British investors buy non-existing properties on the Costa del Sol

International network which defrauded 65 million euros from British investors broken up

The anti-corruption prosecution service in Spain has announced that it has broken up an international criminal network which defrauded 65 million euros from 200 British investors who were promised that their money would be invested in properties in the Costa del Sol.

The investigation which was given the name 'Operación Fuentespino', has led to the arrest and detention of two people in Malaga. Another 20 people of various nationalities are believed to be involved in the criminal network.

The law courts of Fuengirola are directing the operation which is still open. It is believed that those involved are responsible for fraud, false documentation, money laundering and crimes against public finances.

According to judicial sources investors were promised properties in various locations along the Costa del Sol which did not exist.

Major property developer Tremon goes bankrupt

Tremón Group declares itself insolvent after being unable to pay off 900 million euro debt

The property developer Tremón, has gone into administration after being unable to pay off debts totalling 900 million euros. This action makes it the second largest real estate promoter to declare itself insolvent after Matinsa-Fadesa was declared insolvent earlier this year.

Judicial sources have confirmed that around a dozen subsidiary groups belonging to Tremón will also go into administration this week among which include the well known Hotel chain group TRH. Debts owed by Tremón could be as much as 1,200 million euros.

Tremón could not be contacted to give any further explanations on the causes for going into administration. The building promoter got into serious difficulties in 2007 when it tried to get 35% of its capital by floating shares on the market. However, due to instability in stockmarkets around the world and the global financial crisis this attempt had to be abandoned.

In January 2008 Tremón had to get rid of 50 members of its board of directors due to the delicate situation in the property market. The drop in sales and difficulties getting finance meant that it had to stop a number of its building projects.

According to information from the Comisión Nacional del Mercado de Valores (CNMV) Tremón had accumulated debts of 712.3 million euros by July 2007. Out of these debts it owed 38 million to Cajasur, 76.9 million to Banco Pastor, and 65.9 million to Bancaja.

The business plan followed by Tremon would have meant that it had to pay back in the region of 1,842 million euros between 2008 and 2013.

Tremón was created in 1993 and had business interests in Poland, Hungary, the Chech Republic and Morrocco. It made a net profit of 36.5 million in 2006. The group also had plans to expand into Rumania, Bulgaria and Mexico.

Tremon has now joined the list of building promoters that now find themselves in the same situation: Martinsa-Fadesa, Llanera, SEOP, Grupo Lábaro, Cosmani, Promodico, Urazca, Grupo Drac and Restaura.

Effect of crisis on property market in Spain

The number of unsold houses rises as the credit crunch continues to affect the Spanish real estate market

According to an internal study by the Ministry for Housing the national average number of unsold new flats that are on sale per buyer out of every thousand inhabitants is 11 and this number rises to 25 in Toledo and 30 in Castellon.

The report estimates that around 502,983 new houses or flats have been on the market since 31st June, which is 21.6% more than at the end of last year. Even more worrying is that statistics tend to be unreliable in the housing sector and the real figure could be much more.

The Housing Minister, Beatriz Corredor, confirmed that in her opinion the stock of unsold new housing could rise to 650,000 by the end of this year. The housing expert Julio Rodríguez has calculated that the real figure could be as high as 800,000 and other estimates, such as that by the housing valuer, Tinsa, places this figure even higher at 920,000.

After years of frenetic activity in which 800,000 new houses and flats were built, which is more than France, Germany and the UK put together the crash in the Spanish property market has left housing promoters with the problems of what to do with the number of unsold properties on their hands. The report for the Ministry of Housing has used information supplied by 252 municipalities which represents more than 55% of the Spanish population.

According to this report the stock of 413,000 unsold flats at the end of 2007 has shot up and is now over half a million. This increase has been particularly obvious in parts of Spain such as Castilla-La Mancha and the Canary Islands where the number of unsold new housing has gone up by 30%. In places like Catalonia the number of new housing for sale has increased by a whopping 61% and in provinces such as Lugo or Segovia this figure has increased by even more (73%) in the space of just 6 months.

On the other hand, Vizcaya, Melilla, Ceuta and Badajoz are the only places where there are less than 5 unsold new houses or flats per thousand inhabitants.

Furthermore according to the Ministry for Housing property prices have gone up in inter-annual terms by 0.7% whereas according to the Spanish National Institute for Statistics prices have dropped by 0.3%.

According to Tinsa property prices have fallen by 6.5% over the last twelve months. Tinsa has highlighted that this is the biggest drop since prices began to go down 8 months ago. Therefore in line with these calculations prices are now at the levels they were in September 2006.

The biggest drop in prices has been in Mediterranean costal areas with a fall in prices of 8.9% followed by metropolitan areas (7.6%) and capitals of provinces and major cities (6.7%). In the Balearic Islands prices have fallen by 5.4% and 5.3% in the rest of Spain.

Almost all sources of information show that properties are now losing value but according to some not enough. In a report on renting Aguirre Newman, explains that prices need to drop by 23% in order for the housing sector to be reactivated. This has been calculated on the price of renting per month compared to the price of an average mortgage per month. Aguirre believes that the housing sector in Spain will become buoyant once again when the price of an average mortgage is not more than 30% of net income per month which would mean that the cost of buying would not be very different to the cost of renting.

Cheap flats in Madrid

1300 people camp out in Fuenlabrada to try and get cheap flats

Around 1,300 people have been camping out in Fuenlabrada at the doors of the civic centre where the neighbourhood association of La Avanzada has its headquarters. Whole families have been taking it in turns to keep their place in the queue and lists have been drawn up to avoid cheating – all this for the possibility of buying one of the 2,100 cheap flats that will go on sale to the public this Saturday.

The people in the queue have tents and provisions and expect to camp out there until Saturday.

The interest in the sale of the flats is due to their price. Apparently the flats will go on sale at cost price for as little as 88,000 euros for a three bedroom flat. This is five times lower than the current market price.

The promotor behind the special offer, José Moreno (also known as el Pocero de Fuenlabrada), expressed his support for those camping out in the queue and said that you have to ‘cheer on those in the queue because they are demonstrating that young people would come in their thousands to buy a reasonably priced flat’.

In response to a statement from the town hall of Fuenlabrada which distanced itself from this initiative Moreno said that the town hall and the neighbourhood association of La Avanzada ‘had never had or would ever have anything in common’.

El Pocero de Fuenlabrada has not yet confirmed the location of the flats that will go on sale on Saturday.

The cheapest house in Spain

According to an article in Cadena Ser yesterday, the cheapest house in Spain is in León in the locality of Bustarga, in the area known as the Sierra de los Ancares.

Situated in beautiful countryside it has a slate roof, the walls of the house are made of stone and the floor and beams are wooden. However, one disadvantage is that it doesn’t have electricity or running water. Nevertheless perhaps the possibility of seeing deer roam the surrounding area is some compensation for this.

The house which is currently on the market costs just 14,500 euros. It is not small either. It covers 101 squared metres and has 3 floors with 2 bedrooms, one bathroom, an ancient kitchen, a cellar and an attic. Its current owners say it is ‘ideal for weekends with family or friends’.

The most expensive house for sale in Spain

In contrast the most expensive house in the Balearic Islands and is a luxurious chalet costing 17 and a half million euros for sale in Mallorca. It has all the facilities you could wish for but lacks the rural charm of the house in León.