Some good news already for 2008.
The UK bank rate was cut by 1/4% and a further 1/4% predicted for February. This morning the £ fell against the Euro to 1.3888. That is probably the lowest for several years. Not really a problem, the UK economy is basically sound and it will come back to around 1.45
It seems that the B of E had to consider a trade off. They had to ignore the fact that house prices had doubled in the decade against the risk of slowing down of the economy with high interest rates.
There is a interesting
Financial Time Article about this, worth reading because the UK is still the best client for Spanish real estate.
The UK economy is controlled by parliment and the B of E and, of course, there is a housing shortge.
What a shame it's not like that here. But then again, if it had not been for the construction boom, most of us would not be here.
The real guide to values in Spain is what Mr Average can afford.
There is a "rule of thumb" comparision of real estate values against average pre-tax income -
x 1 = undervalued.
x 2 = about right.
x 3 or more = overvalued.
It was written that the average family income in Spain is now 1,600. Therefore, if real estate values were running true, the average family home should cost 38,400 Euros.
If we consider where does Mr Average live in Spain, it could vary from an old town-house to a modern flat or "adosado" and again there is going to be a great variance across the country.
So we could say that this should vary between 20,000 and 80,000 according to property type and location.
Disregarding areas, such as city centres and popular tourist destinations, what were they running at a year ago? Twice these prices at least!
In my view that's it, property value have to fall by half on average (more here, less there) and until that happens there is no future for Spanish real estate.
It always has to be remembered that real estate really means where the 40 million inhabitants of this country actually live and true values over the years have nothing to do with the whims and fancies of second home buyers or get-rich-quick investors.
I understand that there is a bubble already inflating in Bulgaria and other eastern European countries. Lets hope it pops quick and they start coming back to Spain.
Sorry about that but this is the SPANISH Real Estate Forum!
Looking forward to hearing what Richie has planned for 2008.
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