The energy certificate will be approved in January and will be compulsory when acquiring or renting a property from April on.

From April on, anyone selling or renting a property built before 2007, will need a certificate of energy efficiency. According to the Ministry of Industry, the royal decree draft which includes this document will be approved this month and will have an adaptation period of two months, and therefore will be demanded by the government from April on.

This is a requirement established by Brussels which should have been approved on the 1st January. The Ministry of Industry is now assuring that the royal decree draft will be approved this month, but if the approval period is not respected, then most probably Spain will have to assume a fine from Europe.

After the coming into force of the new legislation, any owner in Spain who wishes to sell or rent his property will need to have this certificate available for the buyer and/or tenant. Only those buildings which are considered protected monuments, cult places or housing buildings with a rental agreement for less than four months per year, among others, are free from this obligation.

Any property will have a tag similar to the ones already used on electrical appliances which indicate how efficient they are when it comes to energy consumption. Currently this tag is already used in recently built houses, classifying each property with a color code based on a scale from category “a” (the most efficient) to “g” (the least efficient).

Source: Idealista

Sareb signs up its directors of operations and audit.

The bad bank (Sareb) has speeded up the hiring of executives and is working on the signing up of its two main executives: Alfredo Guitart, general director for Means and Operations; and Orlando García, as general director of Internal Audit. No comments have been made from Sareb on these two appointments.

Guitart comes from Ono, where he met Belén Romana, president of Sareb, and was in charge of the internal audit. Romana was in the telecommunications company from 2008 to 2010, managing the strategy and operative control of the group.

García arrives to the bad bank after a long experience in the financial sector. He started at Banco Exterior and Argentaria, as director of internal audit. He was director of Strategy, Regulatory Compliance and Internal Control at BBVA, and was a member of the Board of Directors of Uno-e and Dinero Express. After his exit from the bank presided by Francisco González, in 2006, he joined Governanza Consulting as a managing partner. He represents the Restructuring Fund (Frob) in the Board of Directors of Catalunya Banc since 2011.

After these two signing ups, the bad bank still has to make some of its main appointments: asset management, financial, legal and risks.

Sareb started on the first of January with only six employees, opposite to the hundred professionals it will need to have once the asset management company is set up.

Romana´s number two is Walter de Luna, who was in charge of ING Real Estate in Spain and Portugal until two months ago.

Last December, Sareb also appointed Oscar García Maceiras as secretary. He was adviser-secretary of Banco Pastor and director of institutional legal advise of Banco Popular.

Source: Expansión

The bad bank is negotiating the entrance of foreign funds as consultants.

The relationship between Sareb and the foreign investors is a history of ups and downs. After the constitution of its initial capital without the presence of these actors, Sareb continues negotiating with them to hire them as consultants without ruling out their entrance as shareholders in the next capital increase.

The bad bank has received in the last weeks an offer of joint counseling from the funds Cerberus, Fortress and Centerbridge, according to sources close to these investors. Nevertheless, Sareb has declined the offer based on differences on the economic terms and has requested a new separate offer from all three funds. They would receive a commission for this work.

With this offer, the international investors would like to assure that the structure and strategy of the bad bank is to their liking. Cerberus, Fortress and Centerbridge proposed in December the contribution of between 150 and 200 million Euros to the capital of the bad bank, but with the condition of having the opportunity to influence its management.

This contribution would have placed them as one of the five main private shareholders of the bad bank, after Santander (660 million Euros), CaixaBank (476), Sabadell (264) and Popular (227), which have contributed with shares and subordinate debt. Above them stands the Restructuring Fund (Frob), with 44% of the capital.

At the time Sareb decided not to accept the conditions of the three foreign funds and decider to obtain this capital from insurance companies.

“It is normal that Sareb defends the interests of its main shareholders, the great Spanish banks, but at some time it will have to align its interests with foreign investors, as we will be the ones who will acquire its assets during the next 15 years”, representatives of one of the agencies declare.

The discrepancies between the bad bank and the foreign investors started after these ones asked for a seat in the Board of Directors of Sareb, a petition which was rejected by Frob.

The arrival of foreign investors is essential of the international credibility of Sareb, this is why it has hired Goldman Sachs, Citi, Barclays Capital, Nomura, Santander and N+1 in order to look for common ground with the funds. Among the offered possibilities, one is to allow the shareholders of the bad bank to have access to the information on the assets the company is planning to sale before their competition. The Government has also assured some tax benefits for the bad bank and its assets, having the intention of turning the company into a fund, in order to optimize its taxation and attract investors.

Sareb will face its acid test in a month, with the capital increase it will need to carry out in order to receive the assets from group 2 (BMN, Liberbank, España-Duero and Caja 3).

These institutions will transfer around 15.000 million Euros in properties and toxic credits, so that Sareb will end up with a volume of 52.000 million Euros. In order to increase its size so drastically, the bad bank will need to obtain around 1500 million Euros in capital, 660 million Euros of which will need to be contributed by Frob while the rest, 840 million Euros, will need to be contributed by private investors.

The three funds which have made a proposal to Sareb have a long career path in Spain.

Cerberus acquired in 2012 a portfolio of 350 million Euros in mortgage loans from Santander.

Fortress, in that same operation, acquired 1000 million Euros in consumer loans and has established its platform, Paratus AMC, in Barcelona.

Centerbridge burst in Spain at the end of last summer with one of the biggest operations of the last few months: the acquisition of Aktua, the subsidiary of Banesto for recovery of failed loans, for 90 million Euros.

Source: Expansión

Ing Direct and Uno-e shoot up the prices of their mortgages.

As seen on January 2012, banks are taking advantage of the beginning of the year to revise their price policies; unfortunately for the consumer, this has always been done upwards. In the last few hours, Ing Direct and Uno-e have increased the price of their mortgages considerably.

The orange bank has increased from Euribor+1,89% to 2,69% (for clients of the institution), and placing the prices for non clients at Euribor+3,49%.

Uno-e, the online bank of BBVA, has also increased the price of its mortgages, increasing the differential from 2,20% to 2,70%, a very similar level to Ing.

There have been no movements from other bank for the moment, such as openbank (differential of 2%) or ibanesto (2,24%), both subsidiaries of Banco de Santander, although most probably it will not take very long before they do it.

With these modifications, online banks are no longer the most competitive offer in the Spanish mortgage scenario, getting further away from the offers made by some banks through their net of offices (without mentioning the mortgage offers of their own properties). As usual, it is necessary to compare offers in depth, as some institutions establish limits as high as 4,50% or great entailments.

If we compare the Euribor of December 2012 (0,549%) and the one of the previous year (2,004%), we can see that the fall means a reduction of the reference interest rate by 1,455 percentage points, curiously very similar to the increase of differentials applied by these banks in this same period of time. In January 2012, Ing Direct was offering mortgages with a differential of 1,24%; we can therefore say that the new mortgage holder would pay exactly the same today as he was paying last year, even if the Euribor has dropped dramatically.

The problem for consumers is that the Euribor will most probably fluctuate upwards, having a negative impact on its periodical revisions, while differentials are fixed. This means we will have mortgages with worse conditions.

As an example, for a mortgage of 150.000 Euros at 30 years, an increase in the differential of 0,50% can mean an increase in the cost of approximately 485 Euros per year (it will depend on the fluctuation of the Euribor), which would mean paying 14.560 Euros more in total, nearly 10% of the total mortgage. If we make the calculation with an increase of 1,50%, it will mean around 1440 Euros more per year or more than 40.000 Euros at the end of the life of the mortgage.

Source: Idealista

Banks are selling seized properties at bargain prices but…. with the former owners inside.

The hurry of banks to sell their properties as soon as possible is leading to some strange situations. It is common practice nowadays to “sell properties without possession”, which consists of the pre-sell of a seized property by the bank, but with the owners still residing in it, awaiting normally an eviction. These sales are therefore made at a lower price.

This operation seeks the optimization of the allocation through the payment of less taxes and maintenance costs. The buyer knows he has given a deposit for a house with tenants, receiving in exchange a bargain price, but he has to wait for a certain period of time before being able of occupying the property.

Fernando Acuña, managing partner of Taurus Ibérica, declares that this type of sale is known as “sale of a property without possession”, and it takes place in allocated properties with tenants awaiting their eviction, after the auction finishes without a purchaser.

Any person can have access to these sales, but they are normally taken up by investors used to these practices with no fear of entering such an operation.

The process of property sales without possession is as follows:

  • The buyer gives a deposit, which varies from bank to bank and which can be around 3000 Euros or 15% of the total value of the house.
  • The seller takes the responsibility of allowing the entrance of the buyer to the property after a certain period of time, after the eviction has taken place. There are also temporary contracts, of around six months, where after this period of time it is possible to renovate or cancel the process. If the latter happens, then the buyer would receive the deposit back. This contract would be renovated every six months because it is not possible to know in advance how long the eviction process will take.

Another possibility would be when the bank offers the buyer the possibility of assuming the cost of the execution of the eviction in exchange for a more attractive price. This means that the buyer needs to hire a lawyer and an attorney in order to carry out that process.

This type of sale is a “blind purchase”, as the individual interested in a property cannot find out if the house is in a good condition nor can he know how he will receive it. This is why the price is so interesting, as it is accepted that the new owner will need to refurbish the property. According to Fernando Acuña, there are individuals who do not mind taking such a risk because they know that if the property goes into the market, it will be sold immediately.

Another way of getting rid of properties as quickly as possible would be to sell them before the legal auction takes place. If the financial institution succeeds in selling the property, then it can cancel the pending debt. As an example, if the bank sells a property for 100.000 Euros, but with a mortgage of 150.000 Euros, those 50.000 Euros are cancelled from the debt of the mortgage owner. Financial institutions save on registering costs, on taxes, like the real estate tax, or on maintenance costs of these properties.

Financial institutions also resort to a credit cession with a grace period: the bank sells the mortgage debt and the right of recovery to a third party and before the auction, in exchange for a discount, or forced sale. This consists in transferring the property to a third party with a discount after the auction and the third party can be the real estate subsidiary.

Source: Idealista

The rural properties, a wealth reserve for investors.

In a scenario of drop of sales within the real estate sector, there is a product which keeps its demand, avoiding the fall of prices. Those are the rural properties.

According to a report drawn up by Tecnitasa, the average price of homes in Spain has dropped in the last five years, around 31%, while the price of rural properties has only decreased in 7%. “Housing reached its peak in the second half of 2007, starting to drop from that moment on. Nevertheless, the rural properties continued increasing their prices until the beginning of 2010.”

This drop in prices has not slowed down operations as it has in the rest of the real estate sector. While the number of mortgages on homes has dropped more than 82% in the last six years, the drop on rural properties has been of around 55%.

“It is surprising that, according to the National Statistics Institute, the number of mortgages on rural properties has dropped by more than 20% in the last year, but the amount of them has seen an important increase, in percentages which had not been seen in the last six years”, Tomás González, director of Rural Properties at Tecnitasa, explains.

“Those properties in Madrid and surroundings with more than 200 hectares are easier to sell than an 80 square meter apartment”, Jorge Villalón, manager at Fincas Villalón, assures. “The are customers who commission us to sell rural and residential properties in cities and are only able to sell the first ones”, he adds. As with most of the real estate products, there are many different types of properties and prices within the rural properties, which are established depending on the area. “These are very mixed products with prices that go from 2500€ per hectare in dry land in Aragon to 300000€ per hectare in greenhouse farms in Andalusia.”

This diversity also affects the different types of buyers. “There are two profiles: the farmers, who demand plots for agriculture and livestock; and investors, which are mainly interested in the farming activity”, Tomas Gonzalez explains.

The crisis has not eliminated property buyers, but has changed their profile. “Weekend getaway properties do not interest developers anymore, who are now the sellers, and are seducing top executives in international banking who are interested in investing in rural assets”, Jorge Villalon comments.

These new owners look, in general, for properties located near the main capitals like Madrid, so that they can use the property as a second residence. “Before the crisis, people were looking for properties of 2000 hectares. Now, they do not want those dimensions, but something smaller at a distance of maximum two hours from Madrid by car”, the owner of Villalon stresses.

Source: Expansión

Real estate investment in Spain drops by 45% in 2012.

The drop in prices and the need of banks and great companies to obtain liquidity through the sale of their assets have not been enough to boost the real estate sales in the Spanish market.

In 2012, the non residential real estate investment decreased in 45% reaching 1806 million Euros, according to the Real Estate Area at Deloitte. This investment was divided into 52 operations, among them the acquisition of the headquarters of BBVA in Barcelona by the owner of Inditex, Amancio Ortega, which was finalized in the last days of December. The total amount of this acquisition was around 100 million Euros.

The office segment is precisely, along with main street premises, the one providing a higher volume, around 505 million Euros, although still very far from the figures reached in previous years. In 2011, this real estate area registered a volume of 970 million Euros, 400 million of which corresponded to one single operation: the acquisition of Torre Picasso by Pontegadea.

In hotels, there have been ten purchase operations, with an investment volume of 295 million Euros, 64% less than on the previous year. The acquisition of Hotel Barceló Raval by the German fund Union Investment, who paid 40 million Euros, stands out in this area.

As for malls, acquisitions have dropped by 47% down to 1051 million Euros. The acquisition of the mall Avenida M-40 in Madrid by the Venezuelan group Sambil for 17 million Euros stands out.

Source: Expansión

Fitch thinks that prices of properties will drop by 15% and that delays in mortgage payments will boost up to 11,4%.

The credit rating agency Fitch considers that the price of properties in Spain will drop by an extra 15% due to the unfavorable conditions of the Spanish economy, as included in a report on the mortgage residential market, where he estimates that the delay in payments can reach 11,4% in Spain.

Fitch explains that, since the crisis started, the sales in the real estate sector have dropped by 70%, while prices have only done so by 25% (33%, according to Tinsa), a downward tendency which should continue due to surplus of around one million homes, the great number of evictions carried out in 2008 and the credit restriction because of the deleverage process of banks.

“It will take many years to absorb the stock of homes even if sales reach levels prior to the crisis”, the agency assures on the situation of the Spanish market.

In general, the agency stresses that there are “considerable worries” on Spain, Portugal, Greece, Ireland and Italy, countries which will have “depressed mortgage loans, continuous decreases of property prices and pressures on incomes and trust of consumers.”

Fitch foresees the greatest drops on property prices in these countries due to the fragile forecast of credit availability, the unemployment, the economic growth and the consumer trust. Property prices will fall by 13% in Italy and Portugal, 15% in Spain and Greece and 20% in Ireland.

On the other hand the agency expects the delays in payments to increase (for mortgages and other credits) in countries such as Spain, Portugal and Italy, due to the increase in evictions and bankruptcies, the high unemployment and the macroeconomic uncertainty. It will reach 11,4% in Spain, 9,9% in Portugal and 9,1% in Italy, figures which are still far from the 21% in Ireland and 18% in Greece.

Fitch claims that the Spanish mortgage market will deteriorate “greatly” during 2013, due to the discouraging forecast on unemployment and the loss of subsidies for long term unemployed with mortgages. On the third quarter of 2012 (last figures of the Bank of Spain), the country registered a delay in payments for mortgages of 3,63%, around 23227 million Euros.

On the other hand, it does not see an increase in interest rates on the short term and hopes they will remain at their historic minimum rates in order to avoid further evictions. Unemployment will therefore be the main cause for default in 2013.

“Nevertheless, the Spanish real estate market is extremely vulnerable to an increase in interest rates on the long term”, Fitch stresses, as most mortgages in Spain are linked to the Euribor.

Source: El Mundo

Most of the Spaniards believe that property prices will continue to fall.

Not only the real estate market experts believe that property prices will continue dropping, in spite of the adjustment of 30% experienced since the beginning of the crisis. Spaniards believe it as well. According to the last Consumer Trust Indicator (CTI) published in December by the Superior Center of Scientific Studies, more than half of the interviewees (52,7%) believe that property prices will continue falling for the next 12 months. Another 37,1% believes that prices will remain unchanged. Only 4,9% foresee an increase in prices.

These percentages, compared to the figures of November, indicate that more people believe that property prices will continue to fall. (…)

Currently, those anticipating more discounts on property prices based their answers on a lesser demand: 40,9% base their response on this factor.

31,4% establish that the descent of purchasing power will be the cause for the fall of property prices and 27,8% declare that the excessive offer will affect prices.

With this scenario, the answer to the question “are you planning to purchase a home in 2013?” is quite obvious. Up to 97,3% rules out this option, while only 2,1% declares an intention to buy a property (…).

Source: El Mundo

International funds throw themselves onto Spanish real estate bargains.

2012 has not been an exception and, last week, several international funds closed acquisitions on buildings with a total global value of around 150 million Euros.

The last one has been carried out by an institution still unknown in the Spanish market: the North American fund Autonomy, which has acquired two office buildings in Alcobendas (Madrid). Those buildings are part of the Parque Omega, a complex created by the real estate companies Lar and Grosvenor. These two buildings are currently empty and their rental price is around 10 Euros per square meter per month. Two of the buildings in Parque Omega are in the hands of Inmoseguros, while the remaining two belong to Grosvenor. The agreement with Autonomy was closed on the two buildings although, according to market sources, it could be extended to the rest of the complex.

The acquisition has been a surprise within the sector, not only because Autonomy was not operating in Spain, but also because of the opportunistic profile of the fund, a type of investor that, although has been analyzing the market for years, had not carried out the expected volume of operations.

Another figure which has taken advantage of December in order to enter the Spanish market is the Venezuelan company Sambil. A developer and a construction company, this firm has acquired the center Avenida M-40 in Madrid for 17 million Euros.

It was opened in 2004 by the fund Sierra and managed by the Portuguese real estate group Sonae Sierra, the mall closed its doors at the end of 2010, after being in creditor´s meeting. 68 million Euros were spent in its construction. Now Sambil is thinking of reopening it as an outlet.

Another two international funds, Värde and Anchorage, have acquired six buildings in Madrid and Barcelona from Eurohypo, which had been taken over from the real estate company Monteverde. The investors have paid around 100 million Euros, according to sources close to the transaction. Another operation has been the purchase of 438 branch offices of Caixabank by Inmobiliaria Carso, belonging to Carlos Slim.

Carso has paid 420 million Euros. Also with a great volume, Grupo Villar Mir has acquired the Madrid complex Canalejas, an operation which has been in motion since the summer.

In spite of these operations, the real estate investment has dropped again in 2012. According to Deloitte, the volume of non residential acquisitions has reached 1642 million Euros, 50% less than the previous year.

Source: Expansión