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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.

Story from Forbes

There was a small uptick in Spanish housing sales during the fourth quarter of last year, according to recent data released by the Spanish Ministry of Housing.

The increase was small, 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″.

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.

Source: kyero.com

Figures for property sales in Spain have shown a small improvement for Q4 of 2009 and the government there has seized upon the opportunity. Sales are shown to be up by over 4% in Q4, compared to the same period of the previous year, with increased sales in Barcelona and Madrid.

The problem is that the sales activity in these two cities at the end of 2009 was so impressive, it elevated the national average and overshadowed the performance of places such as Las Palmas and The Canaries. Barcelona saw a 35% increase in sales with Madrid performing better at over 40%.

However, it seems to be a mystery as to why this should be, leaving industry professionals baffled by the statistics. Anyone who is selling a property in Spain at the moment shouldn’t get too excited about the figures either.

This small and unexplained upturn pales into insignificance when you realize that as a whole, sales figures for the year were down nearly 20% and 46% down on 2007’s figures. Sales and property prices in Spain face a tough year in 2010 and canny investors know that by waiting better deals that are on the way.

Source:propertyworld

Heavy snowfalls have pounded northeastern Spain, knocking out power, canceling flights and forcing the closure of schools in Barcelona and the surrounding area, officials say.

Accumulations of up to 50cm of snow have been forecast for the worst affected areas of Catalonia, prompting the regional government to cancel classes for more than 142,000 students at 476 public schools.

Power was lost in homes throughout the region on Monday, with energy company Fecsa-Endesa reporting 10,000 clients were without electricity, while traffic on more than 60 roads in the area was either prohibited or restricted.

Spain’s border with France at La Jonquera was closed because of the snow, leaving about 3000 trucks stranded, public radio RNE reported.

Bus service in Barcelona was suspended just before the evening rush hour and commuters were encouraged to use the Mediterranean port city’s metro system instead.
While Barcelona’s El Prat airport was operating normally, six flights out of the airport in nearby Girona were canceled and several more were delayed because of the snowfall, which was accompanied by strong winds.

Source:Yahoo News

If you’re looking to diversify, broaden or even begin your property portfolio consider Europe for your next investment destination.

Europe is host to such a broad range of countries all offering diverse property opportunities – you have everything from emerging market economies with massive potential for sharp growth rates, well established city based rental markets giving great yields and even residential housing markets offering an investor a slow burn on his capital outlay.

Here’s an overview of the potential on offer in the top ten European countries for real estate property investors right now.

Bulgaria – Bulgaria is in position for EU accession in 2007 and as a result it is receiving massive foreign and domestic investment particularly into infrastructure and construction and the whole country is benefiting from the amount of money being spent on it.

Those who buy now in Bulgaria are buying into the longest projected period of growth and buying before the expected boom that will begin when Bulgaria is officially made an EU Member State. Furthermore they are buying to target the burgeoning tourism market that heads for the beautiful beaches of the Black Sea Coast in the summer and the snow capped mountains of Bulgaria’s ski resorts in the winter.

Croatia – Another country tipped for full EU membership in 2007, Croatia offers property investors commercial and residential property opportunities. The numbers of international business establishing bases in Croatia has increased substantially in the last couple of years and there is demand for the development of light industrial and office space.

Furthermore Croatia has a strong tourism market that offers a real estate investor further opportunity to either target short term rental yields or to buy off plan or develop for resale to the second and holiday home market in Croatia.

Cyprus – There are two real estate economies in Cyprus – you have the well established Republic of Cyprus property market where an investor should seek to target the retiree audience or the tourism market and then in Northern Cyrus you have an emerging economy currently offering massive growth potential.

Property price increases in North Cyprus have consistently been in double digits for the past three years and there are no signs of a slow down in the offing.

Czech Republic – The majority of real estate investors consider Prague the only city worth targeting in the Czech Republic but the country’s other cities like Brno also offer an investor opportunity to purchase residential accommodation for rent to the domestic and expatriate professional population. Property price growth has been fantastic in recent years and rental rates are increasing annually.

Estonia – Real estate investors should target the local market in Estonia and consider looking for opportunities in the capital city of Tallinn. The Estonian economy is growing at a staggering rate which is affording the local people greater purchasing power which in turn is having a direct effect on the property market in Estonia.

Basically as local demand increases so prices can rise and as local purchasing power increases so it can sustain these price rises. A real estate investor can buy into this growth now and should expect the period of growth to be sustainable for at least the medium term.

Hungary – Property investors who targeted Hungary’s capital city of Budapest last year enjoyed up to 15% growth on underlying property prices and these growth rates show no sign of slowing down currently.

There is local and expatriate demand for property to buy and let in Budapest and the local economy is benefiting from foreign direct investment and strengthening. This means that there are long term prospect for growth in Hungary. Furthermore there’s an emerging market within Hungary’s property sector and that is the tourism market which offers an investor a chance to get in on both residential and commercial property ventures targeting this growing market segment.

Latvia – Latvia is benefiting from substantial foreign direct investment which has helped establish the Latvian economy as one of the fastest growing in Europe and Latvians are on target to receive one of the five largest wage increases in the world. All this means that locally the population can afford to spend more on property either in the form of rental rates payable or property prices payable and real estate investors can buy off plan and flip on to the local market upon completion or even buy to let out in the capital city of Riga or in the coastal port towns.

Poland – Having joined the European Union back in 2004 Poland has received massive aid and investment as a result which has improved the country’s infrastructure incredibly and led to a strong period of economic growth.

Many European and international companies have established bases in Warsaw and Krakow and the demand for accommodation in these cities alone has really soared. Real estate investors are targeting Poland because it offers a low risk, high potential property market. Furthermore investor confidence in Poland is high because the Polish government have already proved that they have a strong commitment to maintaining the good economic growth rates that their country is currently enjoying.

Romania – Because Romania has yet to join the EU and align all its governmental, fiscal and constitutional policies with those of Europe it is quite a tricky country for a foreign investor to get in on. However it offers a real estate investor such exciting opportunities – where else in the world can you buy anything and everything from a castle to a factory at such ridiculously low prices.

Those with a strong appetite for paperwork and red tape will make their fortunes from Romania’s property market, but for the rest of us it’s an economy to watch carefully. As the country moves slowly towards EU membership so it will become easier and more attractive for property investors to target.

Turkey – Turkey is on track for EU accession following agreement that it should begin accession talks in 2005. Since that point Turkey’s economy has been granted ‘Market Economy’ status, the country has received billions of dollars of Middle Eastern funds into its property sector and world wide investor interest in Turkey’s property market has exploded.

The majority of opportunities either exist in Istanbul or along Turkey’s southern coastline where hundreds of thousands of tourists flock every year. Prices for property in Turkey are currently incredibly low so with all the positive data and news coming from Turkey recently there is only one way prices are going to go – and that’s up!

There are so many opportunities available to an investor in Europe that those serious about profiting from real estate property should give the continent careful consideration!

By Rhiannon Williamson

Bulgaria is among the leading European countries in terms of the cost and quality of the outsourcing services the country offers, according to a report by two international real estate and global management consulting firms.

A joint analysis by Colliers International and AT Kearney shows that Bulgaria is in the top position for outsourcing opportunities among the 12 European countries surveyed, the Sofia News agency reported on Monday.

The other countries were: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Serbia, Slovakia and Ukraine.

“The assessment was based on criteria such as financial attractiveness, the economic environment and the availability of a skilled workforce,” said Atanas Garov, executive director of the Bulgarian branch of Colliers International, adding that outsourcing could become a major economic engine for Bulgaria.

Central and Eastern European (CEE) countries will continue to be among the leading global destinations for outsourcing services, according to the study. Their chief advantages are a combination of skilled staff, excellent foreign language training, know-how, cultural proximity and tolerance.

Source: rian.ru

Newly built residential buildings marked a quarter-on-quarter increase of 40.4% in the last three months of 2009, shows preliminary data of the National Statistical Institute.

For October to December 2009, construction companies cut the ribbon on 962 building with 6,404 dwellings in them. For July to September, 685 buildings with 5,214 dwellings were brought to market.

In comparison with the last quarter of 2008, however, the October to December 2009 number of the newly built residential buildings decreased by 1.7% and the number of the dwellings in them marked a decrease of 6.0%.

For October to December 2009, the Varna district accommodated most of the new homes for the period – 1,325. Second came the capital with 1,228, followed by Bourgas with 865, and Plovdiv with 448.

Source: amcham

The average house price in Spain shows an overvaluation of 20 percent, concludes a study by the Institute Juan de Mariana. This institution calculated the relationship between the sale price of real estate (2558 euros per square meter to December 2009) and rental price (95.6 euros per square meters per year).

This ratio fell from 32.2 in 2007 to 28.9 in 2008 and 23.6 in 2009, but the institute says the price of housing still must be reduced by 20 percent for the PER is equal the historical average (19.5).

However, since in the past two years the overvaluation is starting to be corrected, the institution considers that the final adjustment could be reached by the end of 2011.

The report indicates that the historical average of PER in Spain is the highest in Western countries, which, together with the surplus of unsold homes and the lack of credit, however the Institute said that housing prices could fall more than they should.

Still, it insists that throughout 2011 the house prices in Spain could be in line with that which existed before the housing bubble. It does not consider it is appropriate to stop the correction of housing prices through political means, nor aggravate the need for adjustment of prices by, for example, the construction of new subsidized housing.

It did feel it is necessary to introduce greater transparency and streamline most bankruptcy proceedings, so that the assets of bankrupt companies are settled quickly, while suggesting to the autonomous communities they should eliminate Transfer Tax to boost the market for the sale of old housing stock.

Source:barcelonareporter

Spain’s property woes and economic downturn finally may be
catching up with the country’s two largest banks, Banco Santander and
BBVA, the WSJ reports. The big banks have remained profitable throughout
the financial crisis despite the bursting of the housing bubble in
Spain, high unemployment and other problems, the paper notes. One
reason: the government’s strict requirements for Spanish banks to
maintain high reserves against bad loans, in part a response to a
previous property downturn in the 1990s. But now there is concern
whether these cushions can withstand the impact of an increase in
nonperforming loans, the WSJ says.

Source:sharpnews

A glut of new properties in Spain shows that the real estate industry is unlikely to recover quickly as over supply still clogs the market.

The most recent figures from The Ministry of Development show that 387,000 new homes were finished last year despite a property market crash already into its second year. This compared with 220,600 new home sales recorded by the National Institute of Statistics for 2009.

‘This means there is an oversupply of around 166,500 new homes that joined the glut of new homes already languishing on the market in search of a buyer. It illustrates the severity of Spain’s construction boom and bust,’ said Mark Stucklin of Spanish Property Insight.

‘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,’ he added.

When the figures are added together it means the market is now facing a glut of 1.2 million new homes. The Spanish developers’ association and the Ministry of Housing are more optimistic in their figures and estimate there is somewhere between 700,000 and 750,000 new homes on the market but even at that level it will take years for the market to absorb the over supply.

Stucklin says the industry has consistently built too many properties over many year and ignored falling demand. ‘Last year, there were around 225,500 new households formed in Spain, down from 300,000 plus per annum 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 many new homes,’ he explained.

‘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,’ he added.

Although supply now seems to be adjusting to demand there is still a huge glut in the market. But this doesn’t help the economy as a collapse in new building is just as bad for the economy as too much building, Stucklin reckons.

This article has been republished from Property Wire