LIFE IN SPAIN – CHRISTMAS IS A RATHER ODD EXPERIENCE!

This Christmas has been the seventh that we have experienced since moving to Spain permanently and it has been as oddly unsatisfactory as the others. We cannot quite ‘place our finger’ on why? It may be because our children are older and that therefore Christmas has lost its ‘magic’ - or it could have a lot to do with Spain and the life in Spain of ex-pats.

Certainly, Christmas in Spain ‘feels’ different and with some justification. The day itself is unquestionably important to the Spanish although they tend to open their presents on Christmas Eve. However, no Boxing Day is celebrated - thus leaving Christmas feeling brutally short as many people return to work immediately afterwards.

It is also true to say that Spain is avowedly a secular state with the vast majority of the population (contrary to popular myth) irreligious. This means that the ‘objective’ of Christmas is as lost to commercialisation as it is in the UK. Indeed, I suspect that church attendance in Spain is now probably close to its nadir at the beginning of the twentieth century when there were fewer church-goers in Spain than any other European country.

The odd thing is that it is not as if the overall Chrismas period in Spain is, in itself, short. It lasts until the 6th January with the all-important celebration of ‘Three Kings’. This appears to us to be as critical as Christmas day itself with the day a national holiday, widespread formal street processions and, to the delight of Spanish children, another round of presents! Meanwhile, New Year’s Eve is as important in Spain as elsewhere in the world and just as replete with riotous parties welcoming the start of the new year.

The trouble, I think, is that Christmas as an ex-pat is hard to get right because of the absence of an extended family during the holiday period. The very nature of being an ex-pat means that close family and life long friends are (obviously) not close and, as a consequence, the ‘nuclear’ family 'bit' of Christmas is inevitably missing. This may be why our Christmas’ have been so unsatisfactory despite our best efforts. Indeed, whilst I have no regrets about leaving the UK, I do wonder whether our children will have missed out on an important part of their cultural and family heritage.

Of course, the weather (in a curious way) also militates against a British ideal of Christmas. This year (in Valencia) the sun was out on a glorious day that made us all feel somewhat preposterous whilst we remained in front of a rather pointless (but attractive!) blazing fire. In our minds, of course, we imagined ourselves looking out onto snow – or, at least, a chill day of freezing drizzle and lashing wind.

I guess, at the end of the day, Christmas is always going to be different when you live in a foreign country. But then I may be looking back at Christmas in the UK, during times past, with ludicrously pink glasses! If I am not - then it is one of the very few negatives to moving to Spain.

I should also say that any maudlin thoughts as to the benefits of a British Chrismas are usually rapidly dispelled. Yesterday, I was rock climbing in shorts and a tee shirt with some British climbing friends who had just arrived from the UK. Needless to say, when not climbing, we revelled in a picnic of turkey sandwiches whilst regaling each other with stories about how wonderful it was to be warm and able to climb (a dry weather sport – if ever there was one!) despite it being the end of December.

Of course, it is impossible to get everything right when you move to another country. However, mulling all of this over with my wife, we both came to the conclusion that our life in Spain is, in almost every way, preferable to what we had in the UK. It is sad that Christmas is a bit unsettling and disappointing - but the other advantages to living in Spain more than compensate us for a it!1

SPANISH PROPERTY AND THE SPANISH BANKS

It is always reassuring for a writer when first hand experience meets gut instinct and ‘rumour’. This was recently the case when I became involved in the sale negotiations for a hotel in Spain together with an adjoining Spanish villa. Both these properties ‘belonged’ to the same owner who has sadly gone bankrupt - so the properties were the subject of formal repossession proceedings by a major Spanish bank.

I happen to know a lot about the two properties as the owner was a friend of mine and the properties are in my local area. Both properties were bought more or less at the height of the Spanish property boom and both were very heavily mortgaged. Indeed, the hotel had a 100% mortgage (as of December 2007) with the total debt to the Spanish bank – for both properties – some 1,265,000 Euros.

When (in September 2009) I was approached by someone who was interested in buying both properties I had to get in touch with the Spanish bank concerned to negotiate the possibility of a sale. Initially, I was told that the discount for a buyer would be 30,000 Euros off the bank debt. This, needless to say, was laugable - given the 1,265,000 sale price and the fact that Spanish property since 2007 has probably fallen, for the most part, in excess of 30%.

Grumbling, I was eventually passed onto the Spanish bank’s head office to the manager dealing with the repossession of both properties. After some bargaining I managed to get the initial discount bettered by around another 100,000 Euros. So, after a struggle, the sale price for both properties (if bought together) stood at very roughly 1,1,00,000 Euros. However, the 15% discount by the Spanish bank hardly made the properties a bargain – particularly as the hotel had not been open for almost a year and therefore had negligible ‘goodwill’.

My ‘buyer’ asked me to try again to negotiate down the price of the two Spanish properties. This I attempted but with a complete lack of success. I met an absolute barrier regarding the price. The Spanish bank said it was ridiculous to reduce the price further as the valuations (from 2007!!) for the two properties showed them to be worth pretty much the existing bank debt of 1,265,000. Finally, I was advised that the Spanish bank would not, under any circumstances, pay a fee or commission (to anyone) who introduced a ‘buyer’! This made any further negotiations pointless with a clear message attached...

The point of relating this is to illustrate that the ‘stories’ of the Spanish banks giving less away than they appear on their Spanish property sales appears to be true. Furthermore, clearly it is not in a Spanish bank’s interest to sell reposseessed properties when the disparity of their debt to the current value of their properties is considerable. The reason is obvious:

If a Spanish bank has a repossession property on its books it will probably not show those properties as a ‘loss’ on the ‘books’ whilst it holds a valuation (albeit an old one!) that shows that the value matches, more or less (and very much in theory), the debt. However, should the Spanish bank sell the properties (almost certainly at a loss) then on the bank’s ‘books’ the loss is absolutely and irrevocably proven. In other words, it is better for a bank not to sell some properties which have big losses attached - whilst it can maintain that the loss does not exist.

Of course, this is a book keeping exercise. However, if I am right, then it may well suggest that the Spanish banks (as many suspect) are hiding far greater losses than they have so far admitted.

Time, of course, will tell. However, I think the hotel in Spain close to me and its accommpanying villa will be on the market (but not, in reality, purchasable!) - for quite some time. It is rather sad for all concerned...1

SPANISH PROPERTY MARKET – PROPERTY IN SPAIN FOR THE BRITISH

One of the conundrums facing the Spanish property market is when Spanish property will again become financially appealing to British buyers - given the collapse of Sterling against the Euro which has affected both potential buyers and existing owners of Spanish property.

Obviously, the current strength of the Euro against Sterling has had dramatic consequences for anyone living in Spain and relying upon an income paid in Sterling. The difference between an exchange rate at 1.40 Euros to the £ and (say) 1.10 Euros to the £ is huge. In effect, the purchasing power of a UK pension in Spain has dropped by some 30% over the past couple of years. This has unexpectedly ruined the financial planning of many Britons and made, for some people, life in Spain too expensive to sustain.

Indeed, many ex-patriot Britons have had to place their properties in Spain for sale so that they can return to the UK. The danger of this is that many estates in Spain with a high density of British property owners have, as a direct consequence, a disproportionate number of properties for sale.

Of course, the more properties in Spain there are for sale in a given area the harder it is to sell (the laws of supply and demand) with any seller having to rely upon a severe price reduction to differenciate his property from his competitors. This is never more true than when an estate comprises more or less identical properties - which is often the case on ‘new’ urbanisations. To make matters worse, some estates in Spain are primarily ‘British’ and therefore unlikely to appeal greatly to other nationalities. This means that any likely buyers of Spanish properties on ‘British’ estates will largely remain fellow Britons – themselves hampered by the weakened purchasing power of Sterling.

Of course, many Britons bought their properties when Sterling was at 1.40 (or more) to the Euro. This means, very crudely, that they can drop the sale price of their Spanish property by 30% - and still get their money back (at current exchange rates).

The conundrum is obvious.

Property in Spain has fallen by (at least) 30% since the end of the boom in 2007. So, if you, as a Briton, reduce your Spanish property price by 30% (from its 2007 level) then your property in Spain is still not cheap - to a British buyer! In fact, the 30% drop in an ‘in-coming’ Briton’s purchasing power means that your Spanish property price has, in effect, not fallen at all. So, ironically, any UK buyer is going to be looking for a further price discount before he even begins to think he is getting anything like a real bargain.

In fact, ironically, Britons in Spain are not helping the vortex of falling Spanish property prices. At the moment, many are able to drop their prices by 30% with impunity – and then to drop them by a further 10% - 20% if they are prepared to take a (reasonably acceptable!) loss to extricate themselves from Spain. This is more than most Spanish or Euro sellers are prepared to countenance but acts to further destabalise the Spanish property market.

Certainly, it is no secret that the stabalisation of a property market is utterly dependent upon ‘distress’ sales being rare. Until that is the case, any property market will continue to be volatile with the emphasis being on continued falling prices rather than any marked ‘levelling off’.

In short, are prices stabalising on British owned property in Spain?

Sadly, I rather doubt it – although this could change should Sterling suddenly find sustained strength against the Euro. This would put money back into the pockets of those Britons in Spain drawing their incomes in Sterling and thereby make them less desperate to sell. It would also, as a side effect, force prices up as the Euro weakened and reduced the ability of British sellers to drop their sale prices ‘artifically’ on the basis of having bought when Sterling was strong.

In the meantime, can Spanish property offer value for money to in-coming Britons carrying Sterling worth some 30% less than a couple of years ago? The answer is a cautious yes. The unfortunate number of true distress sales (particularly on ‘British’ estates in Spain) provide some real opportunities to buy Spanish properties at bargain prices unthinkable a few years ago – even given Sterling’s depreciation against the Euro.1