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Fitch: House Prices In Spain Have Bottomed Out

12 February 2015 – El Mundo

The ratings agency expects prices to stabilise at their current levels, 40% below their peak.

It also predicts that the increase in house prices will be “marked” by the greater availability of credit and a substantial improvement in the labour market.

The credit rating agency Fitch Ratings expects house prices in Spain to stabilise at their current levels, 40% below the peak levels recorded before the crisis. The agency notes that the data now shows that an equilibrium has been reached and prices will not decrease any further.

According to its report about the mortgage market in Spain, the theoretical benefits of greater access to credit are still a long way off from compensating for the over-supply (of homes) and the lack of confidence caused by high unemployment. Similarly, Fitch adds that the increase in house prices will be “marked” by greater availability of credit and a substantial improvement in the labour market.

In this sense, it stresses that interest rates are currently low and that it expects debt servicing to continue to be manageable in the medium term, but it warns that households that are in the process of deleveraging remain sensitive to interest rate rises.

On the other hand, it considers that banks are more willing to grant mortgages to solvent customers and are gradually reducing their margins, as a result of their own lower financing costs. Nevertheless, the low forecast Euribor rates for 2015 will restrict any further decline in these margins.

The agency notes that, according to data from the National Institute of Statistics (el Instituto Nacional de Estadisticas or INE), house prices rose by 0.2% in Spain in the third quarter of 2014, the first time they had risen for two consecutive months since the third quarter of 2007.

Finally, Fitch notes that unemployment decreased by 2.3 percentage points year-on-year in the fourth quarter of 2014, to 24.2% and it believes that the “less bad” conditions in the labour market are reflected in a decrease in the number of loans falling into arrears.

Original story: El Mundo

Translation: Carmel Drake