Spanish REITs A New Way to Invest in Spanish Property

Spain is a well-established overseas destination to invest in property and a prime favourite with investors from the UK – the Foreign and Commonwealth Office estimates that around 1 million Britons own a property in Spain. However, after a decade (1996 to 2006) of spectacular price rises when property values increased by a huge 190%, the Spanish property market is currently suffering from a downturn.

In an attempt to kickstart the property market and maintain investors’ interest in the country, the Spanish government has drafted new legislation for the creation of real estate investment trusts (REITs). Known as Sociedades Cotizadas de Inversión en el Mercado Inmobiliario in Spanish, the REIT legislation is expected to become law during the first half of 2009.

As a company, a REIT owns and operates real estate properties, and must regularly distribute a large percentage of its income as dividends to investors. In return, REITs enjoy substantial tax breaks. REITs were created in the US in 1960 as a vehicle to allow large-scale investment in property and currently represent an important segment of the US economy. US REITs have experienced a rise in their equity market capitalisation of over 30% in the last 10 years. REITs are also popular in the UK and Australia.

Mallorca Property Market Report

Well it’s been a pretty interesting year to date with the current credit crunch adding further fuel to an already depressed market. The oversupply of Spanish property at the bottom to middle end of the Spanish property however the Balearic Islands and especially Mallorca has faired better than the rest of Spain explained Nick Stuart managing director of Spanish Hot Properties, Spain’s number one internet based real Estate Agency. Whilst mainland Spain has had price falls of 9% prices in the Balearics held up better than on the mainland, falling by only 4.4%. According to a recent Tinsa report

“The forward thinking government of Mallorca through its planning laws and not allowing an over supply of housing stock has helped to keep Mallorca as a the premier place to buy Spanish Property in Spain” explained Nick. “Obviously no place is currently immune from the credit crunch and European wide housing market crash but Mallorca is weathering the storm better than most” Said Nick

However at the bottom end of the market for property in Mallorca you are now beginning to see unheard of Bargains with Taylor Woodrow Espana leading the way with price reductions of up to 30% on last years prices of newly built property and not just at the bottom end of the market either. However the top end of the market is still strong and property prices don’t tend to reflect the bargain prices that can be achieved up to the €600,000 Euro price level explained Nick

Five arrests in latest real estate corruption case in Spain

At least five arrests have been made in the latest case of real estate corruption in Spain, this time in Librilla, Murcia.
Among those arrested is the ex civil servant Luis Cano García add his wife, with a town hall technician.

The investigation is being carried out by Instruction Court 6 in Murcia, investigating possible crimes of bribery, perversion of the course of justice and of deals prohibited for public workers in the Librilla Town Hall.

A search has also been carried out in the offices of the Presidency of the Murcia Regional Government where Sr. García worked, as well as in the Librilla Town Hall and the offices of a local municipal company in both Librilla and Los Alcázares. Some private homes have also been searched.

Spanish real estate debts turn toxic

Spanish banks wisely shunned the toxic financial instruments that crippled several of their international peers. And they can meet their wholesale funding needs with the help of €150bn ($191bn) in emergency Spanish government guarantees and asset purchases.

But Spain’s banks and cajas (the unlisted savings banks) cannot avoid the impact of their domestic property crash.

They are exposed not only to mortgaged homebuyers but also to thousands of struggling property developers and construction companies.

As developer after indebted developer collapses and hands over devalued property projects to creditors, the issue of bad real estate debts has emerged as the biggest threat to the health of the Spanish banking system, according to senior bankers and regulators.