Irish insurer, FBD Holdings, has run into problems with the sale of some land adjoining its La Cala Golf development in Spain's Costa del Sol, according to today's Irish Independent.
Shareholders were, according to the paper, hoping to benefit from a €50m windfall on the back of an €80m deal which was to be concluded on June 21st. The insurer has confirmed it is unable to meet an imminent planning deadline to clear the way for the sale of the land. This was to be the second tranche of a €200m deal agreed in summer 2006 where €120m was payable immediately for 58 ha while €80m was to become payable for the remaining 40 ha, subject to planning being received by June 21st.
According to the Indo report by Laura Noonan, the 80 acres will now be legally transferred to FBD although finance director, Cathal O Caoimh, stressed that it would have no financial impact on FBD since the €80m gain had never been recognised.
The 40-hectare site, which is adjacent to the group's La Cala golf course, already has roads and sewage and has planning permission for residential development.
Mark Stucklin reports over at Spanish Property Insight that there may actually be some light at then end of the tunnel for the the misfortunate Spanish property industry.
Of course we're at a period when there may be a lot of straw grasping done, so I wouldn't be inclined to hold my breath, but it is, nonetheless, better than the constant barrage of negative indicators this market has thrown up over the past half decade.
An article in ‘El Mundo’, one of Spain’s leading news papers, suggests there may be signs of recovery in the Spanish property market, in one of the first positive articles on the outlook for the market since the crisis began.
The newspaper has described this as potentially; "the beginning of the end of the worst period for property sales since the crisis began."
The article has pointed out that real estate markets may have bottomed out in the US, the UK, and France, which isn't really a given, and then goes on to suggest that Spain may also be part of this trend - not really a given either unfortunately - but worth a shot I guess.
The optimism comes from a report by Gonzalo Bernardos, a property market expert and professor of economics at the University of Barcelona, who suggests that the Spanish property market may come back to life this year, following a dismal 2008.
Thee five key reasons he gives are that; “Interest rates are lower; house prices have fallen back to their 2003 levels; banks are lending more; investors are coming back; and many people who were thinking of renting have decided to buy.”
Let's hope the new found optimism isn't ill-founded.
Good news stories are difficult enough to come by these days, particularly in Spain, but here's one from Mark Stucklin in Spanish Property Insight.
In what was indisputably my worst ever property investment, I bought into a development in Xeresa, near Denia (Valencia) in 2004, being built by a large developer (I expect you know them) specialising in golf resorts. My lawyers were Del Valle Associates in Marbella (so you see I chose pretty well all round). I bought two properties off-plan in 2004, on the basis of a contract which looked OK to me at the time but which I subsequently discovered was seriously flawed. I paid deposits of around 30%. The whole process got off to an extraordinarily slow start, but construction finally began in early 2005, though, according to my builder’s start of works certificate, not officially until November, seven months later. This was very difficult to deal with at the time.
I had by this time parted company with Del Valle and found a new lawyer through your website (Juan Bertomeu of Iuris Consulting). It was soon clear to both of us that if I wanted to get out (which I by then did) it could only be done by claiming on the bank guarantee for non-completion in the required time. Given the force majeure conditions in the contract, we established the earliest date in May 2008 by when the claim could be lodged. It was apparent from my site visits (when we were never allowed actually to enter my own properties!) that they would not be completed by the date we’d defined.
Despite this, I was advised in mid 2008 that the properties had been completed (and that this stage payment and that stage payment were now due). Our claim had not at that time been lodged because my/our view was that every duck had to be in the proverbial row, in terms of documentation, before we did so. We finally lodged the claims on both properties in early September.
These were rejected by the bank because the properties had been “completed”.
To cut a very long story short, we made 12 different submissions to the bank , all of which had to be notarised etc. The bank made an endless succession of what we believed to be wholly unreasonable and non-contractual demands. My view was that however unreasonable the demand we would meet it as quickly as we could, and so we did. One notarised submission we made in November, relating to the unfinished state of the apartments, ran to 25 pages.
Finally, miraculously, the first guarantee was finally paid into my Spanish bank one week before Christmas and the second one week later. I received four years interest on my capital deposit. Additionally, of course, I was repaid in Euros, which were around 30% more valuable on the day I got paid than they were when I’d made my deposit.
In broad terms, therefore, I have in sterling made around 10% per annum on my four year investment (net of legal fees of some 13,000 Euros and my personal costs of 3,000) which, so far as I can see, is tax-free. This is far better than any of the parallel UK investments I made over the same period.
The fact that this profit arose through entirely unintended means does not lessen the feat of genius it represents.
So you see, it can be done!
The lessons (for me at least) are as follows:
Firstly, read the bank guarantee very carefully, on the basis that you might well have to use it. Start with the assumption that they will be extremely reluctant to pay.
Secondly, remember that the developer will seek to give himself more room against his own commitments than he is entitled to, especially at the start of the contract when non-completion is the last thing the buyer is thinking about.
Thirdly, before signing or paying anything, visit the site with your lawyer. Within 5 minutes of my doing so, unfortunately by then well into the contract, my new lawyer, on seeing the proposed layout, told me - accurately as it turned out - why the project would end up years behind schedule due to difficulties in obtaining further permissions not yet sought or agreed.
OK, so it is not a typical investment story, and you'd have to be mad to knowingly attempt to make money in this fashion, but it just goes to show that you should never lose heart. If it can't be done one way, then try another.
A quick verse from Rudyard Kipling to finish:
If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too:
If you can wait and not be tired by waiting,
Or, being lied about, don't deal in lies,
Or being hated don't give way to hating,
And yet don't look too good, nor talk too wise.
This could well be a motto for the unprecedented times in which we now live.
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This could be very interesting if you bought property in Spain and sold it for a profit in the last four years. I can hear the cynics say, there aren't too many of those, but, apart from the Costas the rest of Spain was doing fine up to 2007 so there may be some souls out there who made a profit ... and paid 35% Capital Gains Tax (CGT) on it.
Well, God bless the EU, they've said it's not on and those naughty Spaniards shouldn't have been doing this when their own citizens were only paying 15% CGT. So, if you've had to lose a chunk of your capital gain, you may be entitled to claim a chunk of it back from them.
According to law firm Costa, Alvarez, Manglano & Associates, investors who made capital gains by selling Spanish properties could be due tax rebates. Emilio Alvarez says, "Investors could be in line for a 20 per cent tax rebate because foreign non-residents were charged a higher rate than Spanish nationals - and that contravenes the European Community Treaty. Those who sold a home in Spain before changes to the rules last year were charged the Spanish non residents' income tax rate of 35 per cent on any capital gains instead of the Spanish flat rate of 15 perc ent. That means those affected can try and reclaim the difference from the Spanish authorities, plus interest". For more information, go to http://www.spanishtaxreclaim.co.uk
There's a nice piece in today's Independent (English version) about the level of pain being suffered by property owners in Spain. Of course, as we pointed out in a previous post, one person's pain is another's gain, so if you want a holiday home in Spain then the hour most definitely cometh.
The piece quotes Derek Blaney who says; "All the reasons people love to own in Spain are still there. It's two hours from the UK (also 2.5 hours from Ireland but this is a UK paper), the weather is great and it offers good beaches and all the amenities people like. But the market has changed and the people who will benefit most are those who want a holiday home, rather than a pure investment."
This last point is one well made. Spanish coastal property has never been a particularly reliable investment vehicle. Yes, in the early days, some people made lots of money from capital appreciation, but they were lucky. Relying on resort property for rentals is not a way to make money, in fact it is normally a way to lose it. If, however, you want a property for your hols and you particularly like coastal Spain, as many Irish do, then you should probably be keeping an eye on the market. There are bargains to be had.
I know most people reading this blog will not have a lot of sympathy for estate agents, and those who know Spanish estate agents will probably have even less time for them. In our day-to-day running of the site we obviously have to deal with more than our fair share of them and, to be fair to them, they are a much maligned bunch. 90% of agents are decent, law abiding citizens who wish for nothing more than to make sure that their clients get the property they require and in return they expect to make a living from it. Fair enough, isn't that what the most of us want?
The problem for estate agents has been that, it being a largely unregulated industry, there is a magnetic attraction for the Arfur Daley's and Del Boy Trotter's of this world and it therefore meets with its share of calamity.
In any case, we know a lot of overseas agents and you can take our word for it, most of them are very decent people. Consequently we have a level of empathy when we see headlines like "Half of Spanish Agents Shut their Doors in 2007". A report in today's Financial Times isn't likely to fill those trying to sell a property in Spain with much joy either.
The end of the piece says: "Spain’s tourist hotspots have been hardest hit. According to a report by Aguirre Newman, the property consultants, residential estate developments in some parts of the Mediterranean coast now take an average of four years to sell, compared with a few days at the height of the property boom four years ago. About half of the new apartments on the Costa del Sol are sitting unsold, it says."
That's really gotta hurt.
On a lighter note. Here at the website we have a lot of Google alerts set up for various different topics in which we are interested. One of them is obviously Spanish Property. At one stage yesterday two alerts arrived in at the same time showing how two different organisations can have polar opposite opinions on the meaning of recent news:
Spain’s property market headed for a fall Financial Times - London,England,UK By Mark Mulligan in Madrid Spain’s residential property market is heading for a hard landing, as tightening credit conditions exacerbate problems of ...
Investors in Spain 'cannot lose out' Holiday Lettings - Oxford,England,UK Mr Walker added that Spain offers property investors a mix of accessibility and value for money. Although the strong euro will increase initial costs for ...
Whatever else you'll say about Estate agents, they're a great lot to keep the best side out.
If you're one of the many Irish who emptied their matresses to buy property in Spain back in the mid to late nineties then be afraid, be very afraid.
There was a short, but very interesting, piece by Ian Kehoe on the front of the Sunday Business Post yesterday (March 16th) about the revenue stepping up its investigations into property owned by Irish citizens overseas. It claims that it has received the names of thousands of Irish citizens (directly from the Irish agents as far as we're aware but this isn't stated in the piece). It says it is predominantly targetting Spain and France at the moment but there is no doubt that this will be spread out to cover all the usual suspects such as Portugal, Hungary, Bulgaria, etc. before too long.
In light of the recent rise in co-operation between countries, particularly those in the EU - with relation to taxation, banking and asset ownership - the question at this stage is not whether the Revenue will find out about undeclared money invested in overseas property, it's merely a question of when. If you've got a property overseas and haven't declared it, or more importantly the money with which it was purchased, now might be a good time to bite the bullet and make a voluntary declaration. You'll be treated far more favourably and save yourself all the extra taxes and penalties you'll incur between here and the time your purchase is investigated.
The Revenue is going for the jugular, it's not overly interested in the rental income achieved by the properties in question (although you can be sure it will ask for a declaration on this) what it is specifically targetting is the capital used to fund the initial purchase and where exactly this came from. If it hasn't been declared in Ireland, then bingo, it's hit paydirt.
The article can be found here but it will move to the archive at the end of the week.
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Irish insurer, FBD Holdings, has run into problems with the sale of some land adjoining its La Cala Golf development in Spain's Costa del Sol, according to today's Irish Independent. 
