The next thing to hit Spanish property?

I posted back in January about the outlook for Spanish property prices in 2010 and made the point that there was a threat from the banks. Not just a continuing reluctance to lend on favourable terms, even though that is a big factor which I have seen first hand throughout the year so far. But also because the banks are getting more aggressive at getting rid of the mountain of properties they have been forced to take onto their books.

Previously they had been sitting on unsold properties because if they sold them at heavy discounts that would involve taking a loss. The Bank of Spain had changed the rules to discourage this by asking them to value their property portfolios more realistically. The fear was they would sell at any price. A client told me of a 50% reduction he got on a villa he is buying from the banks so maybe this is being borne out.

Now I read on a forum that the Bank of Spain has also told the construction companies and property developers something similar. To quote:

"The Bank of Spain (that regulates Spanish banking) has told the banks and construction companies that they must value unsold property at 60% of its official valuation (tasacion). This is important because these companies have been unwilling to sell property as discounted rates over the past few years because they have been able to put 100% of the official valuation onto their books. i.e. their unsold properties are worth more to them unsold, than if they actually sell them.

Now they have to value at 60% tasacion, this should incentivise them to lower the prices of their property and actually get them sold. Therefore hopefully (or not depending on your situation) we'll be seeing big drops in Spanish property prices in the next 12 months."

This together with the austerity measures announced and turmoil in the Cajas and the markets (Spanish stock market down 11% in May), suggests things might be dificult in the property market for the rest of the year. The austerity measures include a rise in VAT on new properties and possibly a rise in transfer tax from 7% to 8% in most areas for second-hand sales (see explanation of how IVA is charged on Spanish property on our website IVA on property sales).

Related posts and articles:

Why Spanish Property Prices Will Stay Depressed

Spain's economic crisis turns nasty

The Age of Consent in Spain

After my recent post about the age limit for seeing a doctor in Spain unaccompanied by your Mum (16 see here), I got one or two queries about age limits. I did a bit of research and collected them together in an article on the Advoco website called "They Grow Up So Fast. Age Limits in Spain".

I didn't know half of them before I began researching the piece and was more than a little surprised by the news that the age of consent was 13, gay or straight. That seems a bit young to me. Most countries around the world go for Britain's 16 or even higher:

http://www.avert.org/age-of-consent.htm

In these liberal days I suppose I should applaud the intent: to let young people decide for themselves when they are ready and leave the law out of it.

There are two arguments for having a higher age of consent though, both of which have some merit:

(1) kids are not emotionally mature enough at 13 to know what they want or to handle the responsibility and complications that come with young love. By letting them loose too young you risk more lives ruined with teenage pregnancies not too mention more STDs.

(2) young teenagers have no protection from sexual predators outside of their age group, either the classic "dirty old men" or fellow teenagers a few years up the food chain. I wonder ifall the liberal intent of parents who favour the lower limit would go out of the window if they saw a 50 year old stranger buying their 13 year old son or daughter a drink and chatting them up.

Being branded a molester is a strong deterrent for men (and women I suppose) making inappropriate advances to young teenagers and pressuring them. It is interesting to note that Jonathan King, the pop impresario jailed for sleeping with 14 and 15 year old boys in the UK, would have had the full blessing of the law in Spain.

Over on the Rock of Gibraltar there is a debate going on in a different direction: the Gib Women's Association want to raise the age of consent from 16 to 18.

http://www.europasur.es/article/gibraltar/703865/feetham/apuesta/por/incrementar/la/educacion/sexual.html

The Pain in Spain - who is to blame?

I read an interesting debate recently between leading economists about whether the Spanish economic crisis was of Spain's own making or whether Spain was the victim of failings in the Euro or of the global crisis more generally. My view is obvious from the title of the article I wrote on the subject which was published recently here: The Pain in Spain is Mostly Self-Inflicted | Alrroya

Governments love to blame international forces beyond their control for economic ills at home. Gordon Brown was a dab hand at this. But when a boom which involved a tripling of debt and house prices ends in a bust should we really be surprised? And could the governments of Spain and the UK not have stepped in to end the excesses long before their economies got addicted to debt? I think so and let us hope they don't let booms get carried away again although looking at both countries the next boom seems an awfully long way off.

History of Spain's crisis

Labour reform: fiddling while Spain burns

With 4 million unemployed, the economy practically paralysed and the public finances in crisis, something has to be done. Even if inside Spain there does not seem to be a clamour for radical action on the economy (people still in employment too comfy with the status quo and fearful of change?), the EU and the IMF are demanding reform. First came the austerity package (see post Spain's economic crisis turns nasty) and now the government is pushing through labour market reforms.

They are causing a lot of fuss. The unions are threatening a general strike over the reforms but the government has vowed to press ahead anyway (Zapatero to approve reforms with or without agreement) . They have been negotiating changes to a system which clearly does not work for almost two years now. Even with 44% of young people out of work and numerous others working in the black economy, the unions are unhappy because redundancy pay rights are being reduced.

But even if the reforms get pushed through will they make much difference? Looking at the fine print and they are not exactly earth-shattering - redundancy pay down from 45 days pay for every year worked to 33 days. Even that small reduction is only for new contracts not existing workers.

It will still be very expensive to hire and fire workers which is why so many employers needing staff get them unofficially - "sin contrato" - although they need to be wary as one of the new measures is to increase the number of labour inspections specifically to pick up such illegal practices.

The other measures in the package are mainly shuffling subsidies around and actually increasing the burden on employers e.g. by making it harder to offer temporary contracts and extending the requirement to pay redundancy packages. Full details here - Employing Staff in Spain

If Spain was serious about tackling the horrendous employment situation they need a dramatic cut in social security payments by employers and the self-employed, right across the board. Perhaps they could pay for it with an end to the 3 billion € a year they spend on subsidies for encouraging employment which clearly do not work.