Campbell Ferguson (OP Columnist)
THE Overall Market is jittery with so many national and international issues potentially affecting both buyers and sellers.
• Government: Spain now has a left-wing government which has previously acted against the free movement of the property market and this appears likely to recur.
In Andalucia, Murcia and Valencia where right-wing Juntas were elected in opposition to the Madrid Government, it’s more complicated. It may temper future policies but, from previous experience, we’re still likely to see reduced national investment.
• World Conflict: Heightened tension between Iran and other Middle East countries backed by the USA, together with the continuing belligerence of North Korea, is shaking confidence in the world economy, oil and finance markets. Whilst far from Spain, they affect the timing of decisions of potential buyers.
• World Economy: It’s already struggling due to Trade sanctions between the USA and other larger economies like China and the EU.
– Interest rates are so low that, whilst they make mortgages very attractive, they leave national and regional economies fewer options to cushion the effects of any world economic downturn or to stimulate economies back to growth thereafter.
– There is increasing concern that the current economic growth and debt based model may have run its course and that radical change is essential to take account of depletion of the world’s raw material resources and the Climate Crisis.
– Again, these matters all affect buyer decisions along with the terms, availability and exchange rates of mortgages and other bank finance.
• Brexit: ‘No Deal’ is still a prospect. Despite having been removed from the table it’s back by default due to the need to have the basics of an interim agreement before European Council ratification over June 18/19. The Interim agreement period ends on 31st December 2020 and without accord, ‘No Deal’ appears to be the only alternative.
– In addition, the UK Government’s tinkering with previously stated immigration ‘promises’ for EU citizens already in the UK or due to arrive this year is adding uncertainty to how Spain will play it, especially as the Spanish authorities have always said their regulations will mirror Britain’s.
– Whilst existing residence, health and working rights appear to be assured, the change of taxation treatment from EU to 3rd country citizen could affect net incomes significantly – with rental income being taxed on 24% of gross income and not 19% on net income (after expenses), as now.
• Climate Crisis: Nero is fiddling while Rome burns. As history states, not only did the Emperoro play music while his people suffered, he was also an ineffectual leader in a time of crisis. Unfortunately, the world appears to have many ‘Nero’ Governments – America, Brazil, Australia, India, China – which are either in denial or too focused on their own domestic problems to take the required action. That has been left to the individual citizens of the World to act, but inevitably it will result in increased migration and internal conflicts.
– Last year saw the first drop in visitors to Spain since 2012, due in part to collective concern for our carbon footprint. Warmer summers in Northern Europe make the benefits of Mediterranean travel less rational, and there’s competition from other countries too.
In Spain, the Climate Change is predicted to lead to:
? Less rainfall – 2019 was the driest in Málaga Province since records began, reservoirs are at their lowest level in years and 40% of Marbella’s drinking water is being supplied by desalination. We still have the spring rains to come and may they will be plentiful.
? More storms and sudden downpours, which cause surface floods rushing over the land to the sea, with little percolating down to the aquifers upon which our water wells depend.
? Rising sea levels and storm surges, will see greater damage to coastal areas, and flooding up river as downpour waters meet storm waves surging up from the sea.
? On the beneficial side, there will be more tourism hours of sunshine and carbon free energy will be plentiful from both wind and solar power.
• Good News: As a result of all the development licences that have been granted, the financial status of some municipalities has been transformed. Estepona, to judge from the public works construction that is being carried out, is using that money to enhance sports and health facilities, including sharing the cost of a new hospital with the Regional health authority. However the construction of the fancy new Town Hall is questionable, given that the coastal paseo, pozo negro (septic tank) pollution, roads and roundabouts are in urgent need of attention.
• Increased Incentives: Financiers and developers appear to be reacting to reduced inspection visits by enhancing commissions to agents, reducing prices and offering buyer incentives. Others are putting things on hold until the market becomes clearer.
– As stated in previous columns, Spanish market stats may be skewed by the surge in ‘off plan’ purchases. These are secured by private, non-notarised contracts and so will only appear in the record after the paperwork is processed and the buyer has the keys. So if there appears to be a ‘bounce’ in the next few months, it’s inaccurate. The real figures show buyer numbers falling off.
• Completions: Survey Spain is often instructed by individuals to carry out ‘Snagging’/Building Survey inspections of new builds. While developers have their own ‘snagging’ inspections before accepting the building from the contractor, they are likely to have been carried out by an estate agent keen to get sales moving and claim their commission. We come across many properties where the level of workmanship has been far from acceptable, perhaps due to construction being rushed.
Legal changes that could affect property values
(We stress that we are not lawyers and can only comment to the best of our knowledge).
• Housing Regulations: As stated above and previously, Local and National Governments are making regulations to affect the form of development (e.g. demanding a percentage of the development is set aside for VPO ‘Council Housing’), and requiring Licences for seasonal rentals so that the administration of those is similar to hotels. Given the left-wing bias of the newly sworn in Government, there are sure to be further impositions in attempts to create a ‘fair’ market for tenants. Past experience has shown that most of these types of measures, merely skew the market with short-term tenant benefits, but medium-term reductions in availability.
• Mortgages: Spanish banks may be less keen to lend to foreign buyers due to a new law obliging them to charge the mortgage in the buyer’s home currency if the exchange rate has fallen significantly against the euro. Britain is one of nine EU countries affected along with Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania and Sweden.
• Regularisation of Properties: One of the first acts of the new Junta in Andalucia, was to change the local regulations permitting owners of houses built on illegal land to ‘regularise’ them – not making them officially legal but taking no action providing they comply with building regulations. However, this ruling has been appealed to Spain’s Supreme Court by the National Government itself and environmentalists who believe it will encourage illegal development in the future.
In the next issue, Campbell Ferguson hones in on local property trends
