House Stocks Decrease Most Where GDP Growth Is Strongest

25 March 2015 – Cinco Días

Since the burst of the (property) bubble and the subsequent closure of the credit tap, experts in the real estate sector have said that until the employment situation improves and access to financing is relaxed, house purchases will not regain the vigour they once enjoyed.

Seven years after the longest and deepest crisis in this sector in living memory, and just when some regions are beginning to see positive growth, both in terms of house prices and sales, we are seeing that those analysts were right all along.

The Spanish Confederation of the Construction Product Manufacturers Association (Cepco) estimates that 439,617 homes were left unsold and unlet at the end of last year, i.e. 36.26% fewer than the figure in 2009 (689,787) (we should note that the volume of total stock peaked in 2010 at 692,560 homes and has decreased since then).

Recovery

However, this significant reduction in stock, most of which has taken place in the last two years, has not been uniform across the different autonomous regions and, interestingly, has not been determined by the behaviour of prices in each region, but instead by the recovery in economic activity.

Thus, based on data from Cepco and calculations carried out by Cinco Días, the five regions where the stock of new homes decreased the most between 2009 and the third quarter of last year (the latest data available with this level of granularity) are: Navarra, Cantabria, Extremadura, the Canary Islands and Madrid, with decreases ranging from 93.02% in the case of the former, to 45.10% in the case of the latter.

And, in parallel, where have the prices of newly built houses decreased the most? According to statistics compiled by the Ministry of Development based on data from appraisal companies, the five regions where new properties have most decreased in price are: Murcia, Aragón, Valencia, Castilla-La Mancha and Andalucía. On this occasion, the cumulative declines range between 44.46% in the case of the former and 33.05% in the case of the latter.

In fact, house prices are currently equivalent to average values last seen between the end of 2003 and the beginning of 2004; and according to the experts, in some cases, these prices still have further to fall. There is no relationship between these two variables. However, the situation is different if we look at economic growth data.

Although the first official accounting figures by region are not yet available (INE is due to publish them next Friday), the numbers prepared by Hispalink indicate that the five communities that recorded the highest GDP growth rates last year were: the Canary Islands, Madrid, Navarra, Cataluña, and Valencia.

On this occasion, there is a correlation in the case of three regions where house stocks have decreased the most, which shows that, in fact, economic growth is a stronger driver of house sales, including those sold from stock, than the evolution of prices. And (the relationship is proportional): the stronger the recovery, the better.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Britons Buy Homes In Spain, Driven By Strong Pound

5 March 2015 – El Economista

The strength of the British pound makes (house) purchases in Spain more affordable.

Low returns on deposits (at home) encourages Britons to seek alternative investments.

Sun, financial repression and low prices. This perfect cocktail is converting Britons into the main buyers of homes in Spain, especially in areas near the beach. That is because, in addition to the traditional appeal of the coast, Britons are now facing poor returns on their savings at home, due to measures taken by the Bank of England, and because they expect to see a recovery in the real estate sector in Spain. The appreciation of the pound against the euro makes the investment even more affordable for the average Brit, who is also seeing prices in his own country year on year.

An example is Londoner Barry Leverington, who thinks that his money is better off in a Spanish home than it would be earning next to nothing in a British savings account. The bank employee, aged 33 years old, is looking at properties in the Mazarrón Country Club, in Murcia, where two-bedroom villas cost as little as €75,000.

“Anyone who has some capital can buy in Spain, with almost no mortgage, and there is potential for prices to rise”, explains Mr Leverington in a telephone interview. “I grouped together some savings, and with the current low interest rates, I realised they were dormant, not doing anything”.

Foreigners return to Spain

Mr Leverington is not the only one. Foreigner buyers are returning to the Spanish real estate market, attracted by economic growth that exceeds the rates in most of the rest of Europe and by the signs that prices are bottoming out after years of decreases. In fact, sales of homes to foreigners accounted for 13.9% of total sales in the fourth quarter of 2014, a new record.

Britons are the biggest foreign investors, because the zero interest rates on savings accounts (at home) and the prospects for rising house prices in Spain mean that keeping their money in their own country is a much less attractive option.

In total, foreigners invested €6,050 million in Spanish properties during the first nine months of last year, 30% more than during the same period in 2013, according to data from the Ministry of Development. The 40,338 homes purchased represented an increase of 27% with respect to the same period a year before, with Valencia, Andalucía and Cataluña topping the list as the favourite destinations for foreign purchasers.

Interest from overseas investors is increasing after many left scarred, following the collapse of the Spanish real estate market with the onset of the global financial crisis and the burst of the local property bubble. The legacy from this collapse is a stock of more than 1 million homes, many of them in the South and East of the country, in areas very popular with Britons and Europeans.

House prices have also suffered a corresponding crash, having fallen by 42% since their peak in 2007, although in coastal areas, some properties have lost up to 50% of their value, according to estimates from the property appraiser, Tinsa. Nevertheless, it seems that the trend has changed, as the rate of decrease slowed from 9% in 2013 to 3% last year.

Deposits with no returns

The Bank of England has maintained interest rates at a historical low of 0.5% since 2009, which has impacted the interest rates offered by banks on British savings. A financial repression, which is making Britons look for alternatives for their savings, and from there Spanish property looks like a good option.

In addition, it is becoming increasingly expensive to invest in homes in the United Kingdom, where prices increased by 25% between December 2007 and December 2014, according to the Office for National Statistics, led by London, where prices increased by 18% last year alone.

Moreover, the recent increase in the value of the pound against the euro, which has appreciated by 13.5% in the last 12 months, means that homes in Spain are even cheaper for the Brits. This is an important effect to consider, according to the real estate expert José Luis Ruiz Bartolomé, “when something is gifted, it is even more attractive than when you purchase it with a strong currency”.

“People like me want to achieve some kind of return on their savings and they won’t get very far in the real estate market in the UK at the moment”, says Mr Leverington. “Properties in Spain are currently under-valued. It is a win-win situation for everyone”.

Spaniards are also returning to the market, although at a slower rate. The purchase of homes by Spaniards increased slightly by 2.2% in 2014 to reach 319,389 properties, the first increase since 2010, according to date from INE. A ray of light for the sector, although it is still a long way from the highs of 2006, when 955,186 homes changed hands.

Marbella, at its peak

Another symptom of the improvement is that despite the (housing) stock, cranes have reappeared in some areas of major cities and on the coast. Darío Fernández, from the consultancy Jones Lang LaSalle, explains that “we are seeing demand for primary residences from Spaniards in Madrid and Barcelona, and demand for second homes from foreigners in coastal regions. People are confident that the economic risks have disappeared, and see that prices are still very low”.

In fact, in some areas, such as Marbella, demand is so high that international funds are partnering up with local players to buy land and build new homes, adds Fernández. Currently, there are 400 homes under construction in the Malagan town, the highest number in the last six years.

Mr Leverington, the London bank employee, is going to travel to Murcia in June to get to know the area, and if he finds a property he likes, he will buy it. “I have already spoken to some estate agents, I don’t want to wait much longer, because as soon as there is any good news, the market will recover and I don’t want to miss out”.

Original story: El Economista

Translation: Carmel Drake

BBVA: The RE Sector Begins Year Of Growth Supported By Positive Economic Forecasts

3 March 2015 – BBVA Research

Growth in housing sales in December raised transactions in 2014 to 364,600, 19% more than the year before. By the close of 2014, the price of housing had experienced its first quarter of growth since the beginning of the crisis, at the same time as housing starts (new builds) closed the year with positive figures. All in all, the economic growth outlook for this year and the favourable lending conditions are preparing the way for another increase in sales in 2015, which will be accompanied by a moderate price increase and further expansion in construction activity.

Original story: BBVA Research (by Félix Lores Juberías and Ignacio San Martín)

Edited by: Carmel Drake

Strong Pound Makes Spanish Property More Attractive To UK Buyers

26 January 2015 – Murcia Today

Tourism in Spain could also benefit from the weakness of the euro.

Following the announcement on Thursday that the European Central Bank is to inject at least 1.1 trillion euros into the economy of the Eurozone, the reaction on the international currency markets has been to invest in sterling and the US dollar, pushing the UK pound to its highest level against the euro for seven years.

By midday on Friday, one pound was worth 1.34 euros, although it dropped back to 1.31 by close of trading on Friday, meaning that pound-holders’ purchasing power in Spain has increased by 5% since 1 January and by 12% since April last year. At the same time, the euro fell to its lowest rate in eleven years against the dollar.

How the ECB’s “quantitative easing” policy will affect the Spanish economy as a whole will become clear over the next two years, but in the short term, the relative strength of the pound could have two very important consequences.

One of these is that over a short period of time, property in Spain has suddenly become significantly cheaper for buyers from the UK, and it is not unreasonable to imagine that demand may suddenly increase from British buyers in a market which, at least on the Mediterranean coast, already relies heavily on buyers from outside Spain. Coupled with low interest rates, the greater value of the pound means that for most UK nationals, property in Spain is now more affordable than it has been for many years.

At the same time, in a week in which some of the final figures for 2014 in Spain’s tourist sector have been made public, the greater purchasing power of UK residents could lead to further increases in tourist spending by visitors to Spain from the UK after record numbers of foreign visitors came here last year. Flight prices may come down slightly in response to falling fuel costs, and for those whose disposable income is in sterling, visiting Spain and other Eurozone countries is now less of a strain on the pocket than it was a year ago.

It is also good news for those looking to buy property for the first time: Euribor dropped to a record low making borrowing cheaper than ever.

Of course, on the face of it, the fall in the euro is not necessarily good news for Spain, but if the ECB’s intention is to stimulate economic growth in the Eurozone, then the property and tourist sectors of the Spanish economy may be among the first to benefit.

Original story: Murcia Today

Edited by: Carmel Drake