Tag: affordability

Bank of Spain Warns of Mismatch Between Housing Supply and Demand

11 April 2019 – El Confidencial

According to the Bank of Spain, there is a mismatch between the homes that buyers are demanding and those that are available for sale. Indeed, that is one of the main conclusions of the latest report published by the supervisory body entitled the “Recent evolution of the housing market in Spain”.

According to the report, one of the key characteristics of the Spanish property market is its high degree of heterogeneity by region, type of home (new and second-hand) and buyer nationality. “The characteristics of the homes demanded do not necessarily match with the available supply, in certain places, and may differ in terms of size, quality and location”.

In addition, the Bank of Spain warns about the difficulties that young people are facing when it comes to affording a home, as a result of their precarious working conditions. Their situation is further compounded by changes made in recent years regarding tax breaks (the removal of them) for buying a home and the growth of the rental sector.

The Bank’s analysis focuses on Madrid and Barcelona, which are both very close to the peaks of the boom in terms of rental prices. Meanwhile, house prices are currently around their 2006 levels.

Nevertheless, according to the report, it does now seem easier to obtain a mortgage or at least one with more favourable terms for the borrower. Interest rates have decreased and lending periods (mortgage terms) have increased. Approval criteria and general financing conditions have also been relaxed.

Original story: El Confidencial (by E.S.)

Translation/Summary: Carmel Drake

Are Spaniards “Condemned” to Buying Second-Hand Homes?

4 February 2018 – El Confidencial

Only 18% of the homes sold last year were new build properties. 

It is the dream of thousands of Spaniards: to buy their own home and, wherever possible, for that home to be brand new. Nevertheless, it is a dream that now, more than ever, only a lucky few are managing to realise. In 2017 – based on data for the 11 months to November from the National Institute of Statistics (INE) – more than 350,000 second-hand homes were sold in Spain – comprising second and subsequent sales for statistical purposes – compared with just 77,500 new homes – first sales -. In other words, the latter accounted for just 18% of the total number of transactions.

That has not always been the case. At the height of the crisis – between 2008 and 2013 – and as a consequence of the huge stock of unsold new homes that was generated during the real estate bubble, sales of both types of homes were pretty much the same. However, all indications are that new homes are going to continue to be a scarce product and only affordable for the lucky few, given that estimates for the property development sector as a whole indicate that activity is going to normalise at an output rate of around 150,000-200,000 units per year, a figure which the experts consider corresponds to the natural demand for housing, in other words, to the creation of new homes. These numbers come in stark contrast to the 850,000 new homes that were approved in 2006, the highest figure in the historical series.

To put it in context, 81,500 (new home) permits were granted last year, up by 27% compared to the previous 12 months, but still only half the number that property developers expected to reach and 10 times fewer than at the height of the boom.

Property developers dream of reaching those figures in the short term, nevertheless, some voices have already started to warn about the possibility that they may not be able to achieve it due, on the one hand, to a lack of land – plans and urban development projects have been suspended all over Spain, and in particular in markets with lots of demand for housing such as Madrid – but also, and above all, due to a lack of financing.

There will not be financing for 150,000 homes

That was stated publically this week by the President of Property Developers in Madrid (Asprima), Juan Antonio Gómez-Pintado. “The problem is that the market is heading towards 150,000 homes per year, whilst bank financing looks set to provide for just 65,000 homes” (…)

Despite those storm clouds, if there does end up being enough money to go round, will people on the buy-side be able to afford the new homes? For months, real estate debates have been raging about the fact that the homes that are being built at the moment are not affordable for most buyers, which primarily constitute owners looking to reposition themselves – people who already own a home and who want to sell it to buy a better one -.

“The demand is not willing to assume future increases in house prices (…)”, said Ignacio Moreno, CEO of Inmoglacier just a year ago.

The lack of product for sale and the high costs of construction are being passed on in the final prices of homes and also in the prices of land. And all indications are that the rising spiral is set to continue and may even intensify. “Land prices are going to continue to rise, following in the footsteps of housing but multiplied by three. In other words, if house prices go up by 5%, land prices will rise by 15%”, calculates Mikel Echavarren, CEO at Irea.

Price gap

In this way, according to data from INE, during the third quarter of 2017,  the prices of both new build and second-hand homes rose by 7%. And it is the very lack of new build product that is inevitably pushing up prices. But that same shortage is also forcing demand towards the second-hand market, which is also pushing prices up, although, at the national level, the price gap between second-hand and new build homes has been increasing in favour of the latter (…).

Nevertheless, the price per square metre of a new build home is not always more expensive than a second-hand property. El Confidencial has compared the prices per square metre of new build homes in several districts of Madrid and Barcelona, as reported by Socieded de Tasación at the end of 2017, with the prices of second-hand homes, according to the real estate portal Fotocasa, and found that in some cases second-hand homes are more expensive.

How is that possible? The real estate portals show asking prices – not the prices at which operations are actually closed. According to a recent study performed by this real estate portal, in the last year, 71% of buyers obtained an average reduction (on the asking price) of €14,000, a figure that in the majority of cases represented a discount of 10% on the initial sales price (…).

On the other hand, for statistical purposes, when we talk about second-hand housing, we are not always taking into account the age of the property, but rather the number of times that the home has changed hands. Many developments in the hands of the banks are considered second-hand because there has already been a prior transaction involving that property – from the bankrupt property developer to the bank, for example – This means that when such a home is sold it is considered as a second-hand property, even though it may never have actually been lived in. And the prices of those units tend to be higher than those of homes that are several years old (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

AGV: Almost One Third Of Madrid’s Citizens Think More New Homes Are Required

20 November 2017 – Observatorio Inmobiliario

Almost one third of Madrid’s citizens believe that there is not sufficient housing in the city to meets their needs in terms of prices and features. This perception increases as the respondents’ annual salary and age decrease. Similarly, more than half of future buyers believe that there is not sufficient supply to allow them to choose the most appropriate home and almost 45% think that more housing needs to be built. Those are some of the findings of a study conducted by the Association of Housing Managers (‘Asociación de Gestoras de Viviendas’ or AGV) amongst citizens of the capital, which reveals the needs of house buyers in the city of Madrid.

The people surveyed, of whom 3 out of 4 were buyers aged between 31 and 39, revealed that buying a home or apartment in a building is their preferred option. The vast majority confirmed that they would choose to buy a private home (rather than a subsidised property). In fact, almost 80% stated that they are most tempted by that type of home; 90.5% of them are aged 40 or over (86.3%), compared with the younger population, where only 56.7% said that they would be able to buy a private home.

The youngest people who do not own their current homes stated that they will invest less than €160,000 in the purchase of a home as they cannot afford more expensive properties. Moreover, only 11% of the respondents said that they would spend a maximum of €300,000 to buy a property in Madrid.

Price and location are the top priorities

Both price and location stood out as the main factors to take into account when it comes to buying a home. More than half of Madrilenians (63.4%) rank price as one of the most important considerations, along with the characteristics of the home. The study confirmed that price and the lack of help or tax incentives are the main obstacles preventing the majority of Madrileños from affording to buy a new home.

In terms of the housing market, potential future house buyers claim to be those who have planned their savings (29.6%), have good prospects in terms of employment (23.9%), and monthly earnings that allow them to afford the expense (35.7%). Of the latter, the population aged between 31 and 39 stands out, with annual earnings of more than €36,000.

Limited information and a sensation of complexity when accessing social housing

The survey confirmed the existence of a firm interest in social housing properties in the city of Madrid, even though only 30% of those surveyed said that they were informed about subsidised housing, and 61% consider that the application procedures are too complex. In fact, almost 60% of women and 63.3% of young people (under 30) consider that they will have to go down this route.

Juan José Perucho Rodríguez, President of AGV, declared that “we are facing a critical situation given that demand from citizens is clear and the situation is not adapting to reflect what is happening in Madrid. The construction of social housing properties is vital for citizens, who have seen their purchasing power diminish, to be able to afford to buy a home. In this sense, we think that starting to discuss the option of creating more homes is necessary to cover the needs of the citizens who demand them”.

Original story: Observatorio Inmobiliario

Translation: Carmel Drake

Moody’s: House Prices Will Rise By 8.6% Over Next 3 Years

3 November 2017 – El Economista

An increase in the proportion of the active young population and the greater affordability of housing will boost house prices in Spain by 8.6% over the next three years, according to forecasts from the ratings agency Moody’s, which has analysed the impact of demographic trends on prices in the residential real estate sectors of seven large European markets.

In the case of Spain, the risk rating agency forecasts a rise in house prices of around 5.6% in 2018, but then limits that increase to 1.4% per annum in each of the following years, until 2020.

“Low interest rates, an improvement in economic conditions and the higher proportion of the active young population will serve to boost the housing market”, says Greg Davies, analyst at Moody’s, adding that in the last decade, the proportion of young workers has increased by 8%.

The agency indicates that the current environment of low interest rates and the economic recovery, which is reducing the still high level of youth unemployment, are contributing to the affordability of housing in Spain, although it says that salary growth is still low, which is preventing some young professionals from buying a home, something that Moody’s expects to improve over the next few years.

In this sense, the agency points out that in 2014, around 14% of full-time workers in Spain earned less than 2/3 of the median income, compared with just 7% in Italy and 9% in France.

On the other hand, Moody’s underlined that Spain has experienced a decline in the demand for new build homes, whereas there has been a lot of activity in the second-hand market. Construction activity in the country currently represents just 40% of the volume recorded in 2007, reflecting, amongst other factors, the sovereign deleveraging, including the banking sector, which has led to a substantial reduction in residential investment.

Original story: El Economista

Translation: Carmel Drake

Servihabitat: Rental Prices Will Rise By 2% Before Year End

26 October 2017 – La Vanguardia

Residential rental prices will rise by 2% on average in Spain during the second half of the year, according to the third edition of the “Residential rental market in Spain” report, compiled by Servihabitat, which also forecasts that the trend will continue to be “positive” into the beginning of 2018, despite the fact that some provinces “have stalled”.

The platform says that greater geographical mobility, the popularity of the rental culture amongst young people and the impact of tourism are the factors that are continuing to drive up rental property prices.

In this way, according to Servihabitat’s data, almost 70% of renters in its areas of operation are aged between 26 and 35 years, a figure that increases to 90% if that range is extended to include people aged up to 40 years old.

Currently, 52.3% of homes that are rented out are found in buildings with 10 or more homes; 66.1% are between 46 m2 and 90 m2; and 56.4% were constructed more than 35 years ago.

The average time that it takes to rent a home from when it becomes available on the market has decreased from just over two months on average in Spain to 1.7 months, in just six months.

Nevertheless, in the autonomous regions of Cataluña and Madrid, it takes a maximum of 1.5 months to rent out a home. In fact, in cities such as Madrid and Barcelona, the lag time can be as short as a few days.

Spain currently has 97,900 rental homes available, down by 17.5% compared to a year ago. In other words, there are currently 2.5 homes on offer for every 1,000 inhabitants or 5.3 properties for every 1,000 households.

Servihabitat believes that the progressive reduction in available homes is explained by a reduction in the average length of time it takes to rent out a home and due to “the shortage of residential stock being allocated to  the rental market”.

Supply is most abundant, taking into account the population and the number of households, in provinces such as Salamanca, Alicante, Ciudad Real, Segovia, Burgos and Cantabria.

The following autonomous regions have a supply of more than 13,000 homes: Andalucía, Comunidad Valenciana, Cataluña, Cantabria, Castilla y León and Castilla-La Mancha.

Spain’s most expensive regions: Balearic Islands, Madrid and País Vasco

On the basis of price per square metre, the Balearic Islands, Madrid and País Vasco are the regions where the average rental price is the highest.

In general, in Spain, the average price of a home measuring between 80 m2 and 90 m2 is €620, up by 3.3% compared to 6 months ago.

The average gross return from rental homes in Spain amounts to 5.5%, a figure that is even higher in the autonomous regions of Cataluña (6.1%), Madrid and the Balearic Islands (5.8%) and the Canary Islands (5.7%).

The study also highlights that the evolution of the rental market in Spain is characterised by “a positive trend, although it displays different behaviours depending on the region analysed”.

In this way, Servihabitat considers that the proposals aimed at increasing the stock of public housing for rent will contribute to a “greater equilibrium” between the purchase and rental markets as residential options in the country.

The Director-General of Servihabitat’s real estate business, Juan Carlos Álvarez, believes that the rental market represents an “attractive prospect for the arrival of new investors dedicated to this activity in Spain”, but he considers that the trend in the future will involve “necessary regulation” to protects both landlords and tenants alike.

He also thinks that this regulation should be accompanied by “a strong commitment” to the rental market by institutions, through a “decided” institutional investment in the rental market.

Original story: La Vanguardia

Translation: Carmel Drake

ST: New House Prices Rose By 3.7% YoY In June

3 July 2017 – Expansión

The average price of new homes in Spain’s provincial capitals amounted to €2,156/m2 in June, up by 3.7% compared to the same month last year, which represents the highest increase since 2007, according to the latest report from Sociedad de Tasación.

During the first six months of this year, the rise amounted to 1.7%.

With this average price, a typical home measuring 90 m2 costs around €194,000.

In the other cities included in the report (those that are not provincial capitals), the average price amounted to €1,560/m2, which represents an increase of 0.3% since the end of 2016.

If we analyse house prices on the basis of the population of each city, new home prices rose by 1.2% YoY in cities with more than 100,000 inhabitants that are not provincial capitals.

The rise amounted to 1% in cities with between 50,000 and 100,000 inhabitants; 1.3% in cities/towns with between 25,000 and 50,000 inhabitants; and 0.3% in cities/towns with fewer than 25,000 inhabitants.

According to Sociedad de Tasación, this data shows that the heterogeneity in the market is continuing, as the sector is still developing “at two speeds”.

Barcelona is the most expensive provincial capital, with an average price of €3,631/m2, followed by San Sebastián (€3,353/m2) and Madrid (€3,306/m2).

In the provincial capitals with the highest tourist influx, rental prices are rising at a double-digit pace.

Sociedad de Tasación reiterated its warning about the possibility of that trend having an impact over the medium and long term and generating an increase in the prices of homes and land, as well as in the number of operations.

Sociedad de Tasación’s Real Estate Confidence Index continued its upwards trend, with a rise of 2.1 points during the first half of the year, to 56.6 points.

The index also continued above its neutral position, which is 50 points.

The Real Estate Effort Index, which measures the number of years of full salary that it takes an average citizen to buy a home, increased slightly with respect to the previous quarter to amount to 7.5 years.

Nevertheless, the figure was one tenth lower than the level recorded in June 2016 (7.6 years).

Original story: Expansión

Translation: Carmel Drake

Bank Of Spain: Average Housing Yield Amounts To 8.8%

30 April 2017 – Expansión

Housing is still one of the most profitable investments. The net return from buying a home to put it on the market to rent, now amounts to 8.8% on average. That is according to data from the Bank of Spain, which takes into account not only income from the rental of properties, but also the annual appreciation in their values. In other words, if the rental of a home generates an income of 4.4% and the price rises by 5% in twelve months, then its total return would be 9.4%. And that represents an attractive yield, well above the rates being offered on debt and deposits. Moreover, in some places, the real estate market is offering even higher returns.

To this end, Expansión has identified the districts in Spain’s five largest cities where investors can earn more than 10% from buying a home. And the conclusions are clear: 9 out of the 10 districts in Barcelona and 12 of the 21 districts in Madrid already exceed that percentage. In Valencia, 10 of its 19 districts generate returns of more than 10%; in Sevilla, only 1 out of 11; and in Zaragoza, 4 out of 12.

The most profitable districts are concentrated in the Catalan capital, above all due to the very high appreciation in property values there. Ciutat Vella leads the ranking with 27.7%, followed by Eixample (22%) and Horta-Guinardó (20.5%). That same percentage is also being generated in the Madrilenian district of Hortaleza (20.5%), which is not one of the most selective neighbourhoods, but, prices are rising quickly there nevertheless. It is followed by the Centro district of the Spanish capital (19.8%). Following those five, the ranking continues with Rascanya (Valencia) and Tetuán (Madrid), both with a gross annual return of 18.9%.

In the most exclusive neighbourhood of Madrid (the district of Salamanca) the figure is 13.9%. In Sarrià-Sant Gervasi (Barcelona), the average return is 9.8%. Other prime locations such as Chamartín (14.6%) and Gràcia (17.9%) are also very attractive. (…).

“The increase in returns in the city centres is happening due to a cocktail of senior boomers (the generation born in the 1960s) returning to the city centre and the huge boom in tourist rental properties”, said José Antonio Pérez, Director at the Real Estate Practice of the ‘Instituto de Práctica Empresarial’. That means that “now is a good time to buy a small flat or a small building to turn it into apartments for tourists”, said Pérez. (…).

But, investors should not limit themselves only to the large cities to find attractive investments. “Savers should also buy tourist homes in areas along the coast where there is already a lot of demand, or in peripheral areas of large cities that are well connected or in university areas”, advised Pérez.

The recovery in the residential sector is spreading out across the whole country. Slowly and unevenly, but it is happening. (…).

According to Jorge Ripoll, Director of Research at Tinsa, “The best prospects for investment in housing are located in established areas with active markets that are clearly recovering, such as those in Barcelona, Madrid, Málaga, Valencia, San Sebastián and Bilbao, for example”. They are areas “where asset prices are rising and where there is solvent demand for primary residences from those who cannot afford to buy a home due to their inability to have been able to save in the past”, he said.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

ST: House Prices Rose By 2.5% In 2016

4 April 2017 – El Mundo

The average price of housing in Spain experienced an average annual increase of 2.5%, to reach €1,469/m2, according to the Real Estate Sector Trend Report from ST Sociedad de Tasación. In the second half of 2016 alone, house prices rose by 1.5%. Despite this YoY increase, the average salary required to acquire a home remained stable at 7.4 years.

According to Juan Fernández-Aceytuno, Director General of the appraisal company, “the positive variation experienced over the last 18 months confirms the recovery that we have been predicting since 2015”. “Nevertheless”, he clarified, “the average behaviour of prices is not the same across every province”.

In this way, by province, Barcelona experienced an annual increase of 5.5%, followed by the Balearic Islands, with an increase of 4.6% and Madrid, 4.4%. By contrast, Teruel with a reduction of -2.1% and Álava with a fall of -1.6% experienced the highest price decreases, followed by Pontevedra (-1.4%), Zamora (-1.3%) and Burgos (-1.1%).

By autonomous region, the price of new and second-hand homes are still decreasing in some areas, led by Asturias with a decrease of -0.5%, followed by La Rioja (-0.4%) and Castilla y León (-0.3%). Meanwhile, Cataluña (4.8%), the Balearic Islands (4.6%), Madrid (4.4%) and Melilla (3.3%) recorded the highest annual increases.

7.4 years of salary to buy a home

ST Sociedad de Tasación’s Real Estate Effort Index, which defines the number of years of full pay that an average citizen needs to buy an average home, did not change, remaining stable at 7.4 years in the first quarter of 2017.

The Balearic Islands continued to be the region where it takes the longest to acquire a home (14.4 years), although that figure has decreased with respect to 2016. By contrast, La Rioja is the region where it is easiest to access housing (4.9 years), followed by Murcia, where it takes 5.1 years of full pay to buy a home.

Meanwhile, the Accessibility Index prepared by ST Sociedad de Tasación reflects a slight improvement at the state level for the third consecutive quarter. Based on a benchmark of 100 points for those cases in which the capacity for indebtedness is sufficient, the average level in Spain in the first quarter of 2017 amounted to 107 points, three points above the level in the previous quarter. The state average remained above the minimum salary level for the acquisition of an average home for the fifth consecutive quarter.

By autonomous region, Madrid, Cataluña and the Balearic Islands continued to register insufficient levels for the acquisition of a home, with Cantabria moving into positive territory.

Confidence increases in the real estate sector

ST Sociedad de Tasación’s Real Estate Confidence Index continued its upward trend during the first quarter of 2017, registering an increase of 0.9 points, to reach 55.4 points, out of a total of 100. The index hit its lowest ever value in December 2012, at 30.6 points.

By autonomous region, La Rioja exceeds sixty points, with 60.2, followed by Madrid (58.4) and the Balearic Islands (57.6), which reported the highest confidence indices. By contrast, Castilla y León (50.7), País Vasco (51) and Murcia (51.2) recorded the lowest levels.

Original story: El Mundo

Translation: Carmel Drake

Fotocasa: Rental Housing Prices Rose by 1% In May

29 June 2016 – El Economista

The average price of rental housing in Spain rose by 1% in May, to €7.36/m2/month, placing rental prices at levels not seen since October 2012 (€7.38), according to the latest data from the real estate portal Fotocasa.

In YoY terms, rental prices rose by 5% in May, the steepest increase since January 2006, when fotocasa.es began to compile these statistics.

The monthly increase in rental home prices recorded in May continues the trend recorded during 2015, the year when rental prices began their recovery after eight years of widespread decreases.

In monthly terms, rental prices increased in 15 autonomous regions in May, meanwhile, in YoY terms, they rose in every Spanish region.

“The rental market is slowly gaining ground in Spain. Despite the re-opening of the credit tap and the marked decrease in prices, there is still a very significant segment of the population that cannot afford to buy a home and is therefore forced to rent. Higher demand, together with the high returns that this market offers, are causing a widespread recovery in prices across the country”, explained the Head of Research at fotocasa.es, Beatriz Toribio.

Since rental prices peaked in May 2007 (at €10.12/m2/month), they have recorded a cumulated decrease of -27.2%. In this sense, four autonomous regions have recorded price decreases of more than 30% since their maximums five years ago.

Aragón is the region where residential rental prices have decreased by the most (by -40.2%), followed by Castilla-La Mancha (-35.3%), Cantabria (-34.9%) and Comunidad Valenciana (-30.3%).

Price rises in 15 autonomous regions

By autonomous region, price rises were recorded in 15 regions in May, with the increases ranging from 3.9% in the Balearic Islands to 0.1% in Cataluña and La Rioja. Meanwhile, prices remained stable in Navarra and fell by -0.1% in Aragón.

In terms of the price ranking, Madrid (€10.29/m2/month) replaced the País Vasco (€10.18) and Cataluña (€10.23) as the most expensive region to rent a home. At the opposite end of the spectrum, Extremadura (€4.53/m2/month) and Castilla-La Mancha (€4.69/m2/month) are the two regions were rental prices are most affordable.

Original story: El Economista

Translation: Carmel Drake