Comments on: This Is One To Keep An Eye On http://fistfulofeuros.net/afoe/economics-and-demography/this-is-one-to-keep-an-eye-on/ European Opinion Thu, 04 Dec 2008 02:42:45 +0000 http://wordpress.org/?v=2.6.3 By: Antoni Jaume http://fistfulofeuros.net/afoe/economics-and-demography/this-is-one-to-keep-an-eye-on/#comment-2271 Antoni Jaume Wed, 28 Jan 2004 04:03:17 +0000 http://fistfulofeuros.net/wordpress/?p=283#comment-2271 Hello Edward, I see I've been a little too late. As to the sensitivity of the UK buyer to interest rates, maybe it's because in the UK variable rates were the norm, while here fixed interest were preponderant. Then there is the fact that economical activity in Spain were less advanced until recently, so people may not have internalised the same rules. DSW Hello Edward, I see I’ve been a little too late.
As to the sensitivity of the UK buyer to interest rates, maybe it’s because in the UK variable rates were the norm, while here fixed interest were preponderant. Then there is the fact that economical activity in Spain were less advanced until recently, so people may not have internalised the same rules.

DSW

]]> By: Antoni Jaume http://fistfulofeuros.net/afoe/economics-and-demography/this-is-one-to-keep-an-eye-on/#comment-2270 Antoni Jaume Wed, 28 Jan 2004 03:25:51 +0000 http://fistfulofeuros.net/wordpress/?p=283#comment-2270 One factor that maybe Edward has forgotten, is buyers from out of Spain, in Majorca for example there are about a 10% of Germans residents, but Germans own around a 20% of land. Since Spain is a strong tourism destination, quite a few cases are people that choose to buy a house to go in their holidays, and sometime rent to others. DSW One factor that maybe Edward has forgotten, is buyers from out of Spain, in Majorca for example there are about a 10% of Germans residents, but Germans own around a 20% of land. Since Spain is a strong tourism destination, quite a few cases are people that choose to buy a house to go in their holidays, and sometime rent to others.

DSW

]]> By: Edward http://fistfulofeuros.net/afoe/economics-and-demography/this-is-one-to-keep-an-eye-on/#comment-2269 Edward Wed, 28 Jan 2004 03:21:40 +0000 http://fistfulofeuros.net/wordpress/?p=283#comment-2269 "I think that the worry is that people are buying properties under the assumption that the 20% per year rate would continue indefinitely" This I think is the point. The UK case I accept is very different, why it is that people in the UK are so sensitive to interest rate changes is an interesting question in itself. The UK demographic problem is a lot less serious than the one in Spain. Still the level of indebtedness is worrying, and of course, this one you can't blame on the euro. "Spanish property prices are still pretty cheap" Depends on the region, like the UK. Here in Barcelona they are not cheap, but there is a very wealthy middle class - desparate to find somewhere to put their savings - of course most young people are already priced out of many parts of the property market. I guess if you take the native Catalan population as a discrete group (ie don't count the recent Spanish immigrants), they would be one of the richest communities in Europe. Of course another factor is that part of this construction is for UK pensioners looking for a second home, so in a funny way Spain is intertwined with Britain: when the UK bubble bursts maybe there won't be so many customers coming to Spain. “I think that the worry is that people are buying properties under the assumption that the 20% per year rate would continue indefinitely”

This I think is the point. The UK case I accept is very different, why it is that people in the UK are so sensitive to interest rate changes is an interesting question in itself.

The UK demographic problem is a lot less serious than the one in Spain. Still the level of indebtedness is worrying, and of course, this one you can’t blame on the euro.

“Spanish property prices are still pretty cheap”

Depends on the region, like the UK. Here in Barcelona they are not cheap, but there is a very wealthy middle class - desparate to find somewhere to put their savings - of course most young people are already priced out of many parts of the property market. I guess if you take the native Catalan population as a discrete group (ie don’t count the recent Spanish immigrants), they would be one of the richest communities in Europe.

Of course another factor is that part of this construction is for UK pensioners looking for a second home, so in a funny way Spain is intertwined with Britain: when the UK bubble bursts maybe there won’t be so many customers coming to Spain.

]]> By: Barry http://fistfulofeuros.net/afoe/economics-and-demography/this-is-one-to-keep-an-eye-on/#comment-2268 Barry Wed, 28 Jan 2004 01:44:07 +0000 http://fistfulofeuros.net/wordpress/?p=283#comment-2268 John, I think that the worry is that people are buying properties under the assumption that the 20% per year rate would continue indefinitely. Under that assumption, for example, it'd make sense to buy a property even if one really can't make the payments out of one's income. After a year or so, sell the property at a nice profit, an pocket the increase. If, however, property prices stay flat, people might have to sell at no gain, with their payments merely paying the interest on loan. This could be very bad, for those who were drawing down savings to make the payments. If property values actually drop, then disaster strikes. People lose their savings, and acquire a large amount of debt (even if they can sell, because they sell at a loss). John, I think that the worry is that people are buying properties under the assumption that the 20% per year rate would continue indefinitely. Under that assumption, for example, it’d make sense to buy a property even if one really can’t make the payments out of one’s income. After a year or so, sell the property at a nice profit, an pocket the increase.

If, however, property prices stay flat, people might have to sell at no gain, with their payments merely paying the interest on loan. This could be very bad, for those who were drawing down savings to make the payments.

If property values actually drop, then disaster strikes. People lose their savings, and acquire a large amount of debt (even if they can sell, because they sell at a loss).

]]> By: john s http://fistfulofeuros.net/afoe/economics-and-demography/this-is-one-to-keep-an-eye-on/#comment-2267 john s Tue, 27 Jan 2004 22:34:55 +0000 http://fistfulofeuros.net/wordpress/?p=283#comment-2267 Spain's had "the most horrendous housing boom. Property prices have risen at around 20% per annum during the last three years." Sounds bad alright. But wait, "Here in Barcelona I don't know anyone in this category who has not bought at least one extra property, and normally it's two, three or more." Well, that's only anecdotal evidence but it sounds like Spanish property prices are still pretty cheap. Spain’s had “the most horrendous housing boom. Property prices have risen at around 20% per annum during the last three years.” Sounds bad alright. But wait, “Here in Barcelona I don’t know anyone in this category who has not bought at least one extra property, and normally it’s two, three or more.” Well, that’s only anecdotal evidence but it sounds like Spanish property prices are still pretty cheap.

]]> By: Matthew http://fistfulofeuros.net/afoe/economics-and-demography/this-is-one-to-keep-an-eye-on/#comment-2266 Matthew Tue, 27 Jan 2004 21:38:40 +0000 http://fistfulofeuros.net/wordpress/?p=283#comment-2266 But as you say the UK has had a housing boom despite having a central bank able to set interest rates as it pleases, so are there not other factors involved here? At least on the back of rising prices Spain is enjoying a house building boom, unlike in the UK. But as you say the UK has had a housing boom despite having a central bank able to set interest rates as it pleases, so are there not other factors involved here? At least on the back of rising prices Spain is enjoying a house building boom, unlike in the UK.

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