They Are Investors Who Buy Homes in Spain, Not Families

8/10/2014 – El Economista

After years of dipping down to the bottom, Spanish property market seems to be getting back to its feet. While in 2007 the sector accounted for 12.3% of the national GDP, a year ago it showed mere 5.2%. The Statistics Office (also known as the INE) agrees in its calculations with the Property Registrars who add that home values rose by 0.97% year-on.year in the second quarter of 2014.

Furthermore, available data reveals that July sales jumped 10.7% and post 28.583 deals after ten months of declines. Another key statistics provided by the Notaries states that in July home mortgage approvals improved by 17.4%.

However, experts warn about conviction that they are the traditional purchasers who pick the market up. Instead, it turns out that funds, companies and foreign private investors account for 62% of all deals sealed in July and the equity was handed over in cash. Families are not able to boost the market yet.

According to the latest update by the Spanish Association of Notaries, only 37.7% of the total home purchases were financed with a mortgage and the loan covered on average 75.5% of the property value.

Economy professor at the Pompeu i Fabra University and a real estate expert, Jose Garcia Montalvo, explains that ‘the turning point was marked by the arrival of foreign funds in the middle or at the end of 2013′. These investors flocked to Spain tempted by rock-bottom property prices. From 20% to 25% of all home sales have been conducted by investors, to less extent by companies.

The number one appraiser of the country, Tinsa, estimates that since the 2006 peak, housing values fell by 48.4% on the Mediterranean coast, by 45.2% in provincial capitals and large cities, and by 43.4% in metropolitan areas.

Investor Types

Also, middle-aged, Spanish, buy-to-let buyer comes back to the stage. ‘Nowadays, deposits return around 1%, while renting a flat – around 4.5% to 5%’, Mr Montalvo explains.

Another 18% of the sales were to foreign private purchasers who seek second homes in coastal areas. Around 20% of the buyers is represented by overseas real estate companies.

Lately, mortgage financing has been advancing. Spain’s Central Bank has been announcing slight improvements since the beginning of the year, a fact supported by the statistics of the INE claiming that in June the number of new mortgage loans increased by 19% year-on-year, while in July they skyrocketed by 29% y-o-y (18.107 signed contracts).

The market has recovered notably as in 2006, ‘great majority of borrowers held a temporary job but it is not the case anymore’, assures the professor.

In their recent report titled ‘Situation in Spain’, the team of BBVA Research confirms rise in real estate operations number which averaged at 30.000 per each month of the second quarter of 2014.

If the 2015 State Budget document skimmed through, one reads that for the next year the Government foresees a 3.1% growth of investment in construction, whereas the average amount spent on a house purchase is expected to rebound delicately and break the current downward tendency in which the quote plummeted 85% if compared with the 2006 peak.


Original article: El Economista (by Ingrid Gutierrez)

Translation: AURA REE