean a lot of pain for the Spanish economy. A decline like that your going to see numerous banks going bust unemployment heading up etc.

In other economic news the Feds (The Federal Reserve US central bank) has let the inflation bug out, in their decision to cut interest rates and flood the money supply has pretty much guaranteed inflation will return. With Dems poised to control all levers of government and tike hikes and baby boomer retirements looming it wouldn’t surprise me to see the return of stagflation

For those not old enough to remember inflation is basically means everything gets more expensive every year, higher inflation means higher unemployment and stagnate growth. All of it bad news.

Also while cheaper house prices may be a bone to those that want to buy it will be more than offset by the pain of a recession.


I that its not offical becuase it won't show up in the statics for another few months but in talking to people who have bought or are looking for a place have all said the same thing.

Sun setting on Spanish housing market