Fitch: there is no real estate recovery, there are bargains.

The credit grading agency Fitch warns that it is still not possible to talk of a recovery of the real estate market. The rise of the foreign investments is due to the big discounts and not to a change in the trend.

“The interest of foreign investors in Spanish real estate properties is seen as a sign of recovery of the market. But we think that the appetite of the foreign investors is due to an opportunistic search for bargains”, the agency points out in its last report on Spain.

To prove this trend, the agency has selected some of the “more relevant transactions” closed with foreign investors, and has validated that the average price per square meter is well below 1000 Euros. “This is more than 40% below the average national price”, it points out.

It could be implied that, in spite of the discounts, the boom of the operations with foreigners has revived the market up to a point of “stabilization”. Fitch does not agree with this, as “the volume of purchases has not reduced until now the excess offer in order to see a real recovery”, as expressed by the report, carried out by the analysts Carlos Masip and Juan David García.

On the other side, the agency points out a remarkable detail: the properties “which have been recovered by the moneylenders have lost, in average, around 71,5% of its original value. This is nearly double the national average: according to the main valuation company, Tinsa, the value of properties accumulates a descent of 39% since the peak of the real estate bubble.

Also, these seized properties are being sold more and more frequently. In the first half of

2013 the securitization funds got rid of 44% of this type of assets, opposite to the 31% of the previous semester, according to Fitch.

Banks are the ones managing the portfolios of properties of these funds. (…)

Those institutions analyzed by Fitch that sold more in the first half of the year were BBVA and CatalunyaCaixa, which also was the one to sell the highest percentage, more than 80% of the total portfolio.

Finally, Fitch stresses that “the average period to sell the seized properties is around 15 months from the seizure date”, a bit less than in 2012, but still a very long period, due to the difficult situation of the real estate market.


Source: Expansión