ST: Its Still Too “Early” To Talk About A “Complete Recovery”

21 April 2016 – El Economista

The CEO of ST Sociedad de Tasación, Juan Fernández-Aceytuno (pictured above), said on Tuesday that, despite the clear stability that we are seeing in terms of house prices, it is still “early” to talk about the “complete recovery and normalisation” of the market, and he warned that the recovery will only be an “objective” for as long as the net mortgage volume balance continues to decrease.

Those were the words of Fernández-Aceytuno during the opening session of the XXIII Meeting of the Finance Sector, an event organised by Deloitte, ABC and ST Sociedad de Tasación, at which he presented the five key indicators of the real estate sector.

Fernández-Aceytuno indicated that although there has been a double-digit increase in the number of appraisals commissioned by financial entities to support mortgage requests, the volume of mortgages granted in 2015 was “similar to the volume granted in 1998”, i.e. the lowest level in the series detailing mortgage activity prepared by the Spanish Mortgage Association.

Moreover, he said that in 2015, cement consumption amounted to 11.5 million tons, “similar to the levels seen in the 1930s and almost six times lower than the historical peak”.

“It would be interesting to validate and understand that real estate cycles in Spain are 16 years long, eight years of price and activity decreases, followed by eight years of rises”, said Fernández-Aceytuno, before going on to list the five key indicators for determining at which point we are in the cycle.

The five key indicators of the real estate sector

The first is the relationship between mortgages and transactions, regarding which he noted that during times of growth and recovery, the number of mortgages exceeds the number of transactions. “In Spain, that relationship was reversed in 2011; the good news is that since 2015, the number of mortgages granted has grown more quickly than the volume of house purchases”, he said.

Similarly, he indicated that the relationship between the percentage of appraisals commissioned by financial institutions for own assets and loan collateral has varied “significantly” from those commissioned by end clients to support new mortgage applications.

In terms of the creation of new households, Fernández-Aceytuno highlighted that, according to sources at La Caixa, almost 75,000 new households were created in Spain last year, which represents just 20% of the historical maximum. According to the Bank of Spain, the reference figure should amount to around 250,000 new households per year.

Similarly, he said that the New Home Census for 2016 compiled by ST-Sociedad de Tasación reported around 5,400 new homes for sale, compared with the 45,000 resulting from the calculations published by the Ministry of Development.

The variables that determine this difference are: the age of the home, its rental yield and the preference of property developers and banks to sell their homes in more favourable economic environments.

Finally, in terms of the evolution of outstanding mortgage balance, he said that currently the figure for the volume of loans being repaid exceeds the figure for the granting of new mortgages. “Although the latter increased at a higher rate in 2015, for as long as the net mortgage volume continues to decline, the recovery will just be a goal”.

Original story: El Economista

Translation: Carmel Drake

BBVA Predicts House Building Boom In 2016

5 January 2016 – El Economista

BBVA predicts that there will be a “boost” in house construction over the “next few quarters”, in light of the favourable development, at the end of last year, of indicators such as cement consumption, employment in the sector and transactions involving land.

Those are the explanations provided by BBVA in its latest “Real Estate Flash Report for Spain”, which states that the 13.2% reduction in new build construction permits in October, following an otherwise positive 2015, “may well be temporary”.

On the other hand, the financial institution says that “the other variables reflect that construction activity is likely to continue to grow, although from very low levels”.

Firstly, the report argues that cement consumption recovered in October after decreasing in September; and that the number of employees registered for Social Security purposes in the construction sector also experienced “robust” growth during the months of October and November, putting an end to the lethargy of the previous four months.

In the same way, the financial institution says that business owners’ opinions regarding the future evolution of the residential sector improved in November as a result of an increase in order books.

Finally, the report points out that the land transaction data relating to the third quarter reflects a 72.3% YoY increase in terms of the surface area of land sold.

In parallel to the improvement in property developer activity, BBVA highlighted that demand for housing is continuing to grow thanks to the improvement in the economy. Moreover, it forecasts that, if the current trend in terms of house purchases remains stable, almost 400,000 homes will have been sold in 2015.

Original story: El Economista

Translation: Carmel Drake