9 June 2015 – Cinco Días
The recovery in the mortgage market is just one variable that shows that the Spanish economy is continuing to accelerate on more than one front.
The data showing an increase in the number of new loans taken out, after a long period of credit restrictions, is accompanied by statistics that reveal a decrease in the number of mortgage foreclosures, which have decreased by more than 14% since their peak in 2010. In total, 600,000 mortgage foreclosures have been processed since 2007. If we analyse the evolution of this figure since the beginning of the year, the seizure of homes has decreased by almost 7% during Q1 2015, with respect to the same period in 2014.
At the same time, an in-depth analysis of the mortgage sector reveals that the volume of real estate asset foreclosure is continuing to increase for banks, just like is happening with “daciones en pago” (assignment of deeds in lieu of payment). The explanation is that the banks are not managing – or are delaying, due to the disadvantageous market conditions in terms of price – the sale of the high volume of assets that they still hold on their balance sheets. This delay may, amongst other consequences, increase the exposure of Spanish securitisation funds to higher losses, just at a time when the first residential mortgage-backed securitisation in Spain has been subscribed after an eight-year drought. For the experts, the return of these transactions is a clear sign of the recovery in the credit market. Moreover, the fact that financing is beginning to flow again at a time when interest rates are low indicates that there will be faster growth in the housing market.
The signs of revival in terms of real estate transactions are good news, not only for the sector itself and its suppliers, but also for banks, consumers and the economy as a whole. In the case of the financial sector, the return of the flow of credit is opening the door to new financing proposals for the acquisition of real estate assets. This applies to the possibility of creating a specific mortgage loan for investors who want to purchase a home and rent it out, a typical financial product in the UK (buy-to-let). Nevertheless, it seems unlikely that a proposal that combines high risk – particularly in an immature market, such as the rental market in Spain – and limited growth prospects, will be of interest to banks, which today, more than ever, must not only channel their resources in accordance with (strict) solvency and efficiency criteria, but which must also orientate themselves towards higher-yielding, longer term investments.
The challenge for the house market is to start to learn to walk again, and to do so in an orderly and rational way, without repeating the mistakes that Spain has paid for so dearly in recent years.
Original story: Cinco Días (Editorial)
Translation: Carmel Drake