Spain: buy a house, get a free car!

Developers and builders in Spain are offering all kinds of incentives to entice buyers…

According to Kyero.com, Spanish builders are tempting home buyers with free cars, mortgage holidays and hard cash as they try to lift the gloom shrouding the housing sector. Some companies are also diving into the rental market.

At the annual property fair in Madrid last week, the number of promoters was down by a third from the previous year, many of them victims of the deepening housing crisis. With fewer buyers milling around models of white-washed housing estates, there were fewer lines to see sales representatives.

Javier Roca de Togores, managing director of Zapata, commented: "Since the end of the summer, movement in the market has been very, very slack, and we have seen huge falls of around 70 or 80 percent."

A shift to renting

With prices of existing Spanish houses down by more than 4 percent since peaking in mid-2007 and the market still overvalued by up to 20 percent, according to the International Monetary Fund, some companies are shifting to rental properties.

Brokers say U.S. and northern European funds are snapping up coastal plots for 20 percent to 25 percent less than the asking price and new apartment prices, even in Madrid, are down 15 percent to 20 percent on average - a trend yet to show up in official price data.

As the rental market accelerates, these buyers may benefit. Spain has built more than five million new houses in the past decade, taking the stock of existing homes to 24 million, because of economic growth averaging 3.8 percent, historically low interest rates and an influx of immigrants to cities and foreigners to the coastal regions.