For an authoritative guide to the latest news on buying property in Spain, read expert Mark Stucklin's monthly review of the market.

Spanish tax authorities to blitz real estate fraud

Luis Pedroche, Director of Spain's Inland Revenue (national agency responsible for tax collection and known as the Agencia Tributaria in Spain) has announced that a full third of the agency's resources will be dedicated to preventing and controlling real estate fraud in 2006. A failure to declare or pay property-related taxes is one of the biggest sources of tax evasion in Spain. This could have a significant impact on foreign buyers.

During a breakfast organised by the Association of Economic Journalists (APIE), Pedroche announced the creation of special fraud units dedicated to identifying all types of real estate fraud, such as failing to declare the full amount of a property transaction in the deeds of sale.

"Greater fiscal control of the real estate sector is justified by the economic size of the sector, by its social impact, and because of the prevalence of money laundering opportunities and tax evasion", explained Pedroche.

Average Spanish mortgage rises to EUR 144,352

Figures from the National Institute of Statistics show that the average mortgage loan value rose to EUR 144,352 in November 2005, 15 percent higher than November 2004. Average property prices rose to EUR 130,761,  up 15.9 percent on a year before.

Casa del campo: Many expats crave that house in the Spanish countryside

Markets expect ECB to raise base rates to 2.5 pc

The European Central Bank (ECB) has made it clear that it sees a risk of inflation and excessive credit growth, principally of mortgages. In February Jean Claude Tritchet - President of the ECB - dropped heavy hints of an imminent increase, citing inflationary worries (Euro-zone inflation hit 2.4 percent in January, above the target rate of 2 percent), and "abnormal" conditions in certain property markets such as Spain's. According to Trichet, the bank's priority is to "prevent the real estate bubble from inflating any further".

For its part Euribor rose in February to 2.914 percent.

'Madrileños' head for new coasts

According to the Spanish daily 'El Mundo' residents of Madrid - some of the biggest buyers of Spanish coastal property - have started to abandon old favourites like the Costa del Sol and Costa Blanca in favour of 'emerging' coastlines in Cantabria, Huelva, Almeria and Murcia. If true, this will put downward pressure on prices in the old areas and upward pressure on prices in the 'emerging' areas.

Spanish property ownership costs rising in 2006

Estimates from the College of Property Administrators in Madrid reveal that property running costs in Madrid are expected to be EUR 200 per month higher on average than in 2005, and higher in general throughout Spain. Gas prices are expected to be 4.26 percent higher, electricity prices 4.48 percent higher and water rates 3.5 percent higher than last year, to which we can also add a 10.9 percent increase in local rates (Madrid), higher household insurance costs and higher community costs. Figures from the National Institute of Statistics show that most types of costs related to owning and maintaining property in Spain (with the exception of some taxes) rose by between 4 percent and 5 percent over the last 12 months.

Spanish investors turn to Coast of Death after Prestige disaster

The Spanish daily 'El Periódico de Catalunya' reports of an investment-lead real estate boom on the Coast of Death (Costa de la Muerte), on Galicia's northwest coast around Finisterre. This coastline was devastated by oil spills from the tanker 'Prestige' that sank just off the coast of Galicia in November 2002. However the disaster and clean-up operation, now complete, created an extra exposure to the area's beauty that is now turning into real estate investments, including golf course developments.

Spanish Government buying beachfront estates to protect natural environment

The Minister for the environment - Cristina Narbona - has announced that her department has "reserved" 50 costal properties (fincas) to preserve them from building speculators and help protect the environment. She explained that one of her department's policies is to "buy beachfront properties and protect them from urban development".

Spanish Housing stock is 3 times EU average per 1,000 people

According to figures from the European Mortgage Federation and the Spanish Mortgage Association, the number of newly-built residential properties per 1,000 people is 11.7 in Spain compared to an EU average of around 4 per 1,000 of population (range goes from 2 to 6 properties per 1,000 of population). Spain also has more properties - 500 per 1,000 people - than the EU average of 434.

Costa del Sol property speculators turn to renting

The Spanish daily 'Sur' reports that many of the people who speculated with property on the Costa del Sol are now trying to rent out the properties that they have been unable to sell.

Number of housing starts to remain the same in 2006

The consultancy DBK forecasts 705,000 housing starts in Spain during 2006, almost the same number as in 2005 (725,000 according to the Bank of Spain). If the forecast proves correct this will be the first time annual housing starts have not increased in Spain since 1998. This still means that Spain is building almost a third of all housing starts in the EU.

With respect to finished properties the company forecasts that 645,000 new properties will be completed in 2006, 5% more than the 615,000 completed in 2005.

Financial burden of property purchase for Spaniards households on the rise

A recent report by Metrovacesa - one of Spain's biggest builders - reveals that the average financial burden on household income for first time buyers in Spain reached between 39.5 percent and 46 percent of household income in 2005. This is the highest rate in the lat 12 years, but still below the levels reached in 1990 and 1991, when 69 percent of household income went on financing the property purchase of first time buyers. At the present level, average Spanish property prices are now 8.46 times average Spanish incomes.

Spanish rental prices up by 4.2pc over 12 months

Figures from Spain's National Institute of Statistics show that Spanish property rental prices increased by 4.2pc over the last 12 months, exactly the same as consumer price inflation. This means that, in real terms, Spanish property rental prices have not increased at all over 12 months.

Spanish mortgage defaults rising, but still subdued
According to the Spanish Mortgage Association (AHE) the rate of mortgage defaults in Spain rose from 0.394 pc in June 2005 to 0.401pc in September. Nevertheless the default rate remains exceptionally low by historical standards.

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Mark Stucklin

Mark Stucklin runs www.spanishpropertyinsight.com, an independent website about property in Spain and also writes an property-buyers advice column for The Sunday Times.

If you have any questions contact his forum which is used by other property specialists, on the above website.

[Copyright Expatica]

[March 2006]

Subject: Spain; property expert