Fiesta Property are the leading and most established agency on the Costa del Sol for commercial sales, especially Cafes, Bars and Restaurants for sale in Spain.
3/11/10,
Spain Sees Return of International Lifestyle Buyer
Pure investors from the UK have disappeared from a holiday home market now dominated by cash-rich lifestyle buyers, according to new research from Savills.
The report from Savills International Research and holiday lettings company HomeAway.co.uk, revealed how far the overseas property market in the UK had fallen over the last year. Just 2% of the 430,000 foreign-home owners in the UK bought their property in 2009, compared to 70% who bought between 2003 and 2008.
?By spring 2009 Savills International noted that interest in international holiday homes had returned, albeit at far lower levels than previous years,? said the report. ?The market has now reverted back to traditional, end-user buyers (as opposed to investors), and mostly in traditional, established hotspots.?
The high number of distressed sales that have contributed to oversupply and falling prices has helped keep pure investors out of the market, it added. ?In contrast to previous years, investors solely seeking to capitalise on upward price movement are no longer active in the market place.?
Savills? head of international, Charles Weston-Baker, told OPP that mid-market buyers had also started to return to the market. ?We have started to see more grassroots sales coming through,? he said. ?The very top of the market has largely been unaffected, but now end-users who are looking for lower-priced but quality property are buying to enjoy the product.
?We?ve also noticed how important sport has become to buyers, especially for baby boomers and those retiring. There?s a new enthusiasm for experiential holidays and buyers need a reason to be somewhere, such as golf or horseriding. We seem to have jumped 20 years in aging, where people are slowing down at 80 rather than 60.?
The report predicts another quiet year for the UK holiday home market, with most sales taking place to high-income lifestyle buyers in traditional locations, with little activity in the speculative or off-plan markets.
In 2009, although property in France, Portugal and Spanish property remained the most popular destinations for Savills? buyers, the proportion of people buying in western Europe overall decreased, as the popularity of central and southeastern Europe (particularly Cyprus, Greece and Turkey) and the Caribbean grew. However, the sample base for 2009?s results was much smaller than in previous years.
The proportion of people buying in major cities and in villages grew substantially at the expense of smaller towns and isolated rural locations. The popularity of purpose-built resorts also increased.
?This reflects not only the growth in preference for such developments but also the rise in quality and quantity of such communities,? said the report. Interest in buying property to renovate or improve also fell, mirroring the rise in resorts where ready-to-go homes maximise letting potential.
Savills? market has become skewed towards mid-to-top end buyers, and properties worth more than £200,000 now form the majority of purchases, with a particular fall in popularity of homes worth less than £100,000.
Positive economic signs from the UK economy allow a near-miraculous recovery for sterling after a sharp fall. Investors are more relaxed about the Greek budget problems.
Sterling fell sharply last Monday, losing nearly two cents before lunch. The remainder of the week was devoted to the slow and tedious process of recovery. Although it seemed an impossible ambition last Monday afternoon sterling opened in London this morning at ?1.11, unchanged on the week.
At the beginning of the week the non-domiciled tax status of Baron Ashcroft dominated the media. Allegedly, the noble lord had bought his way into a peerage by making large donations to the Conservative party. For some reason this old tradition had become suddenly improper.
It would be an exaggeration to blame sterling's sharp fall on Lord Ashcroft alone but the story will certainly have unnerved investors who were already nervous about the Tories failing to win a majority at the forthcoming general election.
From there it was uphill all the way but at least sterling managed to make it up the hill with the assistance of some positive news.
On Tuesday the government held a successful auction of 30-year gilts which attracted bids for nearly twice that much. The last five auctions of 30-year stock have achieved an average of 1.63 times cover so, whatever misgivings they may have about sterling's short-term future, there is a degree of confidence among investors the current problems will be short-lived.
Having ignored Monday's manufacturing purchasing managers' index (their minds were on other things) investors took a great deal of interest in Wednesday's services sector PMI. At 58.4 the services PMI was more than three points better than predicted, scoring a three-year high. It blew America's 53.0 and Euroland's 51.8 into the weeds.
Coming hard on the heels of a ten-point jump in consumer confidence it was another reminder to the market that not everything to do with Britain's economy is in a state of collapse. There was more reassurance from the Bank of England when the Monetary Policy Committee voted to keep interest rates unchanged for a 13th month and to leave quantitative easing on hold.
A rash of data provided no coherent picture of the euro zone economy. The manufacturing and services PMIs were both a little softer on the month but not far adrift from what the analysts had forecast.
Consumer and producer price inflation were roughly in line with the market's expectations but had no immediate implications for euro interest rates. A -0.3% monthly fall for retail sales was better than the expected -0.5% decline but still not exactly positive. The revision to fourth quarter GDP showed the Euroland economy growing by +0.1%.
The European Central Bank tightened monetary policy on Thursday with an end to the cheap three-month loans it had been offering to commercial banks. They will still be able to borrow one-week money at 1% but the three-month rate will depend in future on market rates.
The ECB had nothing to offer the Athens government and said it would oppose any attempt to approach the IMF for assistance. Nevertheless, Greece did manage to find buyers for a ?5 billion bond issue.
By the end of the weekend it had become clear that, although Germany would not put its hand in its pocket for a Greek bailout, the EU had an emergency plan if push came to shove.
At least for the moment investors are comfortable, if not deliriously happy, about the situation but their next question will be whether France and Germany will be able to carry the euro zone economy ahead on their own if the economies of Greece, Spain, Portugal, Ireland and Italy are to be weighed down by austerity measures of one sort or another.
Whilst sterling's recovery last week might be seen as a sign that there is life in the old dog yet, it is still hard to see the British currency as anything other than a dog. Opinion polls continue to indicate a hung parliament and investors fear that even after the general election Britain's government will be paralysed by indecision, unable or unwilling to tackle the budget gap.
Buyers of the euro should hedge 50% of what they will need. If the money is required in the near future they should consider covering the whole amount.
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Spanish Banks are slowly relaxing their lending criteria with one or two offering more attractive deals and higher LTV?s. However, banks are still being cautious when it comes to assessing a client?s affordability.
Most banks use a debt / income ratio of either 35% or 40%, although we work with one bank that uses 50%. This really helps those clients who struggle to get mortgages elsewhere due to having a higher ratio of regular outgoings on mortgages, loans, credit cards etc. to net disposable income (the ?debt / income ratio?).
The eurozone base rate has remained at 1% for some time now, meaning that borrowing in Spain is still cheap. With the recovery in Germany faltering and ongoing problems in the so-called PIIGS group of countries (Portugal, Italy, Ireland, Greece and Spain), it is very unlikely that there will be a sudden hike in rates.
With regards to the exchange rate, this is more or less the same as last month. Dual-currency mortgages are available, which allows clients to pay the mortgage in pounds sterling and avoid any currency fluctuations.
If you are buying a property for your main residence, we can offer 80% of the bank valuation. This means that if the valuation is higher than the purchase price, it is possible to borrow up to 100% of the purchase price, which is something that has been impossible during the recession.
The interest rate is as low as Euribor (annual) + 0,66% (the lowest we have come across to date), with 0,5% bank opening commission and 0% redemption penalty for partial redemption.
Another attractive option is that you can have up to 2 years? interest-only. This bank also offers remortgage products. Terms are available up to age 75 with a maximum 45-year duration. The only disadvantages with this product appear to be the compulsory insurances and that the client?s income needs to be paid into an account with the bank.
3/11/10,
We're Past the Bottom of the Spanish Property Market
German magazine Bild (equivalent to The Sun in the UK) has ruffled Greek diplomatic feathers this week. In an open letter to the Greek PM during his trip to Germany, Bild pointed out some of the differences between the two countries:
"Here, people work until they are 67 and there is no 14th-month salary for civil servants. Farmers don't swindle EU subsidies with millions of non-existent olive trees."
Bild makes its point with characteristic Sun subtlety, but news of protests in Spain, Portugal and Greece against raising the retirement age to 67 reminded me how some citizens of those countries have yet to accept responsibility for their own futures.
Spanish civil servants enjoy employment for life - it's virtually impossible to get fired. They also enjoy a 13th month extra salary - (not performance-related). Meanwhile, tax evasion is a national pastime and the tax-office (staffed by civil-servants, remember) only go after the easy targets - individuals and businesses who are already paying tax.
Spain needs pension reform, employment reform and tax reform - but I doubt whether Zapatero has the stomach or backbone for very much of that.
(Steps down from soapbox)
Mark Stucklin reports on how the Spanish property market grew at the end of 2009. It's not a massive uptick, but it's better than a further decline.
Looking at the number of estate agents advertising on Kyero.com, we reached 'bottom' during September last year. Since then the number of advertisers has steadily increased - and we're now back to the same number as this time last year.
Regarding traffic to Kyero.com, we're now over 50% up - a doubling of traffic in January and February this year compared to the same period last year.
If what's happening with Kyero is an early indicator of what's happening in the Spanish property market (and I think it is), we can expect Q4 2009 to have marked the bottom of the Spanish property market - in terms of volume of transactions at least.
The rest of this week's news centred around the fragility of the Spanish economy and I've included the most enlightening articles this week. The best, I think is from the NY Times - a well reasoned and comprehensive explanation of the challenges facing Mr Zapatero.
Tens of thousands of protesters took to the streets across Spain last night in the biggest test of the country?s Socialist Government, which is under pressure.
With a general strike threatened in the summer, the two biggest Spanish unions staged protests in Madrid, Barcelona, Valencia and Alicante.
The Union General de Trabajadores (UGT) and the Confederación Sindical de Comisiones Obreras (CCOO), are planning to stage 57 protests in other parts of the country until next week.
Unions are angry about the Government?s proposed pensions reforms which would extend the legal retirement age from 65 to 67.
José Luis Rodríguez Zapatero, the Spanish Prime Minister who recently came under pressure from financial markets to introduce measures to bring the country out of recession, now finds himself threatened by his political allies in the unions.
The protests are the first time that Mr Zapatero has faced street unrest since he came to power in 2004. Leading members of the Prime Minister?s party took part in the protests, a sign that his popularity is dwindling.
Union anger has been mounting because Mr Zapatero changed tack in an effort to convince financial markets that his Socialist Government was serious in its efforts to recover from the worst recession in decades.
Spain?s rising debt has led to concerns that it could follow in the footsteps of Greece, whose budget crisis prompted the European Union to place it under scrutiny.
Mr Zapatero announced reforms of the labour laws which have been criticised by employers in an effort to reduce unemployment which is nearly at 20 per cent.
In another move, designed to cut the deficit which accounts for 11.4 per cent of Gross Domestic Product, Spain introduced an austerity package to save ?50 million (£44 million) over three years.
The pension reform was created to ensure that the social security system remained viable. The reform has not proved popular. A recent poll in the newspaper El Pais showed that 84 per cent were against the move.
Cándido Méndez, the president of the UGT, said that he saw ?no point of agreement? over the retirement plan.
However, Angel Gurria, the secretary-general the OECD, said that the reforms were essential if Spain wanted to reassure nervous financial markets it is committed to reviving the economy and cutting the public deficit.
There was a small uptick in Spanish housing sales during the fourth quarter of last year, according to data released today by the Ministry of Housing. Small, maybe, but enough for the Government to get excited about.
?The transactions in the fourth quarter represent a rise of 4.1% with respect to the same period last year, this being the first year-on-year rise since the fourth quarter of 2006,? goes the first sentence, in bold, of the Ministry?s press release.
In fact, if you just look at the ordinary housing market, the uptick was even better. Excluding social housing there were 116,664 house sales in Q4, a rise of 5.5%. Regrettably, that?s where the good news ends.
Take the year as a whole, there 413,112 transactions last year, a fall of 19% compared to the previous year, and a whopping 46% down on 2007. Even the Q4 was down 33% compared to 2 years ago.
Some regions did better than others. Looking at a selection of regions popular with holiday home buyers, the inland province of Teruel suffered the most in 2009, down 36%, followed by Las Palmas in The Canaries, down 32%. At the other end of the scale, Spain?s two big cities did the best, down just 1.7% in Madrid and 3.9% in Barcelona.
The small national uptick in Q4 that got the Ministry excited was almost entirely driven by big increases in Catalonia and Madrid (Barcelona +35%, Madrid +41%). Why the big surge in home sales in those two cities in the last quarter of 2009? I don?t know. But I wouldn?t be surprised if it had more to do with banks shifting Spanish property around their balance sheets than families buying homes to live in.
The idea that Spain could become a target of the world?s markets, an economic basket case weighing down the euro, is a preposterous notion, but not an unthinkable one.
It?s preposterous in the sense that this is a great, energetic, creative and competent nation that in about 25 years shed a dismissive label as a cheap place for two weeks in the sun to become Europe?s fifth economy, Latin America?s biggest foreign investor, and an all-points, high/low cultural turbine producing terrific films, clothes people want to wear, exceptional food, and great soccer and basketball.
In 2010, that?s a reasonable, widespread perception.
Still, according to Fernando Fernandez, a former chief economist at Banco Santander and former official at the International Monetary Fund in Washington, ?an attack by markets on Spain would be based on some rationality.? Now a professor at IE University here, he said, ?An 11.4 percent deficit like ours is huge.?
Last week, José Manuel Barroso, president of the European Commission, and Angel Gurría, secretary general of Organization of Economic Cooperation and Development, were in town on separate missions to insist, as decorously and elliptically as possible, that Greece (whose 12.7 percent deficit and substandard accounting methods have shaken the euro), and Spain (having the confidence of its lenders and much lower debt) were chalk and cheese.
Still, Spain?s facts are scary: 18.8 percent unemployment; about half the age group under 25 out of work; ?600 billion, or $820 billion, in mortgages outstanding after the end of a construction boom two years ago; and a real effective exchange rate that the E.U. Commission says is overvalued by 10 percent.
Spanish structural realities run a along a similar track:
Productivity and competitiveness are low. The job market?s rigidities mean that two-thirds of the labor force are permanent hires, blocking a potential fall in real wages after a rise in labor costs of 4 percent a year over the last nine. To boot, the central government controls only about 25 percent to 30 percent of discretionary spending, with the rest of state revenue devolving to regional and local governments with their own notions of savings and expenditures.
What to do? The governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, says that failing ?urgent? and ?ambitious? reforms in the labor market, the Spanish economy will enter a ?tough and complicated period.? Which is a gently phrased complement to the insistent market noises saying Spain stays an attractive speculative target even if the European Union rescues Greece.
Mr. Ordóñez, who also sits on the governing committee of the European Central Bank, stressed the need for an immediate, convincing response.
The startling thing in Madrid is its seeming absence. There?s a kind of lethargy instead. No crash program with specific goals to change the Spanish economy over the next weeks and months is coming from right-wing opposition. And the Socialist government of Prime Minister José Luis Rodríguez Zapatero appears to bumble ahead confusedly, casting proposed cutbacks into the air, then reeling them back.
Mr. Zapatero himself informed an international audience of his plan to push back Spain?s retirement age to 67 from 65, which, days later, was put it into the conditional tense. The possibility of a public sector wage freeze, discussed in the press by an official last Wednesday, got buried on Thursday by Finance Minister Elena Salgado.
The government?s effort seemed as feeble as an initiative announced by the Fundación Confianza, a group backed by big Spanish firms like Telefónica, Santander and BBVA, seeking to buck up national confidence with a Web site called estoloarreglamosentretodos.org. Roughly translated, that?s togetherwecanstraightenthingsout. I tried to get onto the site on Monday morning and was shunted to one having to do with sustainable transport.
Spanish politics, frankly, does not currently seem up to the intensity of action that the country?s economic and financial circumstances would suggest ? and appears barely conscious of the implications for the world?s view of Europe if Spain were to fall to its knees.
The opposition Popular Party, which the polls indicate would run up to seven points ahead of the Socialists if national elections scheduled for 2012 were held now, gives the impression of not wanting to do anything ? proposing a cutback in social security levels, for instance ? that might spook a single prospective voter.
Mr. Zapatero, in turn, it is said, just might relish some kind of eventual E.U. involvement, guidance or assistance in enacting the tough austerity measures his constituency, notably the trade unions, would otherwise resist. In the Spanish context, where the electorate holds the E.U. in ongoing reverence, accepting what could be euphemized as a European austerity checklist could be a politically manageable way out for the prime minister.
But the game may be moving quickly outside of Spain?s grip. On Friday, the ratings agency Standard & Poor?s, far from endorsing the credibility of the government?s pledge to the E.U. to reduce its deficit to 3 percent of gross domestic product by 2013, said it thought it was likely to remain above 5 percent.
It said it expected ?much weaker economic performance? than the government expects, with unemployment remaining above 15 percent over the period. The agency also renewed its negative outlook on Spain?s sovereign ratings ?in the absence of more aggressive and tangible actions by the authorities.?
As if in response, Ms. Salgado, the finance minister, asserted that the country, which remains in recession, would grow in every quarter this year.
And ? Let the good times roll! ? sounding like someone who thought they had assurances that Spain was Too Big to Fail, she insisted that members of the euro zone ?will not stand idle if one of the member countries is in trouble.?
That was late Friday. On Monday, Mr. Zapatero doubled up on Ms. Salgado?s statement of confidence, telling the Frankfurter Allgemeine Zeitung in an interview, ?You can have absolute confidence in us. Our plan to reduce the deficit will be fulfilled.?
Then, almost in the next sentence, he added a new turn to the government?s pattern of confusion, and cut the legs off the finance minister?s timetable for Spain?s emergence from recession by as much as half.
?I am convinced,? Mr. Zapatero said, ?that our economy will be growing again by the fourth quarter, at the latest.?
The Ministry of Development has just released some statistics that help illustrate the severity of Spain?s construction boom and bust. What is worse, there is no quick solution as much of the trouble is stored up in a new homes glut that will take years for the market to digest.
The new figures show that 387,000 new homes were finished last year, despite a property market crash already into its second year. Compare this to the 220,600 new home sales recorded by the National Institute of Statistics for 2009, and you get an over-supply of around 166,500 new homes that joined the glut of new homes languishing on the market in search of a buyer.
As a result there might now be something like 1.1 to 1.2 million new homes on the market, the equivalent of the entire housing stock in Madrid. BBVA, one of Spain?s largest banks, put the figure last year at 1.1 million, to which we need to add the new 166,442 finished and not sold in 2009.
The developers? association and the Ministry of Housing are more optimistic in their estimates of between 700,000 ? 750,000 new homes on the market, but even at that level it will take years for the market to absorb.
How much is too many new homes? It all depends on how many new households start each year, as new household formation drives demand for new homes.
Last year, there were around 225,500 new households formed in Spain, down from 300,000 plus p.a. in the boom years. New household formation surged as immigrants flooded into the country and changing demographics and life-style choice (for example and increasing divorce rate) pushed up the demand for housing.
But even at the boom level of 300,000 new households a year, it is now clear that Spain was building way too much Spanish property.
In 2006, for example, there were 865,500 planning approvals, (though not all of them went on to become housing starts). And in 2007 there were a record 641,500 housing completions. Now even if you assume that demand for second homes was a generous 200,000 per year, Spain was still building something like 200,000 or more excess homes per year.
Now they are idling on the market, tying up capital, and dragging down the Spanish economy?s productive potential.
At least supply has finally adjusted to demand, though the astonishing collapse in new residential construction is creating economic havoc (a collapse in new building is just as bad for the economy as too much building).
Residential planning approvals last year were down to 110,000, the lowest level since the present data series began, and lower even than the 1970?s, when the population was much smaller.
A couple of examples will illustrate how severe the shock has been.
In Malaga city (550,000 residents), planning approvals have fallen from 7,500 in 2003 to 800 last year. And in Madrid, the Spanish capital, they have fallen from 35,000 in 2003 to 3,375 last year. That?s a drop of almost 90%. Therein lies the key clue to Spain?s serious economic problems.
Upward revision to fourth quarter economic data does sterling no favours. Germany and France consider a bailout for Greece but there are no details yet.
A two-day honeymoon took sterling from ?1.1350 to almost ?1.1450 before it set off south. Thursday and Friday were a one-way street that took it down to ?1.11 in time for London's opening this morning.
Robert Stheeman, the chap responsible for issuing UK government bonds, managed an upbeat tone when he addressed a conference in London. He said that 'politicians of all colours are taking the [public sector debt] situation very seriously indeed. Investors derive a lot of comfort that there is agreement across the spectrum that the deficit needs to be brought under control.' Mr Stheeman also suggested that a hung parliament might be 'less disruptive' than assumed. Unfortunately the market did not share his optimism and sterling spend most of the week on the slide.
The rot started, as it so often does these days, with cautious words from Bank of England Governor Mervyn King to parliament's Treasury Committee. He did not go out of his way to talk sterling lower but, by refusing to rule out the possibility of further quantitative easing, made it sound as though the Bank's printing press is ticking over and ready for more action. The governor's comments coincided with news that mortgage approvals had dropped sharply in January with the end of the stamp duty holiday.
Sterling spent the rest of the week rolling from one punch after another as investors lightened their holdings. A sharp fall in business investment at the end of last year saw investment down by 24.1% for the full year. Consumer confidence improved by three points but at -14 it still had a minus sign in front of it.
Nationwide reported a -1.0% monthly fall in house prices after nine months of improvement. Britain's overall economic performance in the fourth quarter of 2009 was revised to show growth of +0.3% instead of the +0.1% previously reported but third quarter shrinkage was also revised, from -0.2% to -0.3%. Government spending in the fourth quarter was much higher than expected.
Investors did not just ignore one part of the euro zone economic story, they ignored the lot. Industrial new orders grew in December by +0.8%, less than a third of the pace seen in November but the cumulative effect of several months of improvement took the annual increase to +9.5%.
Confidence figures from Brussels had little to say; consumer and economic confidence were very slightly softer while industrial confidence edged higher. Euroland inflation was roughly in line with expectations. Prices fell by -0.8% in January but were still +1.0% higher than a year ago.
Greece was again the main story for the euro. Even though no solid plans emerged last week, stories at the weekend suggested the emergence of a workable solution that would see the better-heeled euro zone members buying Greek government bonds. EU Economic Affairs Commissioner Olli Rehn is in Athens today, apparently to negotiate a deal whereby Greece would get the support it needs in return for taking painful decisions to reduce its budget deficit.
Although Germany's Chancellor Merkel still publicly maintains that Greece's salvation lies in Athens, not Berlin, she and other European leaders are not looking for a Pyrrhic victory that would scupper the single currency.
The six weeks that sterling spent between ?1.13 and ?1.16 have been consigned to history With opinion polls closing the gap between Labour and Conservative to almost nothing investors fear that even after the general election Britain's government will be paralysed by indecision, unable or unwilling to tackle the budget gap.
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Credit ratings agency Standard & Poor's warned Spain Friday that its weak economic growth prospects could undermine its plan to rein in its budget deficit, making a debt downgrade even more likely.
Though short of the levels being posted in Greece, investors are increasingly worried about Spain's budget deficit - and skeptical about the government's ability to push through sharp cutbacks to right the situation.
The government has announced both tax rises and spending cuts - not all yet specified - to reduce its deficit back towards the 3 percent limit that euro rules prescribe.
In a statement, S&P said Spain's deficit would likely remain above 5 percent of the country's gross domestic product through to 2013 against the government forecast of 3 percent, and that as a result the debt burden could rise to above 80 percent of GDP by 2012.
S&P said it also expects much weaker economic growth than the Spanish government and that there was a "significant implementation risk" with regard to the current plan to reduce the deficit, which is estimated at 11.4 percent of GDP in 2009.
Spain, which has still to get out of recession, is expected to grow by an average annual rate of 0.6 percent between 2010-13, according to S&P, way down on the Spanish government's forecast of 1.5 percent.
S&P said it saw downside risks relating to the government's revenue collection assumptions in particular, largely because Spain's tax base is "highly sensitive" to domestic demand and has been sensitive to the real estate sector, which has collapsed over the last couple of years.
"Neither of these sources is likely to be a strong contributor to revenue growth over the next several years," S&P said.
S&P said it was maintaining its negative outlook on Spain's double A+ rating, which it assigned in December, in the absence of "more aggressive and tangible actions" by the authorities to tackle Spain's economic and fiscal problems.
"Any deterioration over and above our current expectations could put further downward pressure on the ratings," S&P said.
3/11/10,
Spain: Two or Three Reasons to be Cheerful
There were two chinks of light permeating the same old economic gloom in this week's Spanish property news.
First, even though Spain is still officially in recession, consumption in Spanish households increased for the first time in two years. This is still a far cry from a booming economy - but at least it's a move in the right direction.
One other piece of news which I'll stick my neck out and interpret as 'good' is that the Spanish protests organised against raising the retirement age by two years have been poorly supported.
I have no particular feelings either way about the wisdom of this pension reform - but I do feel strongly that striking is the very worst thing for Spain's fragile economy.
Yes, the politicians messed up. Yes, they should be held accountable. Yes, they should find workable solutions to revitalise Spain's economy and reverse the spiralling unemployment rate. But striking won't make those things happen - it will only delay them.
For their part, Spain's politicians are playing 'fast and loose' with the media.
When speaking to international journalists and investors, they emphasise the austerity of the country's economic plans - in an attempt to sooth investor nerves and cement Spain's line of affordable international credit.
Meanwhile in Spain, these same politicians are emphasising how it's 'business as normal' and that there will be no significant cuts in public spending and no erosion of benefits.
The upshot of this - since we live in an age of Google translate and the Internet - is that neither foreign investors, nor the Spanish people have any faith in anything the government says. They're clearly 'bending the truth' at least 50% of the time, if not 100%.
New mortgage lending in Spain is still very depressed, say the latest numbers from the National Institute of Statistics (INE). These figures are one of the few reliable housing market statistics we have, so it?s always worthwhile paying attention to what they have to say.
According to the latest figures, for December and therefore the whole of 2009, new mortgage lending fell again last year, by 22% in volume terms (to 653,173), and by 34% in value terms (to 76.8 billion Euros), as illustrated in the chart above. These are the lowest levels in both volume and value terms since the INE started publishing this data series in 2003.
The number of new mortgages signed have been falling now for 3 years, and the value of new mortgages has been falling even faster. That means there is less money around to spend on Spanish property, which puts downward pressure on prices.
Mortgage lending has been changing in percentage terms over the last few years - falling in both volume and value for the last 3 years, though the rate of decline improved slightly in 2009. That means it is still falling heavily, just not by as much as last year.
Over the last 2 years, new mortgage lending has been falling more in value terms than in volume terms. That means that the average mortgage value is also falling, as borrowers take out smaller mortgages. The average value of new mortgages last year was 117,688 Euros, down 16% on 2008.
Why are people taking out smaller mortgages? Firstly, because the banks have tightened up their lending criteria, and now demand bigger deposits. But also because Spanish property prices are falling, so borrowers don?t need such big mortgages as before.
Peak to trough, new mortgage lending is down 51% by volume, and 59% by value, compared to 2006, when the market peaked. That is a massive decline in the amount of money around chasing property.
3/11/10,
Spanish Pension Reform Protest Lacks Support
Thin turnouts for union protests against an unpopular pension reform may ease pressure on the Spanish government as it seeks to calm markets with austerity measures while avoiding social conflict.
A total of only a few tens of thousands of protesters showed up for marches in Madrid, Barcelona and Valencia on a chilly Tuesday evening, according to most estimates.
The size of the protests, the first by the unions against Socialist Prime Minister Jose Luis Rodriguez Zapatero, was being monitored by international investors for signs the government might struggle to contain social anger against the rise in the pension age to 67 from 65 and a 50 billion euro austerity plan.
These measures are seen as vital if Spain is to convince markets that it can tame a budget deficit that reached 11.4 percent of gross domestic product in 2009.
Doubts over Spain's long-term credit-worthiness caused the spread of 10-year Spanish bonds over German bunds to spike to more than 100 basis points earlier this month during a scare over Greek finances. They have since eased and traded little changed at 76 basis points on Wednesday.
One newspaper poll showed almost half of Spaniards would support a general strike against increasing the retirement age.
But Tuesday's turnout will reinforce suspicions that Spanish unions, which represent only 16 percent of workers, would struggle to bring the country to a halt. Juan Carlos Rodriguez, of Madrid consultancy Analistas Socio-Politicos, said:
"The unions were powerful in the past, but they've lost it. They have much more influence in times of economic boom."
Protesters in Madrid were overwhelmingly middle-aged or older and representatives of Spain's large immigrant population were almost completely absent. The unions also seemed to fail to attract support from people without full-time employment.
"There is a very clear segmentation between the employed and the jobless," said Jose Luis Martinez, of Citigroup.
"Unemployment is at 19 percent, nearly 20 percent," he said, adding that it was essential Spain reform the rigid labour markets which now both protect most union members and bar millions of others from finding employment.
The lack of impact of the union protest was apparent in Wednesday's session of parliament, during which it was notably missing as a major subject of debate.
Nonetheless Labour Minister Celestino Corbacho repeated the government's desire to reach negotiated deals on reforming the pension system and labour laws.
"Protests are one thing. But they are not incompatible with a possible accord," Corbacho told parliament.
Apart from increasing the pensionable age, which the government says is necessary as Spain's population gets older, the government has indicated it is willing to negotiate the length of time for which people must make contributions to the system.
The Bank of Spain is expected to increase the provisions it demands of Spanish lenders to cover property bought from struggling real estate developers.
The central bank?s move would further dent bank profits already hit by economic recession, according to financial sources and bank analysts.
In November, the central bank raised its provisioning requirement from 10 per cent of the property?s value to 20 per cent for real estate held more than a year, and is now expected to raise it to 30 per cent.
However, it has yet to notify lenders formally. ?No decision has been taken yet,? the Bank of Spain said on Monday.
The probable change reflects a growing awareness among regulators and investors that Spanish banks and cajas, the unlisted savings and loan institutions, have massaged their bad loan ratios by refinancing property developers in exchange for Spanish property and equity in the companies, instead of allowing them to collapse.
Iberian Equities, the broker, estimated on Monday that listed Spanish banks had property assets of more than ?12.6bn ($17.1bn) at the end of last year, while the cajas held ?33bn.
Santander and BBVA, the two biggest banks, have taken impairments of about 30 per cent. But the proposed increase in provisioning requirements would amount to ?1bn, or a fifth, of 2010 profits for smaller banks, and ?5.3bn-?5.9bn, or a fifth, of profits for the cajas, Iberian Equities said.
A flurry of recent debt-for-assets and debt-for-equity swaps ? involving developers including Colonial, Reyal Urbis and Metrovacesa ? has deepened the scepticism of analysts and investors about the true bad loan positions of Spanish lenders. Total exposure to developers is ?324bn.
?While banks? doubtful domestic loans have risen quickly over the last two years, the recognition of impaired assets has been far slower than the severity of the recession might otherwise suggest,? wrote Jamie Dannhauser of Lombard Street Research.
There are particular suspicions about the way the collective bad loan ratio of the cajas has reached a plateau and started to decline, down to 5.05 per cent of assets in December.
That is only slightly higher than the 5.02 per cent figure for the banks, whose accounts are generally more transparent.
If the numbers were correct, that would be the ?best news on the Spanish economy I?ve heard for a long time?, said Luis Garicano, professor of economics and strategy at the London School of Economics, in a blog on Spain. ?Personally, I don?t believe it. The alternative is that the bad loan numbers of the cajas don?t make a lot of sense.?
Prof Garicano said it would not be possible to re-establish the credibility of the financial system if the regulator permitted ?these accounting games?.
The Bank of Spain?s expected tightening of its provisioning requirements could go some way towards defusing such criticism.
