19 February 2015 – El Mundo
Second-hand house prices have increased in value (y.o.y) for the first time since 2010.
The average price is now €1,458 per m2 after a cumulative decrease of 58% since 2007.
“The decrease (in house prices) has come to an end and we expect the market to remain stable for a while”.
House prices are also recovering in the second-hand home segment. Without a doubt, the hardest hit by the crisis. According to Tecnocasa’s 20th Report about the housing market (el XX Informe sobre el mercado de la vivienda), used homes increased in value by 1.12% during the second half of 2014, which represented the first increase since 2010. From the peaks recorded during the first half of 2007, this real estate segment has experienced a cumulative price decrease of 58.21%. During the first half of 2014, the fall was minimal, a token 0.04%.
The company reports that the average cost of second-hand homes is now €1,458 per square metre and that, therefore, the slump in prices has come to an end. “The decreases have come to an end and we are beginning a phase of stability”, says the firm, which prepared the study together with the University of Pompeu Fabra (UPF) of Barcelona. “In any case”, it adds, “we expect prices to remain stable for some time”.
By city, Sevilla recorded the largest decrease in the cost of used housing (-4.5%), whilst Barcelona experienced the greatest increase (+5.84%). “The decline in Sevilla reflects the fact that prices began to fall a little later in Andalucía”, said Tecnocasa in a statement. In terms of average values, the lowest continue to be in Valencia (€775 per square metre) and the highest in Barcelona (€2,011/m2).
José García-Montalvo, Professor in Economics at UPF and the coordinator of the report, wanted to stress that whilst the sector “continues to be significantly effected by an improvement in the short term”, he does not expect “a price explosion”, but rather a period “marked by stability”. In this sense, he explained that there has been a “change in terms of expectations” in the Spanish real estate sector, since the market “is no longer ruled by buyers”; sellers are “again able to set prices and conditions”.
The average mortgage decreases to €90,333
Paolo Boarini, CEO of the Tecnocasa Group in Spain, has analysed the financial data and house buyer profile for the second half of 2014. During the period, the average mortgage decreased by 2% (on a year-on-year basis compared with the second half of 2013). This decrease brings the average mortgage down to €90,333.
According to the report, the decrease in the average mortgage is due to the low level of house prices and the decision by banks to reduce loan risk. Moreover, the percentage of mortgages granted to people with temporary employment contracts has deceased from 38% (of the total) in 2005 to 7.6% in the second half of 2014.
In terms of the loan to value ratio, it remains low (72% in the second half of 2014), although, that did represent an increase from 67% in the first half of 2014. The reductions in interest rates and in the size of mortgages has contributed to a decrease in monthly mortgage payments. Such payments averaged €976 in 2007, but now amount to €382. This means that the ratio between the monthly mortgage payment and the monthly salary of the borrower now sits below 30%; a figure that reflects the conservative behaviour of credit institutions.
Boarini highlights that the market is undergoing a period of “stabilisation”, after the speed of decline “decreased in recent years”. In addition, he assures that we are currently seeing “a situation that would not have occurred in previous years, with low prices and good financing conditions”.
The Tecnocasa Group’s report has been prepared using data from transactions brokered by its associates. Specifically, based on sales managed by Tecnocasa and loans granted by Kiron, the entity’s financial services company.
Original story: El Mundo
Translation: Carmel Drake