Property Focus

Moraira Property Update Aug 2014

Over the past twelve months we have had various reports that housing prices in Spain have almost bottomed out and even more so along the Costa’s and that in 2015 prices will start to rise by 2% for that year, as an average. Obviously these statements deal with the overall data which
are also broken down into the most successful regions and leading the way is the Valencia region with 13,436 properties sold to foreigners during the last quarter of 2013. That equates to a third of all property sales in Spain!

On a year to year comparison there were 16,619 properties sold to foreigners during 2013 compared to 13,793 properties sold in 2012. This
equates to a 17% increase. In addition the total sales figures increased for the same period by 11% to 1.7 billion euros. That’s 102,292 average sales price per property.

In 2013 Alicante province achieved the majority of sales with 13,736 properties sold to foreigners. That’s a whopping 83% of the total regional market. The rest were divided by 11.7% for Valencia and 5.3% for
Castellon. Nationally resale properties were more popular than new build
properties. The British lead the market acquiring 13% of all sales. It was 40% back in 2008!

Russian sales have been increasing each month and Scandinavian, Algerian and Belgian buyers have also taken a substantial slice of property purchases. All this sounds like good news and yes sales have been good and everyone likes to talk it up, however, this kind of news also gives false hope and raises expectations of where the market is actually going.

Sure there is more confidence but there is a problem that seems to be
unreported and that is the bulk of purchases made have been at the bottom end of the market, mostly under 350,000 euros. So much so, the spike in sales, especially in Moraira & Javea, has absorbed pretty much all of the property stock that had been hanging around for years which stood a chance of a sale. This increase in sales is because those vendors have had to negotiate way beyond their comfort level, in most cases, in response to the bulk of budgets buyers have had. This then leaves a growing problem which all agents are experiencing to one degree or another right now. And that is where do they find the property stock to fill the hole created by the recent spike in sales. How do we manage the expectations of the seller with all this so called good news and false hope?

Due to this false hope, some vendors are seemingly increasing their prices or standing firm on negotiations on properties that by large were overpriced for the market to begin with, hence still not sold. The phrase “shoot yourself
in the foot” comes to mind and this could potentially throw the market backwards if this becomes common practice.

Unless we see a massive increase in budgets soon, the reality is that the problem still remains the same. And that is the bulk of buyers do not have a budget over 350,000 and many of these have under 200,000 hence the recovery at the bottom end which the statistics prove. Added to this the 13% cost to purchase and then cost to modernise the mostly dated condition of properties at these price levels, it becomes too expensive for most.

Budgets may or may not improve over the coming years but when they do it may only be marginally as it’s an ageing market and most do not want debt or big villas to maintain. Rather they downsize at home and keep some capital back for an easy maintained property/life in Spain. Consequently the vastly overpriced middle bit, typically anything over 500,000, will remain a difficult price band, unless it’s amazing, whilst the top end with at least some wow factor always seems to tick along. So unless the bulk of the middle market has a significant price drop or budgets increase accordingly, it’s going to continue to be very difficult to manage the expectations of foreign buyers. For all the positive news we read about, if there is little stock that can satisfy the bulk of demand or budgets can’t be increased to a level that’s acceptable, it could be stalemate for an unknown period of time.

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Posted by on 08/22/2014 10:39:00

Spainish Property Update Nov 2013

Statistics released by the Central Government Public Works on property purchase during the second quarter indicate a resurgence of interest in buying property in Spain. Figures demonstrated an increase in sales in five of Spain’s 18 autonomous regions. The province of Alicante saw a total of 3,543 properties purchased making it the most popular province.

Interestingly, 54% of buyers in the province of Alicante came from abroad compared to a national average of 17% across Spain. The British are the principal buyers, mainly retirees, followed by Belgian, French and Russian purchasers. Furthermore, according to figures from the National Council of Notaries up to June 2013, 70% of the homes purchased in Spain were paid for without mortgages, whereas, prior to the economic crisis only 37% of Spanish homes were bought with no loan. One reason for this adjustment can be attributed to the lower prices of property since the economic crisis. Indeed, a study conducted by the Pompeu Fabra University revealed some areas of Spain have seen price reductions of up to 50%. These price corrections have stimulated investors to consider property as a viable option when planning their financial future. You will see that this graph clearly indicates what has been happening since the property crisis in Spain. Spanish Property Sales graph 2006-2012

There has been a change in the financial tide and as the banks lose both trust and credibility, investors are beginning to modify their attitude and behavior towards their investments. In addition, the precarious state of stocks and shares has left investors facing the challenge to find the foundation for a more resilient investment. Furthermore, the ridiculously low interest rates currently offered to savers leaves no doubt that a more constructive approach to investment is required. In short, the lost rapport, damaged trust and jaded attitude towards traditional avenues of saving and investing has resulted in a revolution as individuals search for a healthier return on their money.

The emerging savvy investor is recognising the value of a tangible investment. For example, in Moraira and Javea you can purchase a stunning 5-6 bedroom villa in a prime rental location for around 483,000 to 647,000 euros including the 12.5% purchase cost. The historical income of a property of this nature is around 40,000-50,000 euros gross, per annum. Or perhaps you could consider a property with four bedrooms offering an income of 25,000-30,000 euros annually for a purchase price of circa 400,000 euros.

The highly desirable areas of Moraira and Javea offer unspoilt resorts with beautiful coastline backed by spectacular mountain ranges. The wealth of charm and tradition is maintained by strict conservation rules ensuring the area remains unblemished. Attracted by the sun-soaked, fun-filled promises of the Northern Costa Blanca area visitors are also treated to surprisingly stunning countryside with dramatic landscapes, green vineyards, almond groves and orange orchards. A short drive from the coastal towns leads you to between craggy mountains dotted with traditional white-washed villages. Follow the narrow mountain passes and head high to be rewarded with breath-taking views. As you ascend you may be lucky enough to discover, nestling on the mountain side, traditional family run restaurants offering simple delicious food and wine menus to satisfy the hungry traveller. These unique experiences along with one of the best climates in the world offering 300 days of sunshine each year ensure visitors repeatedly return to the unspoilt area of North Costa Blanca.

In order to maintain a healthy return on your investment you will need to consider how to manage the property. Some owners choose to hire a property management company who offer a complete package acting as the lynchpin between property owners and rental guests. They take responsibility for advertising, bookings, maintenance, cleaning and pool care. A reputable company will offer good service resulting in repeat bookings. A letting agent of this nature typically charge 30-40% for their service. On a property costing 438,000 as mentioned above, this offers you an income of around 24,000-28,000 euros, a return on investment of 5-6%. Alternatively, you could maximise your return on investment, increasing it to 7-8% by choosing to orchestrate bookings and advertising yourself. There are many small businesses in the area that you could arrange to take care of the changeover and pool care.

The chances of capital growth in the highly desirable Javea and Moraira area is very realistic. Prices have now stabilised and inflation alone will guarantee growth in your investment. Furthermore, vendors are pricing their properties realistically and are willing to negotiate. Javea, Moraira and the Bennisa Coast have sustained reasonable property sales throughout the crisis. The outlook is positive for this beautiful area of the Northern Costa Blanca.

If you are considering a purchase there are a number of elements to consider. For example, a north facing villa may rent well but if in the future you wish to sell it, you risk excluding Northern European buyers as they crave sunshine all year round. Engaging the services of a professional property investment advisor will ensure all gems of information are brought to light. By covering the complete market of properties available they will be able offer you the much needed insight and reveal the excellent opportunities available.

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Posted by on 11/16/2013 18:51:00

Rental Income targeted by UK Taxman

Worldwide tax authorities are trying
to increase tax revenue and income from renting is coming under close scrutiny.
If you are the owner of a property that is rented out, whether the property is
in Spain, the UK or somewhere else, you need to ensure that tax is being
correctly calculated and paid.

It’s not hard to make mistakes,
especially if the property is located in one country and you reside in another.

In the UK, HM Revenue and Customs
(HMRC) reckons that some £500 million is lost each year through tax
underpayment on rental income. It has launched a "Let Property Campaign” to
encourage landlords to put their declarations in order, whether errors have
been made genuinely or income has not been declared deliberately. The campaign
covers UK resident landlords, and includes holiday lettings abroad in countries
like Spain.

In a recent press release, HMRC
declared "HMRC will use information it holds about property rental in the UK
and abroad, along with information already held on HMRC’s digital intelligence
system Connect, to identify people who have not paid what they owe. For those
that fail to come forward, higher penalties – or even criminal prosecution –
could follow”. Well, there seems little doubt about HMRC’s attitudes there.

Undoubtedly, there is an
ever-increasing exchange of information, so you can expect UK authorities to
find out about Spanish property and vice versa. Certainly, co-operation with
tax collection will occur between UK and Spanish tax authorities.

So what are your tax obligations if
you are a UK resident who owns a Spanish property?
As a UK taxpayer, you
need to declare Spanish property rent on your annual UK tax return. Expenses
can be deducted. Any gains on sale need to be declared and taxed in the UK.
Overseas property must also be declared as part of your estate for UK
inheritance tax purposes.

In Spain, rental income from
property owned by non-residents is taxed at 24.75% (on net income after
allowable expenses for EU residents).

If you do not rent out the property,
or when it is un-let, a notional income is deemed to arise and tax is due on
this. When you sell the property, you will pay tax on the capital gain under
the savings income regime, at rates of between 21% and 27%.

The net equity value of the property
is currently liable to wealth tax if valued at over 700000 euros for
individuals and 1400000 euros for couples owning in joint names. A mortgage can
reduce its taxable value.

The property will be subject to
succession tax, and that can be expensive for non-residents in Spain.

UK and Spain apply their own tax
rules so the taxable amount is different in each country. You do not have to
pay tax twice, however. You can offset the Spanish tax paid, against the UK
liability, to avoid double taxation. If the UK tax is higher, further tax will
be due in the UK. If the UK tax is lower, you do not get a refund for the
difference.

This has looked at Spanish rental
income and gains for UK residents, but there will be similar tax considerations
if you are resident in Spain and own a UK property. If that is the case, you
are urged to take advice from an expert who specializes in both Spanish and UK
taxation.

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Posted by on 11/15/2013 10:30:00

buying insurance online if so take care

Undoubtedly, people are increasingly
opting to shop on-line for insurance on-line, to cover our cars, holidays, homes
and phones. Indeed in the past year some 75% of new car insurance policies were
bought over the internet. Certainly, comparing prices on-line can save hundreds
of pounds, but there are a number of traps that we need to be careful of.

The rejection of insurance claims is
on the increase because of exclusions or escape clauses that were never spotted
by the policy holders. They simply went for the cheapest deal.

A big mistake people when buying
on-line is to think it will save time – but remember, you are trying to so the
same job as an insurance broker, so you should carry out all the checks they
would carry out.

Keep in mind that if you make the
wrong decision, your claim could be turned down, costing you many thousands of
pounds. If you want to save time, then use a broker, and let him do the work
for you. There’s nothing wrong with consulting a comparison site, as long as
you ensure you are comparing like for like, because the levels of cover can
vary greatly.

Insurance experts seem to agree that
buying on-line can give greater access to information and allows consumers to
compare products conveniently. However, all too often a consumer will just jump
at the cheapest product.

A spokesman from the Financial
Ombudsman Service warns that cheaper does not always mean better. He also urges
you to look at what the insurance does not cover.

So, how can you best protect
yourself?
First ensure you really know who you are actually buying from and
whether or not they are regulated – otherwise, they could just run off with
your money. Somewhere on the company’s web page should be the confirmation of
regulation by the Financial Conduct Authority. Take care to note if it also
says it is the appointed representative of another company. If so, this means
the other firm, is responsible for complying with the law. So, in that case go
to their website and check for FCA regulation here too. Then, look the
organization up on the Financial Services Register, to make sure it is what it
says it is. You can check them out on fca.org.uk/register  However, it’s not simply enough to know
who’s selling you the policy – you’ll also want to know who’ll pay up if you
want to make a claim. This will be the underwriter, the one who may turn down
your claim and to whom you may need to complain.

Generally it‘s the seller of the
policy who’s responsible for ensuring all is clearly explained and all the
major terms and exclusions are highlighted. It’s the underwriter who decides
whether a claim should be paid.

Look at the phone numbers of all the
firms you are planning to deal with – do you really want to call an expensive
0870 or 0844 number every time you speak to them? If there’s no contact number
shown, or the number shown remains unanswered when you try to make contact –
then go elsewhere.

Next, make sure you know how much
the excess is (the amount of each claim you will have to pay yourself). Some
car insurers often have compulsory excesses on top of the agreed voluntary
excess – making the total excess over £500. Additionally, some firms may limit
your access to a hire car if yours is out of action, or insist you take a much
smaller car then your own insured one.

Ensure you disclose everything, even
speeding offences, when applying for car insurance. Failure to do so may result
in a blue pencil going through any future claim. Be as diligent in your check
for exclusions on all kinds of insurance. In the case of medical insurance,
declare existing medical conditions on all those to be insured, and be frank
about any treatment, scans, or referrals in the pipeline. Holidaymakers may not
consider hang gliding or snorkelling to be extreme sports – but some travel
insurance policies do, so please check carefully.

Check too on personal possessions
limits. Will the policy include or exclude jewellery or a huge flat screen TV or
hi-fi or computer equipment? Additionally will the policy provide a new replacement
or reduce the value for wear and tear?

Finally, your job as a consumer is
to read the policies when they arrive, and not just toss them in a drawer
somewhere.  Read them carefully to make
sure they say what you expect them to say following your pre-buying research.

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Posted by on 11/11/2013 18:54:00

Whats the chance of renting your property in Moraira

If you have a property in Teulada-Moraira – perhaps it’s a holiday home that’s vacant for much of the summer – and you would welcome the chance to defray some of the costs of ownership – then all available statistics suggest that the renting of your property is a real possibility for you.

The occupation rates for Teulada-Moraira were higher than those of 2012 – 93.33% in August, up from 87.48% last year and 80.44% in 2011. In July this year it was 73.3% versus 71% in 2012, and 64.41% in 2011. The June figures show no major change – the 52.25% of 2013 was slightly lower than the 55.76% of 2012, but up on the 46.11% of 2011.

In June, July and August this year a total of over 15000 enquiries were made at our Office of Tourism by over 7000 people. This far exceeds the number of previous years. Undoubtedly the new Town Hall location is a factor in the increase, but so is the larger number of visitors to Teulada-Moraira.

It’s interesting to note that French tourists were the most common this year, followed by the UK and Germany. There were lots of newcomers from Eastern Europe and Scandinavia, and it was good to see a surge in Spanish visitor numbers, many from other parts of the Valencian Community. Clearly owners need to take this into account when planning the marketing of their property to attract renters.

Local mayor Antoni Joan Bertomeu declared himself to be very happy with the tourism results for 2013, but pledged more effort to continue the trend during the next year. He also declared that new leisure alternatives would be put in place, to allow visitors to enjoy Teulada-Moraira all year and not just in the summer months.

The Town Council is working on a series of projects to make the area an even more attractive proposition to visitors. For example, a lot of money is going into a local street repair programme – 100000 euros to be precise. Not only will the improved road surface be better for our elderly motor vehicles and people, but it will continue to upgrade the appearance of the holiday resort of Teulada-Moraira.

Then, in an area called La Sabatera, a 5000+ square meter plot of land is being developed as a green zone. Rustic wooden benches will be installed, and a railing will be finally positioned around the perimeter, after pine and carob trees are pruned back. All this activity will give citizens and visitors a place to picnic and relax alongside nature.

Last but not least, a campaign to remove rocks from L’Ampolla beach is underway. These rocks and stones are a nuisance for bathers, and the initiative is designed to make bathing there a more pleasant experience in the summer and the rest of the year too.

So it does seem that visitor statistics and the council’s investment in improvements to the area, make the renting of your property an excellent possibility, providing it is well marketed.

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Posted by on 10/23/2013 17:07:00

Spain and offshore Assets

Like most governments in such difficult economic times, the Spanish government is trying to increase tax revenues and has firmly set its sights on offshore assets. There is nothing wrong with owning assets outside Spain, but you need to ensure you declare them according to the rules of Spanish legislation.

 It’s clear that there’s an international move towards the automatic exchange of information, and without doubt, that will provide governments with much more data on undeclared or misrepresented foreign assets and income. The G5 (Spain, UK, France, Germany and Italy) has announced a pilot scheme for the multilateral, automatic and standardized exchange of tax information.

Additionally, in September, the G20 agreed to the introduction of the automatic exchange of asset information, so it does seem to be only a matter of time before details of undisclosed foreign assets will be uncovered

Some people who meet Spain’s residency criteria, do not declare themselves for tax. The tax agency (Agencia Tributaria) has been cracking down on this. They are known to be looking through utility bills and studying lists of foreign children registered in local schools. Then, there is evidence that the tax authority is using information from abroad, and is writing to residents suspected of having undeclared funds abroad.

The Voluntary Disclosure Procedure was a tax amnesty, available last year, designed to encourage taxpayers to regularize undeclared assets. The Agencia Tributaria is now following this up, asking for proof of the source of funds or clarification on discrepancies with data already on file.

In October 2012, the government introduced its new anti-tax fraud law. Included in this, was the obligation to report assets held outside Spain, using Form 720. Speaking in May, Prime Minister Mariano Rajoy said that over 130000 taxpayers had submitted Form 720, declaring assets worth 87 billion euros. However, the Union of Tax Inspectors (GESTHA) reckons the is a derisory number, since there are around 2.6 million foreign residents alone – the group most likely to have overseas assets.

Clearly the taxation of Spain’s foreign residents has been given a lot of effort. It’s doubtful this effort will lessen. Consequently, this raises the question whether or not it’s worth UK nationals moving to Spain, given all the tax increase measures being put in place.

Undoubtedly the answer is a resounding "Si” . However you are advised to acquire some professional advice on taxation in Spain, relevant to your particular circumstances. 

 

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Posted by on 10/21/2013 15:07:00

Energy Performance Certificate In Spain

As
from the 1st June 2013 every domestic property for sale in Spain will require
an energy performance certificate (EPC) which is regulated by the EC directive
2002/91/EC.  In Spain it is known as the
Certificado de Eficiencia Energetica (CEE) and is valid for ten years. The EPC
has its roots in the Kyoto Protocol which was a worldwide initiative started in
1997 to address the issue of Greenhouse gases and forms part of the ‘Energy
Performance of Buildings Directive’ (EPBD)

The
EPC provides information on how to make your home more energy efficient to
reduce carbon dioxide emissions. The test measures the efficiency of the
property as a whole and all energy consuming elements that are integrated
within it. The ratings are scaled from A to G, ‘A’ being the most efficient
and  ‘G’ being the least.

The
report will advise on how to improve the energy efficiency of the property in
at lest two ways. Improvements are voluntary not mandatory but could save you
substantial cost in the longer term. Insulating your home for example would
keep you warmer in the winter and cooler in the summer thus saving fuel cost.

Property
for sale

If
you intend to sell your property you will need an EPC before it is advertised.
For properties already for sale, you will have seven days after the 1st June
2013 to prove that you have applied for the certificate and then you are given
a 21 day extended period to obtain the EPC
You can of course obtain one beforehand. All estate agents are required
to show the EPC rating on their details. Failure to obtain the EPC could result
in a fine for both the vendor and estate agent, ranging from 3000 – 600,000
euros!   If a sale is agreed without the
EPC, your sales contract could be declared void and your purchaser can demand
compensation for not being informed about the properties energy efficiency,
especially if lawyers have been engaged.

Notaries
are also obliged to request the certificate when signing over the property.

If
your property has been insulated and double glazed, once tested, it should have
an excellent energy efficiency rating. This will be attractive to prospective
purchasers. On the other hand, if you have a poor rating, it could work against
you.

Rental
property

This
new law also affects properties for rent. A certificate will be required for
any let that consumes at least 25% of the annual energy consumption. This
applies to short term holiday lets as well! This short term letting is
obviously very difficult to police and many will choose to ignore the
requirement. If you advertise for longer term lets

(min
4 months) the certificate will be required. If you already have a tenanted
property, you do not require a certificate unless you get a new tenant. The
laws says that new tenants have the right to know the energy consumption of the
property they rent. Failure to provide the EPC means you can be fined 3.000 to
600.000 Euros by the Spanish government, your rental contract declared void and
your tenant can demand compensation for not being informed about the properties
energy efficiency.

If
you rent out your property through an agent, either you or your agent will need
to get a certificate for your property. An agent will not be legally allowed to
offer your

property
for rent or sale without a certificate. The law assumes that most holiday lets
that are being commercially advertised will consume more than 25% of the annual
energy used.

How
do I obtain an EPC

Only
a qualified official energy efficiency certifier can perform an EPC test.

The
building inspector will collect data from the building as follows:

1.Measurement of walls and windows and orientation, North, West,
East , South.

2.Composition of walls, cavity wall, insulation, materials.
Composition of windows, doors, double or single glazing.

3.Composition of roof, floors and foundations in contact with
the ground.

4.Solar control devices, porches. awnings, overhangs or shadows
that can affect the building excluding trees.

5. Installations, boiler, air conditioning, heating system,
solar panels etc..

The time it takes to collect all the information depends on many
factors. One hour for a simple one level property of a small size but longer
for a larger property on more than one level.

Other considerations also include, when the original property was
built, if it has been extended over recent years. This
data is then in-putted into a special program, which can then provide an energy
efficiency / carbon emissions rating. This is a quick process but may take
several hours subject to the complexity and amount of data being processed,
after which a certificate should be issued promptly.

If
you make changes to your property that help improve your rating, you can have
your property re assessed at any time during the period your certificate is
valid.

This article has been written by Anthony Bloom and may be used with permission only.

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Posted by on 04/24/2013 15:24:00

The Spanish Property Crisis 2013

During the final boom year of 2006, over one million
properties were sold in Spain which on reflection, was quiet remarkable. Those
were the days of easy lending, which fuelled demand and inflated property
prices.

Since the end of 2007 to 2011 the property market had suffered a price correction, which has resulted in a 25 – 30% price reduction across
the board. Many properties were sold during that period regardless and 2011 was a very good year for property sales
by comparison to the previous four.  2012 was slightly down
on 2011 but there were still three hundred and twenty thousand properties sold
in Spain during 2012.  It may be a third
from the heights of 2006 but still far from dead, which the media would have
you believe.

In contrast to the doom & gloom reports, the region of
Valencia has seen excellent property sales for 2012 and Javea/Moraira in
particular has continued to attract many northern Europeans.  Property sales so far in 2013 have been
exceptional as more people seem to be reducing their financial exposure to the
banks as well as other non performing financial institutions. It will be
interesting to see the official figures at the end of the year but the message
we hear daily from prospective purchasers, is loud and clear, they all have a
mistrust of the banking system, especially when the EU can request a nation
like Cyprus to rob from personal savings. That is a very unsettling thought for
savers, regardless of where you live in Europe.

Throughout the crisis, we have seen an annual reduction in
property prices and this reduction varies significantly subject to location.
For example in Torrevieja Costa Blanca South, we have seen prices fall by as
much as 70% on some of the mass developments built for a given price but the
more bespoke properties in that area have not suffered anything like this, circa
40% at most.

Many of those mass developments still remain empty, even
though you can buy a relatively new three bed villa for 65,000 euros and
less.  This dire situation basically
makes news headlines and by association gives the property market, for the whole
of Spain, the doom & gloom people read about.

Many of the “new unsold” properties you get to
read about which the government/banks are trying to off load are in  areas like this, all the way down to the
Costa del Sol. This kind of news, drives uncertainty and fear into any
prospective buyer. Consequently today’s buyers are cautious because property is evidently not
the investment it used to be. This whole mind set takes time to come to terms
with as most of us have historically been conditioned to the contrary. The fact
is, we all have to adjust and mange our expectations better. Ultimately this
means big reductions if you want to sell now. It’s no different for me writing
this stuff and it’s a bitter pill to swallow.

Not too bad if you buy again in Spain but if you are going
back to the UK, most have to scale down considerably from their Spanish villa
in the sun.

The northern Costa Blanca, specifically Moraira & Javea
has suffered a 25-30% correction in prices since the boom year of 2006. This
has meant some excellent bargains for the buyers living within the euro zone.

For the Brits, whom have historically been the major buyers
of Spanish property, they have not really seen a significant price reduction in
real terms, due to the loss of value in GBP Vs Euro.

GBP has lost circa 30% since 2006 against the Euro.
Consequently the demand from the other euro zone nations has increased
dramatically. Regardless of the price corrections, euro zone buyers still want
substantial price reductions, especially on anything that needs updating, which
is common place.

Providing the accommodation, location, orientation and plot
is desirable, quality is still in demand and sells quickly. Like most property
agents in Moraira & Javea, we are inundated with buyers looking for quality property for sale in Javea  and properties for sale in moraira at a reasonable price, unfortunately properties like that are few and far between. Consequently,
property that is dated tends to either hang around for months or vendors
eventually decide to accept a low offer to sell it, usually on a reluctant
“needs must basis.”  In many
cases this price erosion process takes three years or more. During which
time  fair offers often get rejected
only to be reduced even lower than this a year later but still behind the
reality of price reductions as other sellers have also become more realistic
with pricing relative to the actual demand.

Moraira & Javea Villas for sale.

For the majority of buyers around, regardless of
nationality, their expectations often exceed the available property stock
within their budget range. In many cases, middle ground can be found but this
means compromises for both buyer & seller. The properties that are
realistically priced amongst all others keep selling and are always in big
demand.    Good affordable property
stock is very hard to find, as most of the properties for sale are still vastly
overpriced for the condition and location they are in.

In our experience a lot of villas priced at 295-395,000 euros tend to be 50 – 100,000 over priced compared to some of the better quality ones available at this price level. So unless a property has been completely renovated to a high standard and situated in a good
location, many are still too expensive for today’s prudent buyer. Many have had price reductions but unfortunately do not reflect what’s happened to the market.

The price reality gap between buyer and seller is still
significant but not as bad as it has been in the past for this area.  That said, prices still need to come down on
many properties for them to stand a chance of selling. For those that really
want to sell its easy to find buyers, providing they have a desirable property
that falls within the affordability band of up to say 300,000 euros and are
seriously prepared to negotiate subject to the condition, location etc… Above
this, what would seem to be a “falling price band,” buyers get
significantly fewer. Speaking with many agents, they report that circa 90% of buyers are within
this 300k euro price band. If you add on the 11% purchase cost it’s still too much
for most.

Regardless of price reductions there are those properties
that can be very difficult to sell.

For example, if you have too many steps to get in and out of
your property, it’s getting very difficult to find buyers that will compromise
because the average buying age has risen to 50 years of age and is creeping even
higher.  This age group and beyond have
basically accrued some wealth over the years and have “real
money”  which is just as well
because banks don’t want the risk any more, other than for dumping their own
unsold poor quality repossessed stock.

For the moment the Moraira & Javea property market is
busy with many buyers looking for a deal. So if you have a property for sale and it’s not selling, there
is usually good reason as there are many buyers around and villas being sold. The longer you leave it
and hope a buyer will come along, the higher the risk you have in not
getting the bottom line price you have
in mind. If you really must sell, speak with your estate agent and get them to
give you a realistic price that will make it desirable to the buyers around
today.

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Posted by on 04/11/2013 09:35:00

Moraira Property News 2012

Property sales in the Alicante province rose by 10% in
August compared to the same period in 2011. The rise is attributed to the increase in the number of
foreign buyers.

On a national scale the buying level has also risen according
to this report and others.

Although we can not obtain figures from the notary by town,
our local experience of the Moraira & Javea property market provides a good
barometer and supports the statistics. If anything, we would say that Moraira
has seen a significant rise in property sales during 2012 compared to 2011 according to
many estate agents and independent sources. It makes you wonder what the proportion of the Moraira property sales were, relative to the increase of the regional figures announced. Such a shame the notaries
will not provide us with the breakdowns per town. We have tried but our efforts were in vain. Apparently, all figures get sent
to the regional governments statistical department, where they collate the info
by region, or so we were told. We would have thought that this information should be public
knowledge! If anyone would like to take this up and let us know, we would
really appreciate it. We think it would provide some very useful information,
especially for prospective purchasers.

Purchasers are still mostly cash buyers but there are still a few that require mortgages. The problem with mortgages recently is that the valuations are poor.

The banks simply do not want any
risk. Some of the figures they give are very hard to swallow and in no way reflect the
actual prices being achieved on the ground. A word of advice here, especially
if you want to ensure the bank can give a prospective purchaser a better
valuation, is to make sure you have any undeclared accommodation registered
before you agree to a valuation or, if possible, even offer the property for sale.

The banks can only value what is registered!  It’s going to cost you to register what has not been registered already on
completion, so you might as well get it done first and at least you will
give yourself a better sales opportunity. Yes it’s outlay now rather than later
but money well spent! It could be the difference between a sale or no sale.

There seems to be many properties with un-registered
under-builds and extensions that can not be included in the banks valuation. As
an example a villa that’s priced at 550k may only value up to 315k should the
downstairs or extension not be registered with the land registry. This value is
what the bank will base their lending upon. 60-70% mortgages can still be
obtained, so it’s prudent to be ahead of the game if you are a vendor.

If you are a purchaser willing to pay the valuation fees,
circa 400 euros, for a bank valuation, it might be a good idea to ask the
vendor or estate agent if everything has been registered before you give the
instruction to the bank requesting a valuation, otherwise you may be in for a shock when the banks give you the
figures! So before you build up any hopes, please be aware of these facts.  If it has been valued and the figures are poor for the reason mentioned, the
vendor may of course try to get it all registered to satisfy a higher
valuation, which usually takes 2-3 weeks but in the meantime you may
run the risk of someone else buying the property and then you are 400 euros worse off and
dreams shattered. So it pays to do your home work and ask the right questions.

If you require sound property investment advice, please
contact us to find out more

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Posted by on 10/15/2012 20:00:00

A small mortgage a big difference!

Even though the property market has seen significant price corrections over the past few years, they have tended to level out and hold some ground at least for the desirable ones!

It’s always a good idea to view a range of property at slightly higher prices than your budget will allow. This will help you to establish a true value, plus you never know how much you may be able to negotiate.

Even after negotiations and price reductions, we get many buyers that still need the extra 50,000 Euros!
It’s amazing what difference some additional funding can make, especially on properties under say 400,000 Euros

Buyer and seller expectations are still widely apart and even though sellers may have reduced their prices significantly, most are still willing to take a fair offer. However, there does come a point where one cannot go. Usually this is when a purchaser may see something fantastic but way beyond their budget and regardless tries their luck!

In most cases they do manage to get a substantial reduction but inevitably fall short. This is where a Spanish mortgage for a small amount could help you buy something very special. It could be a short term solution rather than take second best. You just need to be able to service the debt until you can pay it off in full should you wish to.

Cash buyers are always around and ready to secure a deal unlike anyone needing or considering some extra finance. It may well be worth your while to investigate the cost of some additional funding as it may help you fulfil a dream or acquire a property that will be a much better investment, especially if it attracts a considerable rental income.

Should this be the case, it’s better to know exactly how much you can get and at what cost as well as go through the banks means testing process before looking at properties. This means you are well prepared and ready to strike a deal. If you are unprepared and happen to find something special, chances are another cash buyer will pip you to the post by the time you get mortgage approval!

To help prepare anyone seeking a Spanish mortgage here is a simple outline of what a bank will require.
Take note that some of the figures and examples given will change but were correct at the time of writing 1st Feb 2012.

It’s also worth noting that many banks now require a physical appointment with you before you can open an account with them. It never used to be like this. However some do have banks in the UK which would suffice.

What will a bank require from you?

(Assuming you are working for someone else)

A copy of your employment contract
Three recent Wage slips.
The bank will also look at the strength of the company you work for.
Last P60 Tax return
Recent bank statement
Experian or Equifax credit report
If you have an existing mortgage they will want a copy of your payment history.
If you intend to obtain a mortgage in joint names both parties will need to supply all this information independently.
Passport copy
NIE number- you need to obtain this before purchasing a property in Spain. It’s used to pay taxes against. This can take a few weeks so it’s prudent to get one in advance.
Asset list. You need to write down a list of main assets like properties, investments and shares.

(Assuming you are self employed)

Same as above plus 2 years accounts

(Assuming you are a director of a limited company)

As above plus

Company details and registration number . Date of incorporation/ copy of certificate.
Your directorship/position and shareholding/ equity in the company. Last full set of audited accounts.
Company loans and a list of the board of directors.

For a bank to consider extending a mortgage to you, your debt to earnings ratio should be no more than 33% including your new mortgage! Credit cards are only taken into account should the debt on them be very excessive.

Usually mortgages can be extended as follows:

Non resident in Spain: Mortgage period up to 30 years but maximum age 75 and can lend up to 70% based on the minimum amount i.e. Valuation or purchase price.

You can pay off the mortgage at any time, partially or fully but you will be liable to a cancellation fee of 0.5% for the first 5 years. After that the rate drops to 0.25%.
This is governed by law and not a bank rule!

Most banks avoid interest only mortgages, so this is difficult to obtain and usually short term.

The mortgage can be for a resale property or for a new build project with a plot of land. In this case funds are given out over a period of time subject to the progress of construction.

Most banks require that you have your life insurance with them.
For the first year you must also use them for your buildings insurance. After which you are free to obtain alternative quotes but not for your life insurance as that is normally an integral part of your mortgage.

If resident in Spain you can get up to 80% mortgage for your main home, up to the age of 75, for a maximum period of 40 years. If it’s a second home this changes to a maximum 70% mortgage.

Mortgage cost (figures will vary)
A Spanish mortgage can have a fixed interest rate for its life, currently 6.1%
Variable rates are reviewed annually. Currently 1st year 4.25% then Euribor plus 2.2%
Euribor current rate is 2%. There is a minimum and a maximum on the rates to be applied. Currently 4,25% – 12%. This means that the interest rate will never be less than 4,25% (as first year) or more than 12%.
For example, if on rate review, Euribor is 1% , + 2,20 = 3,20%, regardless, the rate applied will be 4,25% as a minimum.

Initial set up fees are typically 1-2% of the amount loaned to you.

There is also a mortgage tax called ADJ and is 1.7% so you need to allow for this on the typical 10% purchase cost. Plus there will be extra notary and land registry fees for the new mortgage deed. However, if you take over an existing mortgage you can avoid the ADJ tax. See below.

Based on the above, lets say you are a non resident and wanted an extra 80,000 over 15 years.

A fixed rate of interest of 6.1% would mean your monthly payments including life insurance would be 710 euros.

If it was a variable interest rate the monthly payments for the first year would be 628.90 at 4.25%

To check the Euribor rate you can find it Here

Another option is to take over any existing mortgage on the property. Bearing in mind you will inherit the previously agreed mortgage terms, so worth studying to ensure you are happy with them. If you want to extend the term or increase the debt the bank have the right to change any previous interest rates and bring them up to date which may be to your disadvantage. If you leave all as is the terms should remain the same.

Most banks will want you to pay 20% of the amount declared at the notary and thus reducing the debt. This will not be reason for the banks to modify interest rates though.

Taking over a mortgage is called “subrogacion” doing this means you will avoid the set up tax of the mortgage deed known as ADJ (Actos Documentados Juridicos) also known as stamp duty. Banks will also negotiate or remove any set up fees if you ask them nicely!
All other purchase cost are the same and typically amount to 10%

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Posted by on 02/02/2012 11:12:00