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Does China give us clues as to how the property market will recover?

I use the word "recover" because although we aren´t officially in recession, effectively the property market (and much of the rest of the economy) in Spain is "on ice", ie frozen, paralysed and put-on-hold (apart from a very few exceptions) whilst the confinement (lockdown) continues.  The lockdown has now been officially extended till the 26th April, with President Sánchez already saying he fully expects to have to request an extension into May.  But the restrictions on non-essential businesses eg the construction industry are set to be relaxed on Monday (https://www.lasexta.com/noticias/nacional/construccion-industria-estas-son-las-actividades-que-se-reactivan-el-lunes-tras-el-paron-por-coronavirus_202004095e8f2387eb72ce00012a20ad.html) although there is scepticism about how this will work with the lack of personal protective equipment available.  

For our part at Villas Fox, we have several sales that were almost ready for completion prior to the lockdown, and we are expecting the majority of these sales to still take place as soon as the lockdown is lifted.  Hopefully that will be the start of our own personal recovery.  But this article published today in El Confidencial offers some reassurance about what the rest of the year might look like for the property market, and talks about a possible rapid recovery.  As you might expect, given the optimism of the article at a time when the whole country (unless you are one of the wonderful people holding everything together by working in or as part of a hospital, supermarket, petrol station, chemist, security forces, waste collection, delivery drivers  etc) is still almost under a 24 hour curfew with unprecedented fears about health, jobs and education...the comments section is already looking quite hostile!  https://www.elconfidencial.com/vivienda/2020-04-08/coronavirus-china-mercado-residencial-viviendas_2538008

Google translation: What will happen to housing in Spain? The Chinese market gives us several clues China's property market stopped in January 2020 to try to stem the expansion of the coronavirus. The Spanish did it on March 15 and 26 Photo: Construction workers commute by bicycle. (Reuters) Workers on a construction site travel by bicycle. (Reuters) AUTHOR E. SANZ Contact the author elena_sanz TAGS CORONAVIRUSREAL-ESTATE MARKETCHINA NEWSECONOMIC RECOVERYRESIDENTIAL SECTORBUY AND SELL READING TIME 12 min 04/08/2020 11:59 - UPDATED: 04/08/2020 18:28 The real estate market of China stopped in January 2020 to try to halt the spread of the coronavirus . The Spanish did it on March 15 and 26, when the Government decreed the state of alarm and later the cessation of all non-essential activities , including the works of dozens of promotions throughout the Spanish geography. In Spain, just as it happened in China, the sale of houses has been paralyzed and the uncertainty around this market once the works are restarted - predictably, on April 9 - is uncertain. Experts point to a deep crisis and rapid recovery , but the truth is that the practical absence of similar principles makes the future pose many questions. However, what happened in 2003 in Hong Kong with SARS or the gradual return of economic activity to China offer us some clues about the effects that this crisis will have on the national economy and, specifically, on the residential market. According to data from Capital Economics and Knight Frank, transactions in the 30 main cities of China have plummeted almost 100% from the day the first case of contagion was discovered, while in the first half of March, almost two months later. from that, sales partially recovered. Sales of houses in the entire month of March of the top 100 developers in the country increased by 136% compared to February In fact, according to data from China Real Estate Information Corporation (CRIC), home sales in the entire month of March of the country's top 100 developers increased by 136% compared to February , a percentage that reduces the drop in the first quarter at 21% compared to the first quarter of 2019. The promoters, meanwhile, expect sales to normalize during the month of April , although, according to Oxford Economics, there is still a lot of caution among buyers regarding the virus and uncertainty about job losses. The sector is confident, however, that the government's financial support measures and greater liquidity can help boost sales, as stated by the president of China Evergrande, the third largest sales promoter in the country, in statements collected by 'The New York Times'. Back to normal at the end of the year? In Spain, for its part, after the sales slump expected in March and April , the real estate sector as a whole relies on a slow recovery during the summer months, to achieve a certain normality of transactions in the final stretch of the year. Thus, for example, the CEO of the Appraisal Society, Juan Fernández-Aceytuno, was betting a few days ago to recover the average of about 40,000 monthly sales in the month of December . Also in China, many promoters consider that the coronavirus will only have a short-term effect and will not affect the demand for housing in the long term. The North American newspaper highlights, for example, how China Evergrande foresees an increase in sales of 30%, while other large promoters in the country have set more or less the same sales targets as last year , in some cases even higher. The first data already point to a certain normality. CapitaLand's sales offices in China progressively reopened in March, with sales of 1.3 billion yuan (170 million euros), more than 5.5 times their January and February sales combined. One of its projects in the city of Xi'an, which consists of 288 units and went on sale on March 24, sold in just four days for a gross value of 405 million yuan (almost 53 million euros). The house is preparing for the first price falls due to the coronavirus E. SANZ The arrival on the scene of a black swan called coronavirus has blown up the world economy and will have a direct impact on the residential market The first data on transactions and this type of sales - very punctual, of course - have injected a good dose of optimism into the country's large developers, who hope to increase spending thanks precisely to a faster rise in home sales. than expected in the first quarter and more liquidity. Analysts, however, call for caution, since the economic recovery could take longer than expected and, furthermore, warn that it will not be homogeneous, as they have already begun to verify. In fact, nationwide, home sales in terms of square meters are expected to show a drop of 14% in the first half and 4.5% in the second, as long as the pandemic is under control in April in the whole country. In addition, secondary markets and small cities are not yet at the recovery levels of large cities, where the lack of product and greater demand have allowed greater dynamism in transactions after the end of confinement. And in Spain, according to experts, the same is expected to happen. Pudong Financial Center in Shanghai, China. (EFE)Pudong Financial Center in Shanghai, China. (EFE) Recovery at different speeds According to CRIC data collected by the 'South China Morning Post', transactions in eight major cities - Shenzhen, Chengdu, Fuzhou, Hangzhou, Huaian, Yangzhou, Jiaxing and Shantou - show the return of buyers in recent weeks, with a volume of sales that has exceeded the average levels of the last quarter of 2019 . In addition, home sales in 30 large and medium-sized cities have tripled February figures in March, according to Wind Information. And the same could happen in Spain, with a market that since the recovery began in 2014 has moved at two speeds, with cities such as Madrid or Barcelona leading the way. Experts also hope that the lack of new construction product in both cities will serve as a catalyst for sales. The impact will also be very different in the developer sector. As in China, in Spain it is a highly atomized sector and analysts believe that a drop in home sales this year in the Chinese country could lead to the collapse of the smallest developers . In fact, the largest Chinese developers tend to focus their developments in large cities, where the demand for housing is strongest. The lack of product and greater demand have allowed greater dynamism of transactions in large cities In Spain, experts such as Juan Fernández-Aceytuno are betting that the trend prior to the outbreak of the crisis will continue. "If we take into account what has happened after other pandemic crises such as the SARS of 2003 in Hong Kong, after the initial coup, the real estate sector will resume the trend of prices and transactions prior to the outbreak of the crisis . That is, if said trend it was on the downside, it is expected to continue, but not to accelerate. " Regarding prices, few experts venture to make forecasts. In the case of Spain, the economist Gonzalo Bernardos figures a fall between 4% and 6% nationally and somewhat higher in Madrid and Barcelona , while Mikel Echavarren, CEO of Colliers International, foresees a further adjustment in the case of second - hand market completely paralyzed, and that being in private hands, visits to homes for sale were fully braking. Will prices drop? If we turn our gaze back to China, what has happened to prices? Some promoters have been forced to offer discounts to increase sales and avoid a liquidity crisis, but this does not seem to be an option on the table in Spain, since, as Samuel Population, director of national and land of CBRE, " there are not excessive margins to adjust prices , since it would mean putting too much stress on the promoter sector and incurring possible losses." On the other hand, according to the 'South China Morning Post', the prices of some projects have been limited by the Government , and are below the market price, which has favored sales, and the same has happened with the price. of land —especially that of state ownership—, which has encouraged the transactions of large developers, especially larger ones, since small, weaker and dependent on home sales to subsist, are being forced to drop ballast, with the sale of floors . An example. Country Garden, another of the country's large developers, bought more land in the first quarter than a year ago. Purchases that have been triggered by tax breaks and which have also caused the first price increases due to the huge buying appetite. Experts bet that the real estate sector will resume the trend of prices and transactions prior to the outbreak of the crisis Could something similar happen in Spain? Experts say that you have to be careful with comparisons, since the response of different governments to the crisis is being very different . According to Knight Frank, experience in Asia suggests that when the number of infections decreases, activity increases relatively quickly , although it is also true that it starts from very low levels. On the other hand, it should not be forgotten that in large cities such as Madrid or Barcelona, ​​the price trend was down before the outbreak of the crisis, while the great problem of accessibility to a home has not been solved. Furthermore, with house prices at their highest in these cities , the wave of temporary layoffs triggered by the conronavirus and the drop in wages, a possible deterioration in access to financing is expected , such that access to a home owned could be complicated in the near future for part of the demand, which until a few weeks ago could afford to buy a home. Governments vs. Covid: more money to buy a house or pay only interest E. SANZ Governments around the world have been quick to take steps to cushion the brutal impact it will have on their economies and their citizens as much as possible In addition, as Juan Confnández-Aceytuno recently published in El Confidencial , "in Spain, this crisis takes us with the feeling of an economic recovery that has not yet reached the finalist economy , with the shared perception that we are reaching a change trend in the residential sector, a slowdown in the overall economy and a lack of political stability. " "China is the most recent example in which Spain can look at itself, but as early as 1918, the year of the misnamed Spanish flu, different studies revealed that those places where it acted sooner and more forcefully — in terms of social distancing— Against the epidemic they grew faster when the pandemic passed ”, they point out from the Fotocasa studies department. A final example is that of the 2003 SARS and its effect on the GDP of Hong Kong , one of the most affected places. The North American real estate portal Zillow carried out a study on the behavior of the residential market during previous pandemics and concluded that, although home sales fell dramatically during the outbreak, prices remained almost the same or suffered a slight decrease, which according to this portal had sense, since it is more difficult for prices to fluctuate when there are few transactions. An opinion shared by Juan Fernández-Aceytuno. "We do not know how it will affect prices. We have to wait. At this moment, if I am commissioned to appraise a work in progress, I will take my database and my witnesses. The prices when evaluating them will have a curve that will not follow that of transactions. We cannot confuse value and price, it would be outrageous. There may not be a price because there are no transactions , but the house has a value. I will have to warn in my reports that we are facing a situation of 'shock' and that the appraisal may be affected in the medium and long term, but I cannot quantify it. When transactions begin to occurand a promoter, a witness or a property agent tells me that he has had to drop 20% to sell a house, so I will already have a piece of information to add to my database and prices will start to be adjusted. But do not expect a sudden change in valuations, but a trend, up or down, in the medium or long term. " Recovery in V? "During the influenza pandemic of 1918, as well as the SARS of 2003, the bibliography tells us that GDP fell rapidly around 5-10%, but also that it grew immediately afterward. This type of economic recovery in the form de '—according to the bibliography consulted— is characteristic of pandemic crises, on the other hand, in financial crises, where periods are longer, the recovery varies, depending on the country and its exposure, in periods between 18 and 36 months, "Aceytuno recently explained. V-shaped recovery is characteristic of pandemic crises, although recovery takes more time in financials "With regard to housing prices in Hong Kong, these did not alter the trend prior to the critical moment of the crisis , although activity fell suddenly, at around 70%. When the causes that slowed the Interaction between people, and therefore visits to homes and bank branches, transactions not only recovered, but in terms of transactions the change in positive trend is striking. Regarding prices, it is not that they have decreased since then, but they continued their downtrend practically as if nothing had happened. " As Fotocasa points out, "what many of these patterns have in common, unlike the Spanish financial crisis of 2008, is that their financial systems made a quick effort to maintain liquidity . In this way, the temporary negative economic effects were offset, facilitating short-term recovery. However, Spain is not China, nor Hong Kong of 2003 nor, at all, the United States of a century ago. None of these antecedents allows us to predict the future. Because the current pandemic of Covid- 19 has no possible equivalence with any of the above: globalization has brought much more connected societies (hence the rapid spread of the virus throughout the world) and much more interdependent economies, "they conclude from this real estate portal.

¡Buenos días! or ¡Buenas tardes! if you´ve already eaten. Hope you are all keeping safe. As you probably know, all non-essential businesses have closed temporarily in Spain, until the covid-19 situation improves. We´re still allowed to visit our office if we travel there alone (and keep the front door locked), and today I spent some time printing some posters to show our gratitude to the emergency services in our "A3" window. Despite all the inconveniences of social distancing and not being able to meet friends in bars and restaurants at the moment, our hardship is nothing in comparison to what the emergency and essential services are going through at the moment. We salute you! So, how are we keeping busy at the moment at Villas Fox? Well, that´s not hard because it´s the end of the quarter so we (or rather Sorelle) still have to present all our receipts and invoices to the accountant. We are still getting enquiries from prospective buyers (although not as many as usual for obvious reasons), and there is always plenty of work to do updating our websites. Despite the fact that it´s practically impossible to do viewings or complete sales at the notary, we´ve decided to keep nearly all our advertising going, so you can still see our properties on Rightmove, Kyero, Thinkspain etc with only a couple of exceptions. Ollie and I have also been working on a new website to showcase new-build properties (www.newbuildvillas.com) as we hope to offer our clients more options in the future, and so we are strengthening links with builders and promoters to this end.

 

 

Although we recently invested in an improved phone system in the office, we haven´t been clever enough to work out how to divert calls to our mobile phone during this period (doh!) but to make it easier for you to communicate with us, we have installed a chat/messaging system on our website, to make it easier for you to quickly message us directly from the website. (Getting it to work was not easy, so please try it out - we´d be happy to text-chat with you about anything! The button is on every page on our website (www.villasfox.com) in the top-right corner. Finally, the sun is out and thanks to our wonderful supermarket-workers in San Miguel we have a full fridge, so no complaints here! #quedateencasa #stayathome

 

 

We recently celebrated 5 years since we got the keys to our Villas Fox office, and although we considered having a wild party, we thought we'd save that until we hit 10 years!  So, instead we opted for a cake and a few drinks in the office before heading to Paco's (Mesón Rincón de Paco) to celebrate with the family and some fantastic paella!  Let's hope the next 5 years are as successful as the last!  Thanks to everyone who has helped us to reach this milestone - you know who you are! xxx

!gracias a Paco y Maria por otra cena magnífica en Rincón de Paco! 6 personas, 2x paella (una de verduras y otra de pollo) y la cuenta total era tan solo 65 euros!!! Another great meal in Rincón de Paco last night. 6 people, 2 paellas (a veggie one and a chicken one)..so big we had to take a lot of it home...and the bill came to just 65 euros. You have to order the paellas in advance (the seafood one is excellent too) but if you haven't tried it yet you must do. I'm not even a massive paella fan myself normally but Paco's paellas are something else! And if you don't want paella there are about 25 tapas to choose from and his solomillo is excellent too.

Here is a sneak preview of our new flyer, which is expected back from the printers on 13th January!

Click on the images below, or go to: https://villasfox.com/Villas%20Fox%20Flyer%20January%202020.pdf

 
   

Are you thinking about, or in the process of selling your Spanish property?  We have put together the following information which we hope will be very useful!  It might even influence your decision on whether to sell or not, and at what price.  We try to give our vendors as much information as possible to assist them in the selling process, so that there are no nasty surprises along the way!  I am sure we will be adding to this list of information as the years go by, and laws and practices change.  The information given is meant as a guide only, and you should always seek the assistance of a qualified legal professional (ie a lawyer) at an early stage, especially (but not only) if anything has changed since you purchased the property (for example if one of your co-owners has either died or has developed an illness which affects their ability to attend the notary in sound mind, or if you have made any alterations to the property that have not been registered at the land registry, or if you suspect you might be in negative equity due to a mortgage on the property being higher than the likely proceeds of the sale).

1.  Costs and fees when selling my Spanish property

These can be divided into the costs and fees which have to be paid PRIOR to selling, and those that have to be paid on the date of sale.

1a. Costs and fees that need to be paid PRIOR to selling a Spanish property

- Energy efficiency certificate.  If you do not have a valid energy efficiency certificate (CEE = certificado de eficiencia energética), then the law states that you must obtain one and display the rating in all your advertising and present it to the notary on the date of sale.  They are valid for 10 years, regardless of who owns the property.  Villas Fox can help you obtain one, using our local architect.  Click here for latest prices.  Failure to comply could lead to a fine both for you and your estate agent. 

-Habitation certificate (certificado de habitabilidad).  This is otherwise referred to as a secondary occupation licence (licencia de segunda ocupación), cédula or declaración responsable.  This is a 2-stage process.  The first stage is that the architect inspects the property, compares it to the title deeds, and issues a certificate which says that the property is fit to live in, and corresponds to the description of the property in the title deeds.  If the architect dectects that there is a discrepancy between the actual state and size of the property and the description in the title deeds, he will include this in his report, and if the alteration has been made over 10 years ago and before 2014 then he can issue a certificate of antiquity to declare that the change is exempt from any sanctions.  Otherwise you might have to obtain retrospective planning permission for the alterations you have made, which takes longer.  That is why it is a good idea to obtain the habitation certificate at a very early stage, because although the law does not oblige you to have one in place prior to selling, the general advice to buyers is not to buy a property without one, especially as the utilities companies often require one when changing the contract into the new owners name.  Another advantage of obtaining the habitation certificate at an early stage is that the architects report usually includes plans of the house which can be useful to show to buyers.  Buyers will have more confidence in buying your home if they can see that you have already got all the paperwork in place which proves that the property is fully legal.  The second stage in the process of obtaining this certificate is for either yourself or the architect to present his report, together with copies of the title deeds and all recent bills for SUMA (council tax), electricity and water at the town hall, and pay the town hall fee for this.  Some town halls will then subsequently issue the habitation certificate after a period of waiting, but other town halls (e.g. San Miguel de Salinas) will simply issue an official receipt which says that the correct documentation has been provided, and will leave it at that.  This "receipt" is sufficient when you sell the property.  Click here for latest prices for obtaining the habitation certificate (varies between towns).

- All costs and fees associated with the normal running and maintenance of the property, eg community fees, water and electric bills etc, so that your buyer will receive the property free of any debts and with all utilities connected.  This applies even if the sales process takes longer than expected, ie you will still be responsible for all the above, and also be able to benefit from use of the property up until the date of sale

1b. Costs and fees that will have to be paid on the date of sale

All the following costs are usually deducted from the proceeds of the sale on the date of selling the property.  In other words, the bankers draft which you receive on the day of selling will be for an amount NET of the following costs.  However, if you are a fiscal (tax) resident in Spain, this might not apply to the plusvalia tax, which you are responsible for paying soon after the sale.  We strongly recommend that you discuss all these costs, and how they will be paid with your lawyer at an early stage, to avoid any misunderstandings.

If the property has elements or features (eg extra metres of house or land, additional swimming pools, conservatories, extensions and other permanent structures) that weren't previously on the official property description in the land registry, then it is your responsibility to pay the architect, notary and land registry fees related to having the description updated at the land registry.  Most buyers and their solicitors are amenable to this process taking place at the same time as the property is sold, however they may insist that you update the description at the land registry prior to selling the property, which could take a few extra months.  Even if you have already paid for an architect to do a certificate of antiquity to declare that the change is exempt from requiring retrospective planning permission prior to selling the property, you will still have to pay for the notary and land registry costs associated with declaring this change on the official description of the property when you actually sell the property.  For example, if you already paid an architect 250 euros for a certificate of antiquity for your swimming pool, when you sell the property, the solicitors might deduct another 1,000 euros to cover the cost of notary and land registry fees associated with adding the pool to the property description at the land registry.  Don't confuse these fees with the notary and land registry costs of the property sale itself.  These are normally paid by the buyer.

- Notary fees relating to the sale of the property.  At least in this part of Spain, the norm is for the BUYER to pay all the notary fees (and land registry fees) relating to the transferral of ownership of the property.  However, despite this, the law actually says that unless the private sales contract says otherwise, it is the SELLER who has to pay the largest part of the notary fees.  So, it's a good idea to make sure that your private sales contract (which you sign when you agree a price with a buyer) makes it clear that it is the BUYER who pays the notary fees.  Otherwise, you could be held liable to pay most of them!  The standard sales contract at Villas Fox stipulates that the buyer pays them.  However some lawyers prefer to draw up their own contract, and as always it is up to you to read the terms of the contract before you sign it.

- Estate agency fees.  At Villas Fox, we charge the vendor a fee upon successful completion of the sale.  This fee is usually deducted from the proceeds of the sale, and the payment is done by the buyer on behalf of the seller.  In other words, the buyer pays our fee (less any deposit we are holding) and this amount is discounted from the amount the buyer pays the seller.  In this way, it is the seller that is paying our fees, and it is the seller who we give an invoice to.  Our fees include IVA (sales tax) at 21%.  Although our fees can seem like just another large chunk of money which you lose in the process, we like to think that the international marketing we provide will enable you to reach out to a much wider audience and attract more potential buyers.  That could mean the difference between selling and not selling your home.  Or it could mean that we find you a buyer with more spending power (possibly one that doesn't speak your language), who might be willing to pay a higher price for your property than if you hadn't used our services.  We like to think that our marketing and general assistance with the sales process represents excellent value for money!

- Plusvalía tax (more correctly known as "El Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana (IIVTNU)" - but I think you can understand why most people shorten it to "plusvalía tax".  This is a tax supposedly levied on the vendor and being linked to the increase in value of the land which the apartment or house sits on.  However, it has to be paid even if the market value of the land has fallen since you bought the property.  It is also related to the value of the land (so vendors of villas on big plots will have to pay a lot more than vendors of small apartments) and is also directly related to the number of full calendar years since you bought the property.  In other words, it is zero if you have owned the property for less than 12 months, but twice as much if you've owned the property for 10 years compared to someone who has owned a similar property for 5 years.  How is it calculated?  If you bring us a recent SUMA bill for property tax (IBI), then we can calculate it for you.  It varies between towns, but typically it could be between 30 and 300 euros for every year you have owned the property.

- 3% retention.  This applies if you are NOT a Spanish tax resident, OR if you are one but fail to provide the certificate that proves you are one.   3% of the official sales price will be retained by the buyer (who has to pay it to the tax authorities on your behalf, and has to accept responsibility for doing so).  This can be considered as a down-payment on any capital gains tax (or other private tax arrears you may have) you may be liable for following the sale.  However, if your lawyer can demonstrate that you have not made a capital gain, or your tax liability is less than 3%, then they can claim all of this back for you (less any taxes you owe).  The process can take a year or more.  Your lawyer will not do this automatically - you must instruct them that you wish to claim this back.  Ask them if you need to keep your Spanish bank account open in order for the money to be paid into it.

- Retention for SUMA, community fees, electric and water.  The lawyers involved in the sale will decide if monies need to be retained from your proceeds in order to satisfy any outstanding obligations regarding the payment of electric, water, community fees and SUMA.  As the vendor, you are responsible for the payment of the SUMA for the whole calendar year in which the sale takes place, even if the bill for that year has not yet been issued (which is very common, since the bills are usually generated in the autumn).  So, even if you sell the property in the first week of January, the lawyers may retain an approximate amount corresponding to the estimated SUMA bill for the whole year.  If you wish to challenge this, then you should do so before you agree to the sale.  It is important to discuss these retentions with your lawyer, and ask them what the procedure is regarding this.  If you think that the retentions are unnecessarily high, or if you can prove that you have paid the SUMA bill for the current year, then make this clear to your lawyer at an early stage, so that the retentions can be adjusted accordingly.  Also, make sure you cancel all the direct debits for the property AFTER the sale has completed, and inform the providers of your house insurance that you have sold the property.

That's all for now, but in the near future, we will be expanding this article with the following topics and maybe even more:

2.  Choosing your estate agent (and currency company if you don't want to keep the proceeds of the sale in euros) and documentation required to provide

3.  Preparing the property for photographs

4.  Preparing for client visits

5.  I've got an offer - should I accept it?

6.  What happens between the offer being accepted, and completion of the sale? (eg get a certificate of fiscal residency if you are a fiscal resident to avoid paying the 3% retention !)

7.  What do I need to do on the day of completion?

8.  is there anything else I need to do?

 

 

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To Andy and Sorelle with much appreciation to you both for an excellent service during the sale of our property.

Regards Peter and Sandra


Peter and Sandra Row
Friday, 07 July 2017

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