Spanish urban development policies condemned by European Parliament

Yesterday at a meeting of the European Parliament Spanish urban policy was condemned for the third time by European MEPs. In particular the way the Ley Estatal del Suelo (the state land law) which came into effect in 2008 has been implemented in the Valencian Region, Murcia, Castilla-La Mancha, the Balearic Islands and Andalucía where according to a project coordinated by the MEP and environmental campaigner, Margrete Auken, the legislation jeopardises the rights of landowners during the process of urban development.

The report by the EU which demands that Spain changes its legislation was passed by 349 votes in favour with 110 votes against and 114 abstentions. Amongst the conclusion of the report are proposals for the paralysis of the concession of certain EU funding to Spain and the suspension of all the Programas de Actuación Integrada (PAI) that contradict EU directives on environmental protection and public contracts.

The EU report condemns urban development carried out by Spain which violates multiple EU directives and asks for a moratorium on all urban projects. It also suggests the possibility of suspending EU funding to Spain and even puts forward the possibility of suspending Spain from the EU for not respecting the European Convention on Human Rights.

The EU also asks for the abolition of the controversial figure of the urban agent which is regulated in the Valencian Urban law and which was later adopted by the rest of Spain (see EU homeowners and ambassadors challenge Valencia's land law and Valencian land laws debated in European Parliament .

Drop in sale of new housing in Spain

Drop in sale of new housing doubled in January

According to figures published by the Spanish National Institute for Statistics house sales dropped by 38.6% in January compared to the same month last year. During January only 37,931 transactions were recorded which means that the last three months have seen sales drop to historic levels although sales were up by 17% compared to the figures for December 2008 - the worst since the crash in the housing market. Despite this slight improvement the sales of new housing has continued to fall compared to a year ago and the decrease in sales has almost doubled from 14% recorded at the end of 2008 to 29.1% in January 2009.

These figures are significant because they signal that the crisis in the housing market is now affecting new housing as much as used housing. Sales of used housing fell by 47.2% in January 2009 which is a fall of 7 points more compared to December 2008.

The difficulty of selling new housing despite reductions in prices has led to many construction companies to stop current building projects. According to sources from the sector no new projects have been started for 2 months. In fact it is estimated that there are around a million unsold new houses and flats, a figure which is expected to rise even further. The sale of private housing has fallen by 40.9% whereas the fall in the sale of subsidised housing has fallen more moderately by 12.9%.

The fall in sales and the construction of new housing has also had a knock on effect on the price of urban land which has up to now been the most expensive aspect of new building projects. The Housing Ministry published figures today that show that the price of a square metre of land fell by 10.5% in the last quarter of 2008 to 248 euros compared to the same period in 2007. This fall is in line with the fall of 9% in the price of private housing according to the property evaluators Tinsa.

Compared to the last quarter of 2007 the price of urban land has fallen the least in areas which have more than 50,000 inhabitants (1.2% to 632.5 euros). However prices have fallen more in areas with between 5000 and 10,000 inhabitants (6.3% to 191.4 euros) and even more in areas with between 1000 and 5000 inhabitants (11.7% to 129.3 euros). However, prices have dropped most significantly in areas with between 10,000 and 50,000 inhabitants with a fall of 14.6% to 278.7 euros.

At the close of last year the price of urban land was most expensive in areas with more than 50,000 inhabitants, namely Madrid (1,081 euros), San Sebastián (996.9 euros), Alava (989.1 euros) and Barcelona (915.8 euros). On the other hand the lowest price of land was recorded in Jaén (268.3 euros), Segovia (387.6 euros) and Cáceres (395.6 euros).

Fall in value of Spanish property

API estimates that property prices have fallen by up to 40% due to slump in sales
According to Santiago Baena, the chairman of the association Agentes de la Propiedad Inmobiliaria de España (API), the price of property in Spain has fallen by 40%. This figure is far from the official figure of -3.2% provided by the government. Furthermore, the fall in sales has led to the closure of 50,000 Estate Agent’s in Spain.

During the opening of the fifth national conference of API which is taking place in Logroño this week under the slogan ‘The Key to the Future’ Baena said that prices had adjusted enormously and that now was the ‘moment for buyers not for sellers’.
Cristina Thomas, the general secretary for the Ministry of Housing, also spoke at the conference. She said that property sales had fallen by 32% in 2008 but that she was confident that these figures would start to get better over the next few months.

She said that the government was trying to ease the effects of the slump in property sales by combining the interests of constructions companies and property promotors with thousands of citizens who aspired to own their own homes through the State Housing and Rehabilitation Plan 2009-2012.

She also asked the financial sector to help the Ministry of Housing put their plan into actions. So far no agreement between the government and the banks has been reached over the availability of finance for those wishing to take out mortgages under the government’s proposed Housing Plan.

Some Spanish banks require owners to pay for devaluation of their property

Banks force property owners to pay for the devaluation of their properties

Although Spain’s mortgage market cannot be compared to that of the US where subprime mortgages caused the ruin of many banks, consumer organizations did complain that during the recent property boom banks in Spain were too relaxed in conceding mortgages. In fact they even suggested that some of the practices followed by banks were abusive. Now thousands of people who now find themselves unable to pay their mortgages could be forced not only to hand over the keys to their property but also be forced by banks to pay the difference between the value of their property when they bought it and its current value.

For example according to reports in the press today, one property owner who bought his flat three years ago in a suburb of Madrid borrowed 244,000 euros from the bank. However last year he became unemployed and the bank repossessed his flat. He said that the bank said that it was intending to sell it at auction for 150,000 euros and that he was responsible for paying the difference in value (just under 100,000 euros).

In Spain the banks say that Spanish law is not the same as that for the US where handing over the keys to a property cancels a mortgage. A spokesperson speaking on behalf of banks said that in Spain a mortgage holder is responsible for paying for the difference in value.

A group of families from Barcelona have formed an association called Afectados por la Hipoteca, which reports these types of practices followed by the banks. Its spokesperson, Ada Colau, demands that the authorities force banks to renounce their part of the debt so that those affected can keep their property at the price of subsidised housing.

The chairman of the Asociación de Usuarios de Bancos, Cajas y Seguros (Adicae), Manuel Pardos, says that two years ago banks and building societies conceded mortgages for more than 80% of the value of the property in order to cover other costs. He said that then valuation was often inflated and now it is often undervalued. In fact, according to Adicae, 65% of financial institutions were conceding mortgages for 80% of the value of the property as little as one year ago.

Spain's housing policy criticised in UN report

UN report criticises Spanish government’s housing policy

Reposessions in Spain could increase by 194% compared to 2007 according to a report compliled by Raquel Rolnik on behalf of the UN. Rolnik, presented the report yesterday in Barcelona before its presentation to the UN today. She exlpained that the increase in repossessions could mean that as many as 180,000 families might find themselves in a position where they could not meet their monthly mortgage repayments and therefore as a result lose their properties.

The report questions housing policy in Spain and other European countries over recent years saying it had only served to stimulate the purchase of private property. Rolnik explained that ‘the right to a place to live is one thing and the the right to private property is another’. She said that states had converted the right to private property into the only option available and that housing had ended up being considered as an investment or business opportunity.

In her opinion ‘housing is a consumer product that only works if credit is available’. She went on to say that ‘over the last few years mechanisms had been invented so that people who did not fulfill the necessary criteria could enter into this circuit’ until a point had been reached where the ‘bubble had burst’.

Rolnik explained that the crisis should force governments to review and rectify their housing policies ‘because it was not possible to continue injecting thousands of millions into banks and forgetting that there are many large groups of people that cannot gain access to a place to live’. She said that it would be easier and cheaper to help these groups to pay rent during a period than not to build subsidised housing. She cited the example of Germany and also Manhattan where for 30 years a third of all new housing has been destined for rent at subsidised rates in order to help people with limited economic resouces.

In contrast, Rolnik said that ‘the proposals put forward by the Spanish government aimed at helping tenants served more to deregulate more than regulate in a way that protected property owners more than tenants’

Source: El Pais

Resale of respossessed homes in Spain

Spanish savings banks create a joint company to sell repossessed houses and flats at reduced prices

Ahorro Corporación Soluciones Inmobiliarias (ASCI) is the name of the company created by a group of savings banks in order to try and solve the problem of what to do with the increasing number of houses and flats being repossessed by people unable to meet their mortgage payments or by building promotors unable to pay loans taken out to finance building.

Just over half of all Spanish savings banks have decided to participate in the initiative which does not include Spain's two largest savings banks, La Caixa and Caja Madrid. The company's assets have been valued at more than 3000 million euros. These assets consist mostly of new flats and houses which are in the process of being built together with land. The idea behind the creation of ASCI is to reduce the risks that the banks have to take when managing these assets.

The Chairman of company has told the Spanish media that the ASCI did not constitute ‘a bad bank with toxic assets’ although the property assets that the savings banks have transferred to the company have now disappeared from their balances as such and have been automatically converted into shares.

ASCI will become the largest association for selling and renting property in Spain due to its access to the network of over 17,000 branches belonging to its members. The company announced yesterday that discounts of around 25% would be applied to already completed properties.