Structural Change in Spanish Mortgages

Partly caused by the banning of the minimum interest rate clause (la clausula suelo) in Spanish mortgages (see my earler article) there has been a dramatic shift from Base Rate Plus mortgages to Fixed Interest mortgages. At the end of 2015 Fixed Rate mortgages represented less than 10% of the total. By mid 2018 it was 40%.

This has been accompanied by a decrease in the average interest rate charged due, in part, to fiercer competition between financial institutions. Wheres in early 2009 the rate was 5.5% by Autumn 2018 it has dropped to 2.6%.

With the recovery in the economy and increasing property prices, there has been a commensurate increase in the number of mortgages granted which have grown steadily since late 2013. At around 30.000 per month they are a long way from the heights of the boom but the new law on mortgages whereby the costs are switched from the borrower to the lender is expected to boost the growth considerably. This is likely to accelerate the annual growth in property prices which stood at +7.2% for the thrird quarter of 2018.

Cheaper Spanish Mortgages

Banks, not borrowers, must pay the costs

The Spanish government, under pressure from the EU, has clarified who must pay what in terms of costs when a borrower agrees a mortgage loan with a bank. Previously, all charges were paid by the borrower and they were onerous. Now all of the charges, except a valuation of the property, must be paid by the bank and the abusive minimum interest rate clause (la cláusula suelo) has been banned. The charges involved are:

• Notary and Registry charges for the mortgage deed. Typically, for a loan of €200.000 these would be in the region of €700 - €900 added to which there is usually an administrative charge of, perhaps, €150.
• Taxation. It has always seemed anomalous to me that a person who is in need of finance to purchase a property must deliver a proportion of the loan to the government in tax. And the way in which it is calculated is nothing short of outrageous. The rate is 1.5% of the loan. But not just the principal. All of the costs that might possibly be incurred in punitive interest, legal and court costs in the event that the loan was never repaid. This adds, typically, a further 50% to the principal so the true rate of taxation is around 2.25% of the loan. The borrower of our €200.000 loan has, in the past, had to pay around €4.500 in tax. This must now be paid by the lender.

So, the borrower will now save some €5.500 in costs when taking out a loan of €200.000.

How will the bank recover these costs?

Firstly by becoming much more efficient. Banks have been in a rush to merge since the crisisi of 2007-2008. And even some of the mergers, have merged again. Branches have been closed at an extraordinarily rapid rate. Internet banking has caught on and clients are no longer prepared to queue at branches whose practices had changed little in decades. 

Spanish Flag

I read an article recently which highlighted just how much Spain has changed since the death of Franco in 1975 and the adoption of the new constitution in 1978. Whilst many countries have experienced significant change in this period, Spain's transition from a dictatorship, under which industries producing poor quality goods were protected, to a modern democracy with an open economy, has seen a seismic shift. Entry into the European Union in 1986 has undoubtedly been one of the motors behind this change. Spain is still a net beneficiary of EU funds, although to a lesser extent than in the past, and this, together with a desire for political stability, explains why the Spanish are such enthusiastic Europeans. The table below shows just how great the change has been in the past forty years.

Spanish Parliament Building

Spain is in an anomalous position with regard to separating the state from the Catholic church. 

State schools are all lay institutions and religion is taught only as an option. In my daughter’s school the majority of students opt for Valores Éticos (Ethical Values) instead. This is an interesting choice encompassing debates about racism, citizens rights and obligations, discussion of news topics etc.

Following on from my article about the decline in those who regard themselves as Christians (a fall from 92% brought up as Christians to 66% who remain Christians in adulthood) it is interesting to note that only roughly half of that percentage (35%) elect to tick the box on their annual tax return (la casilla de la iglesia) that diverts taxes to the Catholic church.

However, this diversion of funds deprives the state of approximately €250 millions annually, a figure that has not declined despite the crises of the past ten years. So, where does this money go to? Much of it pays the salaries of 22.000 priests who receive €12.600 p.a tax free together with their accommodation and associated costs such as electricity, water etc. and the salaries of 113 bishops and archbishops who receive €17.500 p.a. plus accommodation, a car and chauffeur.

These salaries account for roughly 70% of the diverted taxes, the rest is paid over to the various dioceses for other expenses. Although there is a tacit understanding between church and state that services for followers are provided free there are a vast array of additional services that the clergy charge for, whether directly or as chaplains to prisons, hospitals, brotherhoods, teachers of religion in schools or colleges etc.

Tapas - Chipirones With Potato & Peppers Salad

On a recent trip through Sevilla province I stopped to meet a colleague at a roadside restaurant near Marchena.

I ordered a bottle of water while I was waiting. The waiter asked what tapas I wanted with the water. I opted for chipirones (baby squids). The dish arrived with a  potato and red pepper salad. Delicious.

When I came to pay I could barely believe the cost €1.00. Yes, one euro. Only the water is charged for.

(Apologies for the dirty knife and fork. I'd already eaten one chipirone when I took the photo!)

Semana Santa

According to research by the Pew Research Institute a significant proportion of Spaniards who grew up as Catholics have lost their faith in adulthood. The drop in adherents in Spain is one of the most pronounced in Western Europe. Only Belgium and Norway have seen a greater drop.

Of the respondents to their survey undertaken between April and August 2017, 92% stated thay had been raised Christinan (which in post-Inquisition Spain means Catholic) but only 66% remained Christian in adulthood as the graph below shows.

Of the 66% who consider themselves still to be Christian only 21% attend church at least once a month, slightly more than the U.K. but less than Austria, Germany or Switzerland.

Finally, the propertion of respondents who state that they are atheists, agnostics or have no religion is higher in Spain than all Western European countries surveyed apart from the Benelux countries and the Scandinavian countries of Norway and Sweden.

This research depicts a country that perhaps few people outside of Spain would recognise. It is certainly one of the most tolerant and socially liberal Western societies with a less negative opinion of muslims and with gay marriage and same sex-adopition legalised since 2005.

Granada is the city of the pomegranate…or is it?

It is pomegranate season in the northern hemisphere and, if you have spent any time in Granada, you will soon realise that this slightly grumpy-looking fruit is very much part of the city’s heritage.

Look at some of the beautiful painted pottery, and you will see a pomegranate is the main motif; look down and you’ll see pavement bollards are decorated with them, look up and you’ll see them hanging from the trees, especially in the Albaicín. Why? Because the city was thought to have been renamed after the fruit during the Moorish period and, now, it is Granada’s heraldic device (i.e. part of its coat of arms). 

However, the origins of where Granada gets its name from are in fact not quite so straightforward. The word ‘pomegranate’ in English is said to derive from medieval Latin, from the words for apple and seeded and in old French the fruit was known as the ‘pomme-grenade’ but the name of the city doesn’t derive from ‘grenade’ at all but from the Arabic word Garnata, which is said to mean ‘Hill of Strangers’. The original settlement was on the plain and therefore difficult to protect, so in the 11th century, the Berber ruler moved his home to one of the hills beside the Darro and the city that we now know was born. So, though the fruit is a wondrous image to have at the heart of a city’s identity, it is not the heart of its name!

One of the greatest draws of Andalucia is its geographical position. Apart from the obvious attractions of the heat and the sunshine, it also offers access to mountains (the Sierra Nevada) and the Mediterranean. And, if you want to find a property that is well situated to make the most of both of those, then it might be worth considering the Lecrin Valley.

Located south of Granada, and about 30 minutes north of the coast, it gets just as much sunshine in the summer as the rest of the region but, thanks to its position at the foot of the sierras, it also gets lovely cooling breezes. The name of the valley apparently derives from the Arabic word for ‘gateway’ but, according to some websites and locals ‘el Valle de Lecrin’ means ‘Valley of Happiness’ and that seems more apt. Sunny, yet not too hot, peaceful, yet well connected, rich in agriculture and wildlife, it is a perfect place for either a permanent retreat or a holiday home. And, thanks to being slightly less well known, it tends to be cheaper than the Alpujarra. 

At the bottom of the valley, you will find Lake Beznar, a man-made reservoir which looks like a natural lake (apart from the dam!). At 170 hectares, its turquoise waters can be seen from miles around and, if you don’t want to head to the coast, here you can swim, fish and go out on a (non-motorised) boat.

Famous for citrus and almonds, one of the best times to explore this area is when their blossom appears, usually at the end of January for almonds and April for citrus. Early autumn is also very beautiful and, since it is not as hot as the summer, it lends itself to enjoying this countryside through walking, cycling and horse-riding.

If you are from northern Europe and move south, whether to France, Italy or Spain, you will quickly become aware that there are a lot more holidays, or holy days, than in your own country. Sometimes they are connected to Catholicism, sometimes they are national holidays but they will all, without fail be celebrated in style. This week’s holiday, on Wednesday, is called Columbus Day in US English, El Día de la Hispanidad (the Day of Spanishness) or Fiesta Nacional de España in Spain and it commemorates the day that Christopher Columbus arrived in the Americas in 1492. It is one of two national days (hey, why have one when you can have two), the other being December 6th, El Día de la Constitución, also traditionally one of the biggest days in the Spanish Christmas calendar. 

National holidays, in fact most holidays, in Spain are very much made the most of. Whereas in somewhere like Britain, they are often spent on motorways or slumped on the sofa, a Spanish national holiday always involves a party, a fiesta. In Madrid, there is a big parade and, since the 12th is also the Spain’s Day of the Armed Forces, a fly-past by the Air Force’s aeronautics team. 

In other parts of the country, work and study will be abandoned for a family get-together or a day out. Be prepared for shops and banks to be shut, as well as museums and sites of interest. It can be extremely frustrating, if you are used to being able to do things on a national holiday (in the US, for example, Columbus Day stops very little) but, once you live in Spain, taking the time to see people or have a party when everyone else does will make you feel completely en su casa.

Summer may be nearly over but we look back with fondness on exciting times last month. Unlike in countries in the North of the continent, here in Spain as in France and many other Catholic countries, the 15th August is a public holiday, a day on which no business will get done. For anyone used to a 24-hour culture of work, this can be extremely annoying but proper holy-days, as in days where everything is closed, are an extremely important part of Spanish life. Embracing them, and all the enjoyment they offer, will help you feel like a real resident, not just a tourist. The pace here is slower, and adjusting is key.

Here are some of the highlights in Andalucia. Be sure not to miss them next year!.

In Almería, from the 17-25th August, the region celebrates the Fiesta of the Virgin of the Sea, on August 20th, in Vejer de la Frontera, there is a night-time flamenco festival, Malaga’s horse-racing season continues until August 26th, in Niebla (in Huelva province) the theatre and dance festival starts in July and continues until August 28th. Later in the month, in Cadiz, enjoy the livestock market as part of the Feria Real de San Agustin (28th-31st) and, in Baeza, Jaen, from August 28th to September 3rd, the pilgrimage of the Virgen del Rosell, patron saint of La Yedra takes place: watch the Virgen’s statue being taken from her sanctuary in her village to the town of Baeza, and see the streets full of gypsy carriages and wagons. Finally, in Ronda, enjoy the Feria de Pedro Romero, which starts with a parade at 7.30pm on August 30th and continues to the 4th September.

You can find out more about festivals all year round in Andalucia here. 

Most of northern Europe has lost sight of such traditions and festivals, except for a few key ones; in Spain they are a reminder that this is both a notionally religious country and, perhaps more importantly, one that takes celebrations very seriously indeed!

Back in 2008 if you wanted your name written elegantly in Arabic it used to cost €3. With the arrival of the crisis the street calligraphers dropped their prices. By 2011 you could get the same thing for €1. Today, for the first time in at least five years, the price has doubled to €2. A sign of things to come.....?

According to the June statistics from the Instituto Nacional de Estadisticas (INE) there were 36.856 property transactions in the month, which is the highest figure since January 2013. Even more important from our point of view is that the overall figure masks a fall in new builds. Excluding these, which make up less than 18% of total transactions, paints a much different, even more rosy picture. 

Sales of existing properties, which is our market, reached a level not seen since late 2007, almost nine years ago. June was the 28th successive month of increases in the number of sales of existing properties.

Total sales for the first six months of 2016, at 207.593 have reached a level not seen since 2010.

Author: Allan Hilder 

When clients of ours buy or sell a property in Andalucia, we do all we can to make the process as simple, enjoyable, transparent and cost-free as we can. Unfortunately, sometimes we are let down by other players in the chain, as happened recently.

A vendor client of ours had returned to Germany to live and no longer had a Spanish bank account. When the sale went through the buyer's lawyer agreed to cancel the bank guaranteed cheque which had been issued that morning and he made a transfer in the same amount to the vendor's euro account in Germany. A straightforward favour, which should have cost little money.

Imagine our surprise when the vendor sent an email to say that Banco Popular had charged €1.227.51 to make a transfer of  €182.625.00. No exchange, just one click of a mouse to effect the transfer. Absolutely outrageous. And when it was challenged by the lawyer, the claim fell on deaf ears. His request for a refund was continually passed around from office to office. Delaying tactics, hoping that it would be forgotten.

Banco Popular will never again see an account opened by any of our clients. Whatever damage we can do to their business, we will.

The cheapest and most efficient bank is ING Direct. If you are happy to do your banking online they are by far the best and the cheapest. But if you are the sort of person that likes to go into a bank regularly they are not idea as they have few branches: one in each of Granada, Málaga, Sevilla and Cádiz.

An evening in Spain, in any part of the country and nearly all year round, begins with el paseo, a leisurely stroll through the streets, meeting and greeting friends and family. It is the dividing line between the working day and the evening, signalling a slowing down of tempo, a shift from activity to leisure.

In summer, this glorious tradition is often made even better with the addition of an ice cream and in Granada, you will find that the best ice cream comes from Los Italianos on Calle Gran Vía de Colón. Many a Granadino will tell you that the start of spring is not marked by the weather, but by the first day that Los Italianos opens, usually in April. 

And, a bit like the breakfast tradition we mentioned last week this gentle walk enables you, as a resident, to learn several things. In Granada, for example, head to Plaza Nueva which, on a sunny evening, will be thronged with just as many locals as tourists and take a minute to sit and watch. You will see couples, families and groups of friends strolling along with, it seems, very little direction. They will be stopping and starting, chatting and moving on, stopping and starting again.

If anything is likely to show you how the Spanish interact, and how important such interactions are, this is it. People don’t necessarily make appointments to see someone; they simply head to the same place, bump into someone, catch up, move on. Though the Spanish might seem quite formal, in that they will often greet you with a handshake, el paseo demonstrates that, in reality, they can also be incredibly informal. Talking, greeting, walking, eating, these are all essential parts of Spanish life; it is lived outdoors with lots of others, not indoors with just a few; it is noisy, not quiet; its pleasures are everyday and for everyone. 

Last week we wrote about how the resale market and house prices were definitely improving. But now, it seems, even the new-build market is finally recovering.

On Spanish Property Insight Mark Stücklin notes that since 2008 the building of new houses has dropped by 97%. And, once the recovery began, a lack of new housing meant there was nothing for sale to meet demand. But in April 2016, for the first time in two years, sales of new-build housing went up by 15%. This part of the business has been the slowest to recover from the crisis but, now, says Stücklin, it looks like joining the rest of the market in an upwards curve. This can only be good news for buyers, sellers and investors alike, showing that after eight years, buying a new or old property in Spain is once again looking like a solid investment decision. 

Wherever you are in Spain, but particularly in Andalucia, you are likely to know the name of a small town in Las Alpujarras, even if you have never been there. Order a bottle of water in a bar, or buy one in a shop and the name you will mostly likely see emblazoned across it is Lanjarón, a place that is famous for water, in more ways than one.

This modest town was the first in Spain to bottle its spa water and you can still drink the water free of charge direct from the spring. There are also several fountains to be found throughout the town, where you can fill up your bottles before a walk or a day out. Lanjarón is also a spa town, and at the balneario you can find all sorts of treatments, from the cosmetic to the health-giving, that use the local water. 

But the one week of the year when you can really experience how important water is to the local community is from June 23rd, the Noche de San Juan, to June 26th. From midnight on the 23rd, everyone, old and young, resident and tourist, ready or not, will get wet as the biggest water fight in Spain, Europe and probably the world, begins. The aim? To soak and be soaked, before going off for a drink and a bit of a party. 

The biggest shock you will encounter is that a water pistol is not going to cut it; on the balconies of the main street you will see water hoses worthy of fire stations and the residents are not ashamed to use them. You can get your own back, at least a little, by buying a bucket before the fun starts (they are on sale everywhere), standing under a hose to fill it up, before throwing the contents at someone else. In less than an hour, the party has moved from one end of the town to the other, the main street is a river, and you will wish you had worn your swimsuit after all…

According to Spain's Institute of National Statistics (INE) the year on year price increase in the first quarter of 2016 is the highest since 2007. See graph above. The average price of a resale property was 6.4% higher than the same period in 2015. And the rate of increase is accelerating.

Also on the up are property sales. See graph above. In the month of April 2016 there were 35.199 transactions according to the INE of which 28.028 were resales. This is the highest figure this year, 29% above the same month last year and is also the highest number of monthly sales since February 2013.

We have been saying for some months that prices have bottomed out and are on the rise. We have had three vendors increase their prices recently - the first time that has happened since 2007.

Don't wait. Call us now if you are thinking of buying. 0034 958 227735.

The cities of Andalucia are exceptionally beautiful but, if you are more interested in living in the countryside, in a finca or a cortijo, the Alpujarras is a wonderful area to consider, especially if you like walking.

Sandwiched between the Sierra Nevada to the north and the Mediterranean to the south, this is a hilly region, full of stunning scenery, incredible wildlife and beautiful pueblos blancos (white villages). Most of the towns are small, and offer a very different lifestyle to the larger cities, yet even the most remote are only an hour or two away from Granada and Malaga. 

High above sea level, here you will find some of the best walking country in the world. Try heading up to Trevélez (at 1470 metres, the highest village in Europe) or Capileira then walking down their valleys, admire the incredible views of the Sierra or, on a good day, of the sea and then, when your muscles are screaming from the exercise, head to the spa town of Lanjarón for a relaxing massage or to the administrative, Orgiva, for its more cosmopolitan bustle and still-free tapas. 

If you want to find out more about the Alpujarras, try reading Chris Stewart’s accounts of his life over the past twenty years, living on a sheep farm outside of Órgiva:

Driving Over Lemons

In Britain, where I come from, breakfast is the meal that is most likely to be eaten at home. Head south, across France and to Spain and, the further south you get, the more outdoors eating and drinking takes place in the morning.

And, once you have bought a property in Andalucia, one of the best ways to discover your neighbourhood, and meet your neighbours, is by breakfasting in your local café. If you’re a cereal and tea person, this might seem an unlikely prospect but I urge you to try it. Find a spot that you like, a bar that is welcoming and, whether on your way to the market, or to the bank, try and find a time every day or at least at the weekend when you can slide onto a stool at the bar and join in the fun. 

Don’t know what to order? Here’s our quick guide to drinks:

Cafe solo - Espresso, a bit larger than the Italian version

Cafe americano - Black coffee

Four years ago my husband and I led a 'city life', he was a successful commercial photographer and I was the Director of the Netherlands Institute. But there was something unsatisfactory about our lives and we decided that we wanted to make a change. Not just a change of country but a bigger, all encompassing change of life and lifestyle. We wanted a different way of living, with a smaller carbon footprint and more connected to nature.

So we embarked on a journey of searching for that special place. High on our wish list was a place in a natural park, where we would have nature on our doorstep. That however was a difficult box to tick, as properties in nature reserves are scarce. During our search we somehow ended up in La Alpujarra and I am not sure whether we chose it or it chose us.

You would imagine that this gem in Southern Spain would attract many tourists but it actually doesn't and is therefore relatively unspoilt and peaceful. The small trails and old bridle paths that lead through fertile, green valleys and along rugged mountain tracks are definitely off the beaten track. It is a picturesque place where it feels like time stood still.

We exchanged our city life for a life in the mountains, we bought a traditional, stone built cortijo with 2 hectares of land. The house was ready to move in to but the land had been neglected for many years and it needed trees planting, a lot of water and tlc.

One of the reasons we wanted to live in nature was because of our two horses and our desire to go out on long rides. We wanted to be able to just ride out of our own gate into the natural park, and that we found!