though in practice this rarely happens).

Fifthly, real estate agent commissions are generally higher in Spain with standard rates between 3% and 5% even rising to 10% or more in some areas. There is furthermore, the effect of exchange rates, for if you purchased selling pounds and buying Euros at a good rate and then sold when the exchange rate was less favourable, you would no doubt lose some of your gain (if there was any).

We are unfortunately at a point in the Spanish property market when distressed sellers, in particular, are having to seriously 'undervalue' their properties to achieve a sale. There still exists a predominant culture of greed and hearsay where vendors' perception of their property's true value is overly optimistic and ultimately, unrealistic. Many are now having to face the fact that they bought badly in the first place and the additional cost of buying, coupled with the costs and taxes payable on disposal negate any margin of profit that there might be. Many are even looking at losses.

Overall, with slower demand for larger Spanish properties, a growing supply of properties for sale in the resale market, m

One of the enduring reasons why Spain remains an first choice destination for holiday-makers, property investors and would-be residents is that the fundamentals that attract people never seem to change. There's the weather with at least 300 days of sunshine annually along the Southern Spanish coastline; Spain remains cheaply accessible from most of Europe especially the UK; it's certainly alot cheaper in real terms; the people are generally accepting of foreigners and speak reasonable English; there's considerable infrastructure for foreigners; taxes are lower; petrol is cheaper. It's no wonder why so many people have invested in Spain. But for those who bought in the last few years when clearly the market has slowed, it's worth asking just what is the true value of some of those properties.

The value of any Spanish property is usually only a concern should you need to sell it. Long-term residents and retirees need read no further. But let's suppose you bought a villa 3 years ago for 500,000 Euros and you paid an additional 7% IVA (Spanish VAT) and another 3% to 4% in notary, land registry and mortgage set-up fees. Your total outlay before you've purchased furniture and completed the garden landscaping is already around 550,000 to 560,000 Euros - 10 to 12% above the 'market' price you paid at the time. (Incidentally, if you had purchased your plot outright prior to your build you would have paid 16% IVA on the plot alone and then 7% on the construction). If you still had to purchase furniture and complete your garden, you could easily find yourself at the 600,000 Euro level before you've acquired your title deeds (escritura) at the notary.

So you need to sell your villa and your investment now stands 20% higher than your purchase price. The latter point is not at all unusual especially with new build property. The general consensus is that prices have risen in the last 3 years which is true to a point but certainly not across the whole market. Indeed, the market for larger properties and especially top-end luxury villas has been difficult for a considerable period and here there has been little, if any, price appreciation in real terms over the last 3 years.

At the time of writing (December 2006) the market is quite simply over-saturated with large detached villas with few buyers in the market for properties over 500,000 Euros. There is a danger in thinking that demand and supply in the Spanish property market is sensitive to the same factors that influence that in the UK. Further analysis reveals that they are quite different.

Firstly, people buy property in the UK for largely different reasons than in Spain. Work and family considerations, affordability, area popularity, proximity to good schools and hospitals and local crime rates generally drive public demand while in Spain, many properties are purchased purely as holiday homes or investments where many of these factors are not as relevant.

Secondly, population densities are much higher and people themselves are less transient in the UK. This naturally keeps people in the same areas for longer and provides a solid basis for property prices as there are always others waiting to enter so-called 'good' areas. In Spain, there is no such pressure or demand for particular areas as the reasons for buying were different in the first place.

Thirdly, both Spanish real estate agent and bank valuations in Spain are notoriously inaccurate. In the UK, advanced systems exist showing property prices, previous sale prices and there is a generally higher level of qualification amongst surveyors. The same cannot be said in Spain where bank valuations, in particular, are often more influenced by the borrowing requirements of the buyer. Generally, Spanish mortgages are offered to non-residents up to 70% or 80% of a given property's value. For would-be buyers without sufficient funds to finance the remainder, unscrupulous agents often manipulate valuers to achieve the right valuation in order that the final loan-to-value is higher than 80%. Factor in the generally low level of expertise and qualification amongst local real estate agents and you clearly have a recipe for arbitrary pricing which in no way helps vendors understand what their properties are really worth.

Fourthly, the differing systems and application of taxation clearly impacts property prices. Spain, being a secondary property market for many people, means buyers are subject to non-resident tax rules. Capital gains tax, currently 35% (for 2006 but probably reducing to 18% in 2007), must be paid to the Spanish exchequer on disposal (although in practice this rarely happens).

Fifthly, real estate agent commissions are generally higher in Spain with standard rates between 3% and 5% even rising to 10% or more in some areas. There is furthermore, the effect of exchange rates, for if you purchased selling pounds and buying Euros at a good rate and then sold when the exchange rate was less favourable, you would no doubt lose some of your gain (if there was any).

We are unfortunately at a point in the Spanish property market when distressed sellers, in particular, are having to seriously 'undervalue' their properties to achieve a sale. There still exists a predominant culture of greed and hearsay where vendors' perception of their property's true value is overly optimistic and ultimately, unrealistic. Many are now having to face the fact that they bought badly in the first place and the additional cost of buying, coupled with the costs and taxes payable on disposal negate any margin of profit that there might be. Many are even looking at losses.

Overall, with slower demand for larger Spanish properties, a growing supply of properties for sale in the resale market, ma

you've purchased furniture and completed the garden landscaping is already around 550,000 to 560,000 Euros - 10 to 12% above the 'market' price you paid at the time. (Incidentally, if you had purchased your plot outright prior to your build you would have paid 16% IVA on the plot alone and then 7% on the construction). If you still had to purchase furniture and complete your garden, you could easily find yourself at the 600,000 Euro level before you've acquired your title deeds (escritura) at the notary.

So you need to sell your villa and your investment now stands 20% higher than your purchase price. The latter point is not at all unusual especially with new build property. The general consensus is that prices have risen in the last 3 years which is true to a point but certainly not across the whole market. Indeed, the market for larger properties and especially top-end luxury villas has been difficult for a considerable period and here there has been little, if any, price appreciation in real terms over the last 3 years.

At the time of writing (December 2006) the market is quite simply over-saturated with large detached villas with few buyers in the market for properties over 500,000 Euros. There is a danger in thinking that demand and supply in the Spanish property market is sensitive to the same factors that influence that in the UK. Further analysis reveals that they are quite different.

Firstly, people buy property in the UK for largely different reasons than in Spain. Work and family considerations, affordability, area popularity, proximity to good schools and hospitals and local crime rates generally drive public demand while in Spain, many properties are purchased purely as holiday homes or investments where many of these factors are not as relevant.

Secondly, population densities are much higher and people themselves are less transient in the UK. This naturally keeps people in the same areas for longer and provides a solid basis for property prices as there are always others waiting to enter so-called 'good' areas. In Spain, there is no such pressure or demand for particular areas as the reasons for buying were different in the first place.

Thirdly, both Spanish real estate agent and bank valuations in Spain are notoriously inaccurate. In the UK, advanced systems exist showing property prices, previous sale prices and there is a generally higher level of qualification amongst surveyors. The same cannot be said in Spain where bank valuations, in particular, are often more influenced by the borrowing requirements of the buyer. Generally, Spanish mortgages are offered to non-residents up to 70% or 80% of a given property's value. For would-be buyers without sufficient funds to finance the remainder, unscrupulous agents often manipulate valuers to achieve the right valuation in order that the final loan-to-value is higher than 80%. Factor in the generally low level of expertise and qualification amongst local real estate agents and you clearly have a recipe for arbitrary pricing which in no way helps vendors understand what their properties are really worth.

Fourthly, the differing systems and application of taxation clearly impacts property prices. Spain, being a secondary property market for many people, means buyers are subject to non-resident tax rules. Capital gains tax, currently 35% (for 2006 but probably reducing to 18% in 2007), must be paid to the Spanish exchequer on disposal (although in practice this rarely happens).

Fifthly, real estate agent commissions are generally higher in Spain with standard rates between 3% and 5% even rising to 10% or more in some areas. There is furthermore, the effect of exchange rates, for if you purchased selling pounds and buying Euros at a good rate and then sold when the exchange rate was less favourable, you would no doubt lose some of your gain (if there was any).

We are unfortunately at a point in the Spanish property market when distressed sellers, in particular, are having to seriously 'undervalue' their properties to achieve a sale. There still exists a predominant culture of greed and hearsay where vendors' perception of their property's true value is overly optimistic and ultimately, unrealistic. Many are now having to face the fact that they bought badly in the first place and the additional cost of buying, coupled with the costs and taxes payable on disposal negate any margin of profit that there might be. Many are even looking at losses.

Overall, with slower demand for larger Spanish properties, a growing supply of properties for sale in the resale market, m

ew buyers in the market for properties over 500,000 Euros. There is a danger in thinking that demand and supply in the Spanish property market is sensitive to the same factors that influence that in the UK. Further analysis reveals that they are quite different.

Firstly, people buy property in the UK for largely different reasons than in Spain. Work and family considerations, affordability, area popularity, proximity to good schools and hospitals and local crime rates generally drive public demand while in Spain, many properties are purchased purely as holiday homes or investments where many of these factors are not as relevant.

Secondly, population densities are much higher and people themselves are less transient in the UK. This naturally keeps people in the same areas for longer and provides a solid basis for property prices as there are always others waiting to enter so-called 'good' areas. In Spain, there is no such pressure or demand for particular areas as the reasons for buying were different in the first place.

Thirdly, both Spanish real estate agent and bank valuations in Spain are notoriously inaccurate. In the UK, advanced systems exist showing property prices, previous sale prices and there is a generally higher level of qualification amongst surveyors. The same cannot be said in Spain where bank valuations, in particular, are often more influenced by the borrowing requirements of the buyer. Generally, Spanish mortgages are offered to non-residents up to 70% or 80% of a given property's value. For would-be buyers without sufficient funds to finance the remainder, unscrupulous agents often manipulate valuers to achieve the right valuation in order that the final loan-to-value is higher than 80%. Factor in the generally low level of expertise and qualification amongst local real estate agents and you clearly have a recipe for arbitrary pricing which in no way helps vendors understand what their properties are really worth.

Fourthly, the differing systems and application of taxation clearly impacts property prices. Spain, being a secondary property market for many people, means buyers are subject to non-resident tax rules. Capital gains tax, currently 35% (for 2006 but probably reducing to 18% in 2007), must be paid to the Spanish exchequer on disposal (although in practice this rarely happens).

Fifthly, real estate agent commissions are generally higher in Spain with standard rates between 3% and 5% even rising to 10% or more in some areas. There is furthermore, the effect of exchange rates, for if you purchased selling pounds and buying Euros at a good rate and then sold when the exchange rate was less favourable, you would no doubt lose some of your gain (if there was any).

We are unfortunately at a point in the Spanish property market when distressed sellers, in particular, are having to seriously 'undervalue' their properties to achieve a sale. There still exists a predominant culture of greed and hearsay where vendors' perception of their property's true value is overly optimistic and ultimately, unrealistic. Many are now having to face the fact that they bought badly in the first place and the additional cost of buying, coupled with the costs and taxes payable on disposal negate any margin of profit that there might be. Many are even looking at losses.

Overall, with slower demand for larger Spanish properties, a growing supply of properties for sale in the resale market, m

anced systems exist showing property prices, previous sale prices and there is a generally higher level of qualification amongst surveyors. The same cannot be said in Spain where bank valuations, in particular, are often more influenced by the borrowing requirements of the buyer. Generally, Spanish mortgages are offered to non-residents up to 70% or 80% of a given property's value. For would-be buyers without sufficient funds to finance the remainder, unscrupulous agents often manipulate valuers to achieve the right valuation in order that the final loan-to-value is higher than 80%. Factor in the generally low level of expertise and qualification amongst local real estate agents and you clearly have a recipe for arbitrary pricing which in no way helps vendors understand what their properties are really worth.

Fourthly, the differing systems and application of taxation clearly impacts property prices. Spain, being a secondary property market for many people, means buyers are subject to non-resident tax rules. Capital gains tax, currently 35% (for 2006 but probably reducing to 18% in 2007), must be paid to the Spanish exchequer on disposal (although in practice this rarely happens).

Fifthly, real estate agent commissions are generally higher in Spain with standard rates between 3% and 5% even rising to 10% or more in some areas. There is furthermore, the effect of exchange rates, for if you purchased selling pounds and buying Euros at a good rate and then sold when the exchange rate was less favourable, you would no doubt lose some of your gain (if there was any).

We are unfortunately at a point in the Spanish property market when distressed sellers, in particular, are having to seriously 'undervalue' their properties to achieve a sale. There still exists a predominant culture of greed and hearsay where vendors' perception of their property's true value is overly optimistic and ultimately, unrealistic. Many are now having to face the fact that they bought badly in the first place and the additional cost of buying, coupled with the costs and taxes payable on disposal negate any margin of profit that there might be. Many are even looking at losses.

Overall, with slower demand for larger Spanish properties, a growing supply of properties for sale in the resale market, m

though in practice this rarely happens).

Fifthly, real estate agent commissions are generally higher in Spain with standard rates between 3% and 5% even rising to 10% or more in some areas. There is furthermore, the effect of exchange rates, for if you purchased selling pounds and buying Euros at a good rate and then sold when the exchange rate was less favourable, you would no doubt lose some of your gain (if there was any).

We are unfortunately at a point in the Spanish property market when distressed sellers, in particular, are having to seriously 'undervalue' their properties to achieve a sale. There still exists a predominant culture of greed and hearsay where vendors' perception of their property's true value is overly optimistic and ultimately, unrealistic. Many are now having to face the fact that they bought badly in the first place and the additional cost of buying, coupled with the costs and taxes payable on disposal negate any margin of profit that there might be. Many are even looking at losses.

Overall, with slower demand for larger Spanish properties, a growing supply of properties for sale in the resale market, many vendors are slowly coming to terms with the fact that their ultimate sale price is considerably lower than that that was initially advertised. It is, after all, only actual sales prices that give us the truest indicator of real property values.