- Ambrose Evans-Pritchard, The Telegraph, 30 July, 2007.
Wishful thinking lingers, but the harsh truth is that the (sic) Spain's housing crash has barely begun.
- ibid, 11 July, 2010.
Indeed.
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Wednesday, July 14, 2010
Time Warp
Spanish house prices have risen 270pc since 1995...., After seven [interest rate] rises to 3.75pc, the bubble is bursting.
- Ambrose Evans-Pritchard, The Telegraph, 30 July, 2007.
Wishful thinking lingers, but the harsh truth is that the (sic) Spain's housing crash has barely begun.
- ibid, 11 July, 2010.
Indeed.
----------------------
- Ambrose Evans-Pritchard, The Telegraph, 30 July, 2007.
Wishful thinking lingers, but the harsh truth is that the (sic) Spain's housing crash has barely begun.
- ibid, 11 July, 2010.
Indeed.
----------------------
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5 Comments:
I had dinner last week with the owner of one of the prominent "luxury inmobiliarias".
They have not sold a single new property in 18 months. They´ve received offers ranging between 40-60% less than asking price. When I asked him wouldn´t it be better to just get rid of inventory, his response was "that would be the banks job, not mine". I mentioned that if all the offers you receive are 40-60% less, they can´t ALL be wrong, right?
He believes they have hit bottom, and things will begin to move again. I bit my toungue but felt like saying "I am not surprised Spain is in the situation it is with "empresarios" like you".
Ole Miss,
You're confusing the moribund high end market with Spanish real estate in general. 450,000 homes have changed hands in Spain in the last year - and this doesn't include debt buybacks or anything like that.
Secondly, if the gent in question is not in dire financial straits he is making the correct long term business decision. His cost of carry on those empty places doesn't get to 1% a year - even if he's paying it all (which he most certainly is not!). Who in his right mind would write off the next 4 decades by accepting a bid 40% below his price just because the only buyers in the luxury segment right now are bottom feeders?
Cheers
Charles - I am clearly not as knowledgeable in this area as you are. I do know the company is in dire financial straits.
I don´t understand what you mean about writing off the next 4 decades, or how the carrying costs can only be 1%? Are you talking about 1% of the sale cost or the builders cost?
I don´t know what his margins are but I would think they would be around that amount. I come from a country where inventory is a disease, so it seems to me that it would benefit bank and company to get rid of inventory and call it a day.
Ole Miss,
Carrying costs - what it costs to maintain an empty and unutilized piece of property. Well under 1% of what he thinks is the value of his property - even assuming that he pays the water and electricity minimums, bothers insuring it and is paying community fees on a partially occupied building.
http://ibexsalad.blogspot.com/2009/10/why-spain-is-not-florida.html
http://ibexsalad.blogspot.com/2009/10/more-cost-of-carry.html
His company's financial position may not have much to do with his, but in any regard he is evidently playing chicken with his bank. They don't want to foreclose on a high-end property because it will have to go to auction. Then they'll be faced with the same bottom feeders offering 40 cents on the dollar. Too much of that and they'll have to mark all similar luxury loans down. Better to let sleeping dogs lie.
You're right about attitudes to inventories of property. Here it is considered a disease to have too much money.
Charles - ok, got it. I don´t understand how someone who pays 40% on a 3 million euros property is a bottom feeder though...but ok.
Someone in the end is going to have to sell it at 40-60% off, whether bank or inmobiliaria.
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