Eurostat: House Prices Rose by 6.2% in Spain in 2017

11 July 2018 – Eje Prime

The acceleration of the housing market has placed Spain amongst the leading countries in Europe in terms of price rises. In fact, in just one year, the country has risen from 21st position, with an average increase of 4.6% in 2016, to 12th , with an average increase of 6.2% last year.

In 2016, Spain already exceeded the average rise for the European Union as a whole, which amounted to 4.6% at the time, but in 2017, it distanced itself further from the average, moving closer to the group of countries with the highest rises in prices: whilst in Spain, the increase amounted to 6.2% in 2017, the average rise for the European Union as a whole was 4.4%.

Spain outperformed Austria, where prices rose by 8.5% in 2016 (in 2017, they only increased by 5.3%); Norway, which went from an increase of 7.9% in 2016 to 5.4% in 2017; and the United Kingdom, where house prices increased by 7% in 2016 and by 4.5% in 2017.

Iceland, the Czech Republic and Ireland were, in that order, the three markets where house prices rose by the most in 2017, with rises of 19.5%, 11.7% and 10.9%, respectively. Iceland was the only country to feature in the top 3 in both years; in 2016, it was joined by Hungary and Sweden.

Several countries from Eastern Europe, such as Lithuania, Latvia, Bulgaria, Slovenia and Hungary (with high volatilities in terms of the evolution of house prices) were amongst the most inflationary in terms of house prices in 2017, together with countries in Western Europe, such as Portugal, where prices rose by 9.2%; the Netherlands (7.5%) and Sweden (6.4%).

At the opposite end of the spectrum, the only European country where house prices decreased in 2017 was Italy, with a reduction of -0.8%. It was accompanied by moderate price increases in Finland (1.6%), Cyprus (2.2%), France (3.6%) and Croatia and Poland (both 3.8%).

The figures from Eurostat, the European Union’s statistics office, include purchase prices of new and second-hand homes. According to the EU entity, these prices “have fluctuated significantly since 2006”. “The annual growth rate in the European Union as a whole was close to 8% in 2006 and 2007, followed by decreases of 4% as a result of the financial crisis”, it continued.

Prices started to increase in 2014, with an average cumulative rise across the whole of the European Union of 11% between 2010 and 2017, and of 6% in the Eurozone during the same period, according to Eurostat. In the case of Spain, despite the increases in recent years, the country has registered a cumulative decrease of 17% since the start of the century.

Original story: Eje Prime (by Christian de Angelis)

Translation: Carmel Drake

Spain No Longer Features in EU’s Top 10 Home Ownership Ranking

23 March 2018 – El País

77.8% of citizens resident in Spain own their own homes. In this way, the country was placed in 13th position in the ranking of European Union (EU) countries in terms of this parameter in 2016, one place below its position the previous year – after being overtaken by the Czech Republic – according to data from the European statistics institute Eurostat, and well outside of the Top 10. Compared to the European average (69.2%), the Spanish figures are still high, although each year, the percentage of homeowners is decreasing slightly to the benefit of the rental market. Ownership fever dominates in Eastern Europe, in particular, where the percentage exceeds 90% in many countries.

In 2007, the first year for which Eurostat compiled data for Spain, the country was ranked in 9th place in terms of the number of citizens owning their own home, with a percentage of 80.6%. Thus, between then and 2016, the rate has been decreasing slightly at the same time as the rates in other countries have been increasing, relegating Spain to lower positions in the ranking.

“In Spain, home ownership is decreasing slightly each year due to the economic conditions and the difficulty in accessing a mortgage”, explains José García Montalvo, Professor at the Universidad Pompeu Fabra, who points out that nowadays you need to have a permanent (employment) contract to be granted a mortgage, whereas, in 2007, you could have been a temporary worker. García Montalvo also argues that society has changed and young people – who are finding it harder to access real estate loans due to their employment conditions – regard the purchase of a home as a “problem” (…).

The professor says that the price of rental homes is rising due to greater demand, and he does not think that the decrease in home ownership is a phenomenon that is going to reverse despite the rent increases. In 2017, the price of rental homes in Spain recorded its third annual rise. The average price grew by 8.9% in 2017, the highest ever increase in the historical series of the real estate portal Fotocasa’s index, which has been compiling data since January 2006.

Eastern European countries lead the home-ownership statistics

In 2016, Romania was the country where the highest percentage of citizens owned their own home, with 96%. It was followed by Lithuania, with 90.3%; Croatia and Macedonia, with 90%; Slovakia (89.5%); Hungary with 86.3%; Poland, with 83.4%; Bulgaria (82.3%); Estonia and Malta, with 81.4%; Latvia with 80.9% and the Czech Republic with 78.2%. “The countries where citizens are most committed to buying their own home are primarily those in Eastern Europe. This is partly a result of the fact that many of those regions were communist countries and that when the market was opened up, it was shared out and everyone got involved”, says García Montalvo.

By contrast, the data from Eurostat shows that the citizens of countries with more consolidated economies back the rental market to a greater extent over the acquisition of home. Thus, Germany leads this category with 51.7% of its citizens owning their own home, followed by Austria, with 55%; and Denmark with 62%. Nevertheless, none of these countries fall below 50%, although the percentages are decreasing every year, opting for a rental model. The EU average stands at 69.2%, more than 8 percentage points below the figure in Spain.

“Rental is favoured in countries where labour mobility is higher such as in Germany and Austria. In Spain, it would be great if that was the case to boost labour mobility because ownership ties people down a lot (…).

Original story: El País (by Nahiara S. Alonso)

Translation: Carmel Drake

EU Agrees To Create National Bad Banks To Assume Doubtful Debt

11 April 2017 – RTVE

On Friday (7 April),at a meeting in La Valeta, Malta, the Economic and Finance Ministers of the European Union agreed to back the creation of national bad banks, which will take on doubtful debt from the banks and whereby try to solve the problem of the “high” level of toxic assets in the European financial sector.

These non-performing loans, whose value amounts to almost €1 billion (equivalent to 7% of the EU’s GDP), account for 5.4% of the entire European credit portfolio, on average (in Spain, they account for 5.9%). Of particular concern is the high proportion in Italy (16.4%).

The Vice-President of the European Commission for the Euro and Social Dialogue, Valdis Dombroviskis, said that there had been “widespread support for the development of a project regarding how to design a national asset management company” and he encouraged ministers “to make use of the experience regarding asset management companies already in operation in some member states”.

In this sense, he explained that the EU Executive will work on a document that will serve as a guide for the creation of bad banks at the national level, which will take on these toxic products. When asked about the possibility of launching such an entity at the European level, the Latvian remarked that “most of the instruments are already in the hands of the member States” and that “loans are issued in accordance with national legislation”.

The ECB used the bad bank in Spain by way of example

Meanwhile, the Vice-President of the European Central Bank (ECB), Vitor Constancio, highlighted that the preparation of this plan by Brussels was a “very important” conclusion to emerge from the meeting. He gave the example of the good results in cases such as Spain, through the ‘Company for the Management of Assets Proceeding from the Bank Restructuring’ (‘Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria’ or Sareb). (…).

Dombrovskis added that Brussels is also exploring initiatives to facilitate the development of secondary markets for doubtful loans and in this sense, stated that “comparable and high-quality” data are “invaluable” because investors “have to know what they are buying”.

De Guindos defended the Spanish model

The Spanish Minister for the Economy, Luis de Guindos, defended the creation of a bad bank for the non-peforming loans of Europe’s banks as a solution that would eliminate “the root” of this problem, based on the model that Spain has put into practice for its real estate assets with Sareb. (…).

De Guindos underlined that it is also “very important” to value these assets properly and ensure that the provisions to cover them “are at the correct level”. Also, there must be a “fast-track legal system (in the EU) so that lenders are able to foreclose loans”.

The option of creating a bad bank was proposed by the European Banking Authority (EBA), which presented Spain’s Sareb by way of example of the benefits of these types of structure. Sareb was created to provide an exit for toxic real estate assets, but it is not supported by all parties.

Original story: RTVE

Translation: Carmel Drake

Bank Of Spain: The Housing Market Is Not Overheating

4 April 2017 – El Mundo

The Bank of Spain (BdE) does not perceive “any signs of overheating” in the housing market, nor does it expect the real estate sector to overheat anytime soon, given that the recovery in the market is happening at the same time as the process to deleverage the economy.

During the presentation of the supervisory body’s macroeconomic forecasts for the Spanish economy (2017-2020), the Director General of Economics and Statistics at the Bank of Spain, Pablo Hernández de Cos, denied that the housing market is showing any signs of overheating.

Hernández de Cos highlighted that the housing market has been enjoying a recovery for several quarters, which is being seen in the number of transactions, the number of new builds started and the trend in prices, although the Bank of Spain does not expect “the market to overheat”.

Despite the fact that the growth rates “may be significant”, the Director of the Bank of Spain said that after a “very significant” adjustment process in the sector in terms of transactions and the correction of prices, the recovery in the market is taking place in parallel to the continuation of the process to deleverage the Spanish economy. “We are not seeing any signs of overheating”, he added.

“Uneven” reactivation

In its forecasts, the supervisory body notes that high-frequency information relating to both the number of new builds started and the number of transactions involving residential properties, indicates a “continuation of the path of gradual improvement in residential investment, whose prolongation during the forecast horizon will be based on the favourable evolution of employment, the expected continuation of propitious financing conditions and the expectation that assets are going to appreciate in value”.

Nevertheless, it forecasts that the recovery will progress in an “uneven” way by region, with the main cities and autonomous regions most focused on tourism experiencing the most intense growth. In any case, it warns that the latter areas may experience a certain moderation in demand as a result of the process for the United Kingdom’s exit from the European Union (EU).

Original story: El Mundo 

Translation: Carmel Drake

Eurostat: House Prices Rose By 6.3% In Q1 2016

13 July 2016 – El Mundo

House prices in Spain rose by 6.3% YoY in Q1 2016, which represents the highest increase since Q3 2007, before the burst of the Spanish real estate bubble, according to the most recent data from the EU’s statistics office, Eurostat.

During the fourth quarter of 2015, house prices in Spain rose by 4.3% YoY, i.e. by two tenths less than the YoY increase of 4.5% recorded in Q3 2015.

In this way, the Spanish real estate market has recorded eight consecutive quarters of YoY rises in terms of house prices, after six consecutive years of price decreases.

Compared to the previous quarter, house prices in Spain rose by 1.4%, after remaining stable during the final quarter of 2015, which represents the highest QoQ increase in real estate prices since the second quarter of last year, when they increased by 4.1%.

Across the Eurozone as a whole, house prices rose by 3% YoY during the first quarter of 2016, in other words, by four tenths more than the YoY increase recorded in Q4 2015 and their highest increase since Q1 2008. In quarterly terms, house prices in the Eurozone rose by 0.4% between January and March, after increasing by 0.1% during the previous quarter.

Across the European Union as a whole, prices rose by 4% YoY, compared with an increase of 3.6% during the fourth quarter, whilst the quarterly increase in house prices across the twenty eight countries amounted to 0.7%, i.e. three tenths more than in the previous three months.

Of the countries for which data was available, the highest YoY house price increases were recorded in Hungary (15.2%), Austria (13.4%) and Sweden (12.5%), whilst price decreases were observed in Italy and Cyprus (-1.2% in both cases).

Compared with the previous quarter, the highest increase in house prices was recorded in Hungary (5.2%), followed by Austria (4.2%) and Romania (3.3%), whilst the most significant price decreases were registered in Cyprus (-3.4%) and Malta (-2.8%).

Original story: El Mundo

Translation: Carmel Drake

Brexit Will Hit Spain’s Coastal Housing Market

27 June 2016 – El Mundo

The tremors of the international earthquake caused by Brexit, i.e. the victory of the “Yes” campaign in the United Kingdom’s referendum to leave the European Union (EU), will also be felt in the Spanish housing market. Especially in coastal areas, which are so dependent on British demand. The effects are yet to be measured, but all signs are that the UK Goodbye will overshadow the domestic property sector, at least in the short term.

Until now, the consequences of the possible Brexit, now a harsh reality, had been limited to a slowdown in the number of transactions and the signing of SPA contracts with annulment clauses to be invoked in the event that the United Kingdom left the EU, according to Santiago Sánchez, managing Partner at Engel & Völkers (E&V) in Torrevieja and Orihuela. (…).

“In addition, the new international environment may cause Brits to sell the homes that they already own in exchange for euros. And as we know: more supply and the same or less demand, decreases prices”, warns Sánchez, who acknowledges that the market had assumed the opposite outcome from the vote. “We were expecting a boost in activity following a “No” Brexit vote and for all of the built-up demand to be able to go ahead and make purchases, however…”, he laments.

For Sánchez, nevertheless, the problem that will penalise the housing market the most will be the bureaucractic aspects. “If the United Kingdom leaves the EU, it will become much harder for British citizens to settle down in Spain. They will have to request residence and work permits, take out private health insurance, and they don’t know what will happen in terms of inheritance and gifts, etc”, he said. In any case, the head of E&V believes that Brits will continue to weigh up the appeal of living in Spain. “I think that they will keep buying homes because they want to retire here”, he said.

On the other hand, most economists and real estate experts consulted agree that Brexit is bad news for the recovery of the (housing) sector in Spain, which had been started to gain strength, including along the coast. And it is precisely in the coastal regions where the United Kingdom’s departure from the EU will cause the most negative effects, given that Brits account for 21.3% of house purchases by foreigners, and the vast majority of those purchases are made by the sea. The experts are certain that the devaluation of the pound and the on-going uncertainty will weigh down on this buoyant purchasing activity, both at home and overseas. (…).

Meanwhile, Gonzalo Bernardos, Economist and Director of the Real Estate Masters at the University of Barcelona, is much more positive than his colleagues, and offers a Brexit analysis with a broader outlook. “In light of this emergency situation and to avoid a catastrophe on the markets, I think that the European Central Bank (ECB) will inject a lot of liquidity into the market, which means the banks will have more credit and that will drive the Spanish economy and, therefore, the housing market”, he said. “The current neoliberal EU will be completely redesigned and there will be a major reorganisation of the union to prevent any other country from leaving. We will say goodbye to the strict deficit demands for individual countries. In the case of Spain, the fine that was going to be levied on us, will become worthless”, he said. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake

Acciona Postpones Sale Of RE Subsidiary

14 April 2016 – El Economista

The delay in forming a Government in Spain, along with the uncertainty surrounding the United Kingdom’s departure from the European Union and the instability in world markets, are delaying the possible IPO or sale to a private investor of a stake in Acciona’s real estate subsidiary.

In an interview with EFE-Dow Jones, the Corporate Development Director of Acciona, Juan Muro-Lara, said that the political gridlock “is part of a cocktail of uncertainty in Europe, driven by volatility in the markets and possible discounts on prices”, which means that now “is a difficult time to close operations at a good price”.

For this reason, he said that it is better to wait “for all those uncertainties to be resolved” in order to have the right market conditions for the sale of Acciona Real Estate and he added that “seeing as we do not need to complete the sale at any price, we would rather wait for the conditions to be right”.

Original story: El Economista

Translation: Carmel Drake