According to Premier Marbella news sources, almost seven out of ten property transmissions were made without mortgage between January and March, according to a report by the General Council of Notaries. The leverage of banks, economic uncertainty and tightening conditions have led to this decline in the number of mortgages approved. Only 32.7% of property purchase transactions in April were with a mortgage. Continue reading
According to Premier Marbella news sources, it is six years since the price of second-hand property in Spain reached its maximum values. In April 2007 it stood at € 2,952 / m² and since then has not stopped falling. There are already 73 months of declines in prices to € 1,794 / m² which is the value it stood at in May, according to data analyzed by the IESE business school. Leading Marbella property specialist Romano Keogh is confident that this news will animate overseas buyers to invest in a property in Marbella.
According to Premier Marbella news sources, Property sales fell by 12.6% in March from the same month in 2012, to a total of 22,086 transactions, the lowest figure since April last year, when property transactions just topped 21,500, as reported by the National Statistics Institute (INE). The March decline comes after three consecutive months of annual increases and may be a consequence of the end of the tax benefits for home ownership since last January.
The partner of PricewaterhouseCoopers (PWC) responsible for real estate, Juan Velayos, believes that the price of housing in Spain “is bottoming out” and all indications are that this year and next year the trend is “flat”. However, Velayos dared not specify when property prices would rebound. Also the representative of PWC said that Spain is about to reach the “change curve” and stressed that financial institutions, the public and the management company of assets from bank restructuring (SAREB) have “an obligation to cash in and deleverage assets.”
In his view this will create “ample opportunity” in the Spanish housing market. “We are going to see something that has not been seen in recent years, which is ‘’mass transactions”. In mid-February PWC published its report ‘European real estate market trends 2013’ where the consultant claimed that forced sales of banking stock will be one of the main elements for the sector this year and also investment syndicates are preparing funds for opportunities.
Under the new business plan Sareb intends to sell the 98,000 homes, a portfolio valuing 13,600 million euros, returning an average price value of 138,775 euros per property. The plan anticipates price declines through 2015, a subsequent stabilization and the beginning of recovery in 2017. Moreover, the plan devised by KPMG cuts sales expectations in the first year from 1,500 million, the figure announced by Minister Luis de Guindos to 1,100 million, down 25%.
Thus, the 139,000 euros would be well below the average price of a home in Spain, now 160,000 euros according to the Ministry of Development. Evidently this way the higher & lower prices are hidden, as Sareb has homes of different sizes, located in large cities, towns and coastal areas. Bear in mind that property transferred had to be above 100,000 euros in actual value prior to any of the applicable reductions of Sareb which was done at a discount of 54.2%. In other words the bad bank paid 45,800 euros for an apartment that the rescued banks had valued at 100,000.
2012 accounted for more than 274,000 mortgages, but nevertheless there were a further 44,000 sales transactions (ie, 319,000). This means that 13.8% of home purchase operations that were conducted in 2012 did not require mortgage financing. By contrast, in 2011 there were more mortgaged purchases and specifically 11.9% more mortgages granted. The demands of financial institutions make a large number of young people unable to access mortgages.
According to the business director of Bankimia, Sergio Fernandez, “we are in an environment of strong credit crunch that makes financial institutions very demanding when granting a mortgage so a large number of young people who are unemployed or in temporary employment are excluded. Another barrier outlined by Bankimia for this group is having to contribute funds of up to 20% of the property value.
With this situation, Sergio Fernandez adds “the return of deposits and other savings products is not very attractive and the price of housing, especially in certain areas and for certain uses (second homes) has decreased considerably during the crisis” opening a door to cash rich investors who can find very attractive offers in the real estate sector.
BBVA ‘Research’ believes that the huge stock of homes for sale in Spain will be reduced “modestly” this year, in the wake of 2012. However, it considers that the adjustment for the supply side has been “significant”, and could be close to an end as a result of the “strong” reduction in the number of new housing projects and employment in this sector. BBVA finds a “strong” dynamics in housing demand by foreigners and believes that it could be further strengthened this year, “once the uncertainty in financial markets has dropped and the will be a greater appetite for risk”.
However, the bank president Francisco Gonzalez adds that these factors do not mean that in the coming years there will be a “vigorous” investment recovery, as the cumulative oversupply remains important “but that adjustment is being corrected”. In fact, residential investment is estimated to contract by around 8.3% in 2013. According to the banks estimates, it will be from 2014 when the market begins to record positive growth rates but moderate (+2.1% for the full year), after seven years of declines and a cumulative contraction of over 50%. BBVA also indicates that the real estate industry will face new circumstances that will add uncertainty such as the restructuring of the financial system, the implementation of the Sareb, eliminating tax breaks for the purchase and the increase in VAT on housing reform tenancies Act and the new regulations for Socimi.
JP Morgan Chase outlined in a report the actual disposition of the authorities and the private sector to negotiate and sell assets at lower prices to satisfy liquidity needs. The investment bank stressed that so far the bank was not willing to part with assets below the level of provisions, thus assuming an additional loss.
They also predict that the authorities, entities and individuals will successfully sell assets in the coming months purely because vendors “are clearly willing to accept lower prices to close deals.” They see banks more realistic about the future value of these assets, after the impact of tax increases and an end to tax deductions.
The report also notes that JP Morgan product will hit the market at below cost of construction values, which in their opinion will make Spain “a country with opportunities for bargain property hunters.” Although the U.S. entity believes the Spanish property market recovery will come from exterior sources given the current difficulties with accessing credit in Spain.
The Spanish housing stock has depreciated 1.1 billion euros in the last four years, from 5,713 billion euros to 4,600.9 billion euros, or 19.5% less, and, according to a study by the appraiser Euroval, in this period the net balance of housing has increased by one million units. The report reveals that in this period the housing stock has increased by 4% and its value has been reduced by 20%, with Madrid being the region where housing has depreciated most (by 25%), and Extremadura where it has depreciated least (by 7.4 %).
According to the study, between 2011 and 2012, Spanish properties as a whole have depreciated by 7.42%. “Housing wealth is very relevant to economic decision-making and affects the capacity for borrowing, saving and consumption,” the report says. The equity increase in Spain is not mainly due to the number of dwellings, but the prices, because the value grew annually at rates in excess of 20%, while the number of dwellings grew at a similar figure (24%) for the entire decade. The sale of homes was down 11.3% in 2012. However, this figure rose year on year in December after three consecutive months of falls. According to figures from the National Statistics Institute (INE), achieved sales transactions in the last month of the year reached 23,523 units which was up 2.3% on the same period last year. Records are based on statistics from the Property Registry Office.
The number of mortgages in November on housing in Spain fell by 31.6% (annually) to 19,115 units. According to the National Statistics Institute (INE), the figure is similar to that of the previous month and continues in the ‘minimums zone’ since statistics started. The data refers to dates when property sales increased confirming the idea that more and more property is being bought in cash. There was a time when the number of monthly mortgages far exceeded the number of property sales. This occurred because mortgage activity was even higher than the buyer, as there were numerous mortgage transactions that were linked to a purchase (refinancing, for example).
However for some months now the data from the National Institute of Statistics (INE) shows a turnaround. According to the latest data from INE the number of sales was 25% higher than mortgages. In 2007 the situation was reversed, as the number of mortgages was 50% higher sales. The fall in house prices coupled with the increase in spreads on mortgages is prompting more homes to be purchased with cash. This phenomenon is occurring especially in the affordable housing sector, where some buyers may get to purchase without availing of a mortgage (average interest rates grew up to 4.39% in November). This has also allowed the average amount per mortgage is falling less than the price of housing. Thus, the average mortgage fell only by 4% year on year, when property is down over 10%.