The problems sweeping through the construction and housing industry in Spain has claimed a fresh victim as regulators suspended trading in the shares of Inmobiliaria Colonial, (IC) the country’s second biggest property empire.
The move came after IC’s share price plummeted 42% in two days following the abrupt resignation of its chairman, Luis Portillo. The key shareholders on the company’s board stepped down also soon after.
IC joins a string of Spanish property groups that have either run into severe trouble or gone bankrupt over the past few months. Llanera and Ereaga have both suspended debt payments, while Spain’s largest property group Sacyr has lost 40% of its net worth.
Property prices are now falling in Madrid, Barcelona, Valencia and Seville, ending a spectacular boom that made Spain the hottest market in Western Europe for a decade. Over 700,000 housing units were built last year, more than in France and Germany combined.
The root cause of the bubble has been interest rates, which since Euro membership were slashed well below Spain’s rate of inflation. Now as Euro interest rates are rising, Spain’s economy is slowing and it desperately need lower interest rates.
Colonial is now frantically selling off assets to raise cash, including a Barcelona tower block and a group of warehouses for €309m (£230m). It is seeking buyers for its 15% share in the Spanish builder FCC, and for part of its stake in France’s Societe Fonciere Lyonnaise.
Breakneck expansion has left the group with debts of €8.9bn, equal to 67% of total assets. While it was able to raise €6.4bn in September 2007 from a consortium of banks led by the Royal Bank of Scotland and Goldman Sachs, the interest rate for much of the debt was high, priced at 4% over Euribor.
Engel East to build 100 luxury apartments in central Prague
Engel East Europe NV, the AIM-quoted Central and Eastern European residential property developer has announced that it has formally completed the agreement to purchase a significant parcel of land in Prague, as announced on 29 August 2006.
The Company intends to develop approximately 100 high-end residential units, with a total area of approximately 9,000sqm on the acquired land. The site is located in Troja, one of the most exclusive parts of Prague, and close to the Valtava River and palace gardens.
Engel estimates that the development will generate projected sales of about €25m, meaning that the cost of an apartment will average €250,000.
The total purchase price of the site was approximately €5m. Eitan Padan, CEO of Engel said: “This is a significant step forward for the company under its new leadership and ownership. The project reflects the increased emphasis Engel is placing on high-end projects. The company will continue to invest in high quality parcels of land with the aim of developing prestigious projects in the Czech Republic, along with other markets in the CEE region.”
Bulgarians have lowest purchasing power in the EU
Bulgarians have just 37% of the EU27 average when it comes to purchasing power according to the latest report from Eurostat, which assessed EU spending power in 2006.
Luxembourg came top of the list with 280% of the EU average, making them seven times richer than Bulgarians, while Ireland was nearly 50% above the average. The Netherlands, Austria, Denmark, Sweden and Belgium were 20-30% above the average.
The UK, Finland, Germany and France recorded figures between 10% and 20% above the EU27 average, while Spain, Italy and Greece were around the average.
Cyprus and Slovenia were 10% below the EU27 average, while the Czech Republic, Malta and Portugal were between 20% and 25% below. Estonia, Hungary and Slovakia were about 35% below the average, while Lithuania, Latvia and Poland were between 40% and 50% below the average. Romania and Bulgaria were around 60% below the EU27 average, with 39% and 37% respectively. Both countries scored 35 units in 2005.
However, other countries in the region that have not joined the EU saw their scores decrease in 2006, Serbia and Montenegro scored 33%, Turkey 31%, Macedonia 28%, Bosnia-Herzegovina 26% and Albania 21%.
Fastest growers from 2005 to 2006 were Estonia, up from 63 to 69%, and Latvia, which went from 50 to 54%. Luxembourg’s relative richness was partially thanks to large numbers of cross-border workers who contributed to the GDP, but were not taken into consideration as part of the resident population used to calculate GDP per inhabitant.
The purchasing power standard is an artificial reference currency unit that eliminates price level differences between countries. Thus one unit buys the same volume of goods and services in all countries.
Italy catching Spain as favourite country for second home
Recent figures from Foreign Currency Direct property portal show that overall enquiries for property in Italy in November 2007 are increasing, accounting for 19% of the total with only Spain receiving more with 27% of enquiries.
One of the most popular areas in Italy with buyers at the moment is the Lakes. This is a popular destination both in the summer and in winter for the skiing. Rental returns are reported to be 5-9% with few void periods. Another popular area is Western Liguria, which is closer to the sea.
Linda Travella of Casa Travella, reports a record number of sales of homes in Italy to UK citizens in October of last year.
Travella says the buying frenzy in Eastern Europe has slowed down: “The market has now turned on its head and reverted back to investors looking for established countries such as Italy where there is a track record of capital growth and rental returns. Within two to three years of these new countries coming onto the market, buying figures show that the tide has turned and that established countries are where investors choose to put their money.”
Worldwide News
Hong Kong property transactions up by 47% in 2007
Hong Kong had 145,691 property purchases agreed in 2007, up 47% on the year before, the Land Registry of Hong Kong, announced last week.
The total volume of transactions recorded was up by 66.8%, over 2006, to HK$526bn (US$67.5bn). However, when compared with 2005, the value of transactions rose by 32.9%, highlighting the slowdown in the market that took place in 2006.
China to add and upgrade 270,000km of rural highways in 2008
China is set to build and upgrade 270,000km of rural highway in 2008 in a move to further modernize the country’s transportation system in its vast rural areas, said Chinese Communications Minister Li Shenglin on 6 January.
“The central and local governments will continue to allocate funds to support the improvements for countryside highways and improve the quality of construction this year”, Shenglin reportedly said at the ministry’s annual conference in Beijing.”
Statistics from the Ministry showed that the country built and upgraded a record-breaking 423,000km of countryside highway in 2007, and 98.54% of China’s villages and towns had been connected to a highway by the end of 2007.
China started large-scale countryside highway building and upgrading in 2003. In 2006, 320,000km of rural highway were built and revamped nationwide.
Kuwaiti government slashes corporate tax
Foreign companies, real estate agents and property investment companies investing in Kuwait will no longer be faced with a 55% corporate tax bill after the National Assembly approved a 40% cut in the tax rate for overseas firms.
At the end of December 2007, the government decided to cut the tax bill for international companies to just 15%. The taxation bill, which hopes to encourage investment in Kuwait, will also exempt foreign companies from all profits made from trading in stocks that are listed on the Kuwait Stock Exchange.
Florida developers auction luxury apartments with no reserve price
Two developers from Florida are putting their new-build properties on the auction market with no reserve prices and no minimum bid. The luxury apartments at the two developments in Florida will be sold to the highest bidder however low that bid may be.
The January sale starts at 11am on the 19 th of January when Stirling Sotheby’s International Realty, in association with The British Homes Group, will hold a live auction on the premises at Lely Landings in up-market Naples, on Florida’s west coast.
Twenty-seven, 3-bed homes of at least 1,600 sq ft will be auctioned individually. Alternatively they can be bought as a bulk purchase.
All have integral garages and are set on 3.4 acres of land, situated 5 miles from the beach. A typical 3-bed apartment up for auction was independently valued in November 2007 for $393,000 (£196,500).
A week later on 26 th of January, Stirling Sotheby’s will auction 30 brand new units at Oceanwalk Condominiums in the south beach area of New Smyrna Beach on Florida’s Atlantic east coast. Again the units, which range in size from 1,350-2,050 sq ft and are currently on sale for $250-440,000 (£125-220,000), will be sold on site to the highest bidders with no reserve and no minimums. The 30 apartments are also available on a bulk purchase agreement. New Smyrna Beach is the nearest beach to Disney World, Sea World, Epcot Center and Universal Studios, which is just over an hour and fifteen minutes away.
Potential buyers can register online at: www.stirlingsir.com/auctions/preview.htm and join in the live auction online or by calling UK freephone 08000 518 893.
Stirling Sotheby’s has formed an alliance with The British Homes Group (BHG) for arranging financing for British, European and other foreign nationals buying in the US.
Virginia Cowie, owner and managing director of BHG says: “This dramatic move by two of Florida’s top developers is a stark indication of a desperate sellers’ market and therefore how strong the buyers’ market is for Florida property. These are certainly quality developments in great locations, so with the Euro’s record high against the Dollar, and Sterling’s 26-year high against the Dollar, the British property investor has a great opportunity to take advantage of these highly motivated sellers in the US. If you’re looking for a well-priced villa or apartment, this is probably the ideal time to get one.”
There are further indications that now is the time to buy. The Orlando Sentinel, the business newspaper of the region, reported on 28 th December 2007 that Florida’s economy should hit a low point within the next three months and then begin a long, steady climb upward.
