INE: Mortgage Lending Rose by 9.7% in 2017

28 February 2018 – RTVE

The signing of new mortgages for the purchase of homes grew by 9.7% in 2017 with respect to the previous year and reached 310,096 contracts, whereby closing its fourth consecutive year on the rise, after falling non-stop over the previous seven years, since the start of the crisis.

According to provisional data published on Wednesday by Spain’s National Institute of Statistics (INE), the value of all of the new mortgages constituted in 2017 amounted to €36.2 billion, up by 16.6% compared to the previous year, whilst the average amount loaned grew by 6.3% to reach €116,709.

In December alone, 20,681 new mortgage contracts were constituted to buy homes in Spain, a similar figure to the one recorded in the same month in 2016 but almost 17% lower than the figure recorded in November 2017, according to INE.

The average interest rate decreased by 13.5%

At the end of 2017, the average interest rate of mortgages constituted to purchase homes was 2.73%, down by 13.5% compared to December 2016, with an average term of 23 years.

62.5% of the residential mortgages constituted were variable rate products and 37.5% were fixed rate deals. The number of fixed-rate mortgages increased by 4.9% compared to the end of 2016.

The average interest rate at the beginning of a mortgage term is 2.54% for variable rate residential mortgages, down by 18.6% compared to a year earlier. Meanwhile, fixed-rate mortgages have an average rate of 3.13%, down by 3.5% compared to those signed a year earlier.

Greatest increases in Andalucía, Madrid and Cataluña

In terms of the distribution by autonomous region, the areas that recorded the highest number of residential mortgages constituted during 2017 were Andalucía (60,240), the Community of Madrid (56,644) and Cataluña (49.918). The regions where the most capital was lent for the constitution of mortgages were the Community of Madrid (€9.287 billion), Cataluña (€6.894 billion) and Andalucía (€5.898 billion).

The signing of mortgages to purchase homes increased in all autonomous regions last year. The greatest increases were recorded in La Rioja (up by 18.4%), the Community of Madrid (+16.6%) and Asturias (+12.4%). Meanwhile, Aragón (+0.5%), Navarra (+0.7%) and Extremadura (+2.0%) saw the lowest increases.

In addition to mortgages for buying homes, the number of mortgage loans constituted for buying estates in general also rose. In total, during the whole of last year, 429,082 mortgages were signed, up by 7% compared to 2016. The number of mortgages constituted to buy rural estates decreased by 1.6% to reach 16,485 contracts.

The total capital lent for those loans amounted to €60.7 billion, with an average mortgage ticket of €141,445 (up by 5.8%).

Original story: RTVE

Translation: Carmel Drake

BBVA: Housing Market Makes A Strong Start To 2017

10 May 2017 – Europa Press

BBVA’s latest report highlights the “positive” evolution of the real estate market at the beginning of 2017, given that house purchases are still being “backed” by mortgage financing, construction is continuing to grow and house sales are maintaining their upwards trend.

At least that is according to the “Real Estate Observatory of Spain”, compiled by BBVA Research, the financial entity’s research service and BBVA’s Real Estate area, which states that the recent review of the macroeconomic scenario by BBVA, which forecasts GDP growth of 3% this year, introduces “an upwards bias into the forecasts for 2017”.

In this sense, the entity highlights that house sales maintained their growth rate, supported by the “strong performance” in terms of employment and mortgage loans, whilst construction activity also “remained dynamic”.

According to data from the General Council of Notaries, during the first two months of 2017, 72,371 homes were sold, up by 13.9% compared to a year ago, but in line with the average for 2016 as a whole.

Amongst the factors that BBVA points to as reasons for the improvement in the real estate sector, are the labour market in Spain, which “has continued to improve”, as reflected by Social Security sign-on data, such as the Active Population Survey (EPA). According to the EPA, the number of people in employment grew by 0.6% during the first quarter of the year.

In addition, credit conditions remain “favourable” for households. Interest rates are at minimum levels: the mortgage rate for new operations remains at around 2.2%; meanwhile, the 12-month Euribor rate hit a new minimum in April, closing at -0.119%.

The mortgage market supports residential demand

Moreover, the mortgage market is continuing to drive residential demand. New loans to buy a home rose by 23.5% YoY during the first quarter, excluding refinancings, according to data from the Bank of Spain.

In turn, during the first two months of 2017, almost 12,800 housing permits were granted (20.3% YoY).

Finally, BBVA highlights that the dynamics in the market for land “are still positive”, given that during the first two months of the year, the number of transactions involving land rose by 12.8% YoY, which represents an increase in the traded surface area of 8.8% in one year.

Original story: Europa Press 

Translation: Carmel Drake

ECJ Puts An End To The Eviction Of Family Guarantors

21 October 2016 – Cinco Días

The European Court of Justice (ECJ) has ruled that mortgage guarantees from individuals to companies are protected by the European directive on unfair terms. In this way, the EU judges have opened the way for the cancelation of this kind of guarantee and its most draconian conditions, when the contracts favour financial institutions in an unfair way. The ruling also jeopardises the execution of guarantees between individuals, which are very common in the case of house purchases.

In less than a year, and thanks to one case in Italy and another in Romania, the European Court of Justice has revolutionised the treatment of mortgage guarantees, many of which will be protected by the European directive on unfair terms from now on. Until now, it was assumed that the guarantors of a company were responding to a professional relationship and therefore, they were not covered by the rules governing consumer protection.

However, that interpretation did not consider numerous guarantors whose relationship with the company was of a family or friendly nature, without any commercial interest whatsoever. And so, the European Court of Justice has put an end to the gap by classifying these types of guarantors as consumers.

In November 2015, the EU judges indicated and they have just reiterated (14 September 2016) that the European Directive 93/13 governing unfair terms should protect people who guarantee the credit of a company that they do not manage or hold majority shares in.

In such cases, the new European legislation considers that the guarantor is acting as a consumer and therefore, the national courts may cancel the guarantee if they consider that the contract did not inform them properly about the risks or if the contract grants an unfair advantage to the financial institution.

The lawyer Juan Ignacio Navas, Partner-Director of the law firm Navas & Cusí, classifies these types of guarantees, which do not generate any economic benefits for the guarantor, as “altruistic”. And he says that they are granted regularly, particularly in the case of small and medium-sized companies. (…).

Navas believes that the new legislation will not only affect guarantees for loans to companies but will also be extended to all types of individual guarantors. (…).

The lawyer said that many mortgage loans are signed with these altruistic guarantees: “Cousin, brothers, daughters, parents and friends, in other words, people linked by family or friendship ties, without any economic interest”.

Legal sources stress that in these types of contracts “the guarantor is risking something as important as his/her home without gaining anything in return and he/she does so because of the pressure exerted by financial institutions”. (…).

Nevertheless, other lawyers, such as the Partner of the law firm Jausas, Jordi Ruiz de Villa, warn that the rulings from the European Court only ensure that the conditions of these guarantees will be reviewed from the perspective of consumer protection and that even if a contract includes an unfair term, a judge may decide to just cancel that term or amend the commission charged without the need, for example, to cancel the entire guarantee.

As a result, some Spanish judges have already declared some mortgage guarantees to be null and void as they considers that they include unfair terms, which means that the rulings from the European Court may help halt the evictions of these kinds of family or friend guarantor.

Original story: Cinco Días (by Bernardo De Miguel and Juande Portillo)

Translation: Carmel Drake

INE: House Sales Grew By 16.8% In March

11 May 2016 – El País

House sales increased by 16.8% in March with respect to the same month in 2015, to reach 31,925 operations, according to statistics about the transfer of property rights published by Spain’s National Institute of Statistics (INE). As such, sales recorded two consecutive months of YoY increases, as they also rose in February, by 15.8%. However, the number of transactions in March decreased with respect to the previous month, when 34,771 agreements were signed, and also deteriorated with respect to January (32,417).

Fernando Encinar, Head of Research at Idealista, explained that “the data shows that the normalisation of the market is a reality and seems to be strengthening, with the volume of house sales exceeding 30,000 units each month. However, we will have to wait and see what happens over the next few months, as this easing of the growth rate may indicate that we are approaching the natural sales figure for our sector”.

Once again, INE placed the focus on what it regards as second-hand homes, figures that include new unsold properties that have been on the market for more than two years. In this segment, the volume of transactions increased by 24.2% in YoY terms in March, to reach 25,765 operations, compared with a decline of 6.6% in the sale of new homes during the month, to 6,160 units. Overall, 19.3% of the homes that changed hands were new builds and 80.7% were second hand properties.

There was no variation in terms of the split between unsubsidised and subsidised homes. Just like last month, unsubsidised homes accounted for 89.2% of all sales, whilst the latter represented 10.8%. In annual terms, the number of unsubsidised homes sold rose by 16.5% and the number of subsidised homes sold increased by 18.9%.

The regions with the highest number of sales per 100,000 inhabitants were the Canary Islands (127) and the Balearic Islands (108). The regions that reported the highest YoY variations in terms of the number of house sales were the Canary Islands (52.7%) and Extremadura (34.6%). Meanwhile, La Rioja and Galicia (both with decreases of -3.1%) recorded negative annual growth rates.

Original story: El País (by Sandra López Letón)

Translation: Carmel Drake

Notaries: Foreigners Bought 20% Of All Homes Sold In 2015

10 May 2016 – El Economista

Foreigners purchased 76,680 homes in Spain in 2015, which represents an increase of 12.9% compared with 2014 and means that foreigners accounted for 20% of all the homes purchased last year, according to data from the General Council of Notaries, which shows that the weight of house purchases made by foreigners has been increasing since 2007.

Distinguishing between resident and non-resident foreigners, 51.7% of these purchases were made by non-resident foreigners. Even so, the purchase of unsubsidised homes by resident foreigners increased by 18.2%, which exceeded the rate of growth experienced by non-resident foreign buyers (8.4%).

All of the autonomous regions reported increases in the number of purchases of unsubsidised homes by foreigners. Four regions recorded increases below the national average, namely Cataluña (+4.9%), Comunidad Valenciana (+7.2%), Extremadura (+9.8%) and the Canary Islands (+10.3%).

The other regions recorded increases above the national average, driven in particular by La Rioja (+59.1%), Castilla-La Mancha (+57.3%) and Navarra (+41.5%). Aragón (+39.8%), Castilla y León (+34%), País Vasco (+30.7%), Murcia (+25.8%) and Cantabria (+25.5%) reported slightly lower growth rates.

On the next level, with growth rates slightly above the national average, were Galicia (+23.2%), the Balearic Islands (+22.3%), Madrid (+17.3%) and Andalucía (+13.6%).

In 2015, the regions that recorded the most the purchases of unsubsidised homes by foreigners were: the Balearic Islands (44%), the Canary Islands (39%), Comunidad Valenciana (37%), Murcia (25%) and Andalucía (25%).

By contrast, the regions where operations made by foreigners carried the least weight were: País Vasco, Cantabria, Castilla y León, Galicia and Extremadura, where they accounted for around 4%.

Prices increased by almost 3%

The average price per sqm of house purchases made by foreigners in 2015 amounted to €1,598/sqm, which represents a YoY increase of 2.9%. The average price of homes acquired by non-residents rose by 5.6%, to €1,792/sqm, whilst the average price of properties bought by resident foreigners decreased by 0.1% to €1,367/sqm.

The average price of homes acquired by foreigners was higher than the national average in the Balearic Islands (€2,580/sqm), País Vasco (€2,047/sqm), Madrid (€1,867/sqm) and Cataluña (€1,856/sqm). Prices in the other regions fell below the national average, with the lowest prices recorded in Extremadura (€576/sqm), Castilla-La Mancha (€597/sqm), La Rioja (€710/sqm) and Castilla y León (€712/sqm).

In terms of the nationality of the foreigners who bought homes in Spain, the most active buyers were British (which accounted for 20.6% of the total), followed by the French (8.8%), Germans (7.5%), Belgians (5.7%), Italians (5.5%) and Romanian (5.3%). Those nationalities accounted for more than half of the transactions involving purchases of unsubsidised homes made by foreigners in 2015.

The nationality that increased its level of activity by the most in the market for unsubsidised homes during 2015 was Romanian, with a YoY increase of 59%. In addition, Ecuadorian (+43.1%), British (+37.7%), Moroccan (+25.8%), Italian (+18.5%), Irish (+17.8%), Chinese (+16.8%), Swedish (+15%), Argentine (+14.8%) and Swiss (+13.6%) buyers recorded YoY growth rates above the national average.

Original story: El Economista

Translation: Carmel Drake

Kutxabank Stirs Up The Mortgage War With A 2.5% Fixed Rate Product

12 March 2015 – Expansión

Kutxabank launches one of the best offers in the market / The Basque entity enters the battle started by Sabadell and CaixaBank and seeks to foster loyalty from its customers.

Kutxabank continues to embroil itself in the mortgage war that has been unleashed in the Spanish financial sector, which is showing the first signs of economic recovery. Two months after the launch of mortgages offering rates of Euribor + 1%, the bank comprising the former Basque savings banks BBK, Kutxa and Vital, has now launched one of the most attractive fixed rate offers in the market: a 30-year 2.50% fixed rate product.

According to the entity, its proposal is the “most attractive” in the market because, not only is it offering a reduced interest rate, also this rate will remain unchanged throughout the life of the loan. The nominal interest rate (‘tasa nominal’ or TIN) of 2.50% represents an annual percentage rate (APR, ‘tipo annual equivalente’ or TAE) of 3.28%, according to the new calculation rules, which include various expenses.

Currently, several institutions are embroiled in the fixed-rate mortgage war. Sabadell is offering a nominal fixed rate mortgage at 3.25% (4.18% APR) over thirty years and at 2.90% over twenty years, and CaixaBank has loans at nominal rates of between 2.50% and 3%, depending on the other products held by the customer, and with no set-up fees. Other banks, such as Bankinter, Bankia and BMN are also offering fixed rate mortgages with interest rates of between 3.4% and 4.6%.

Just like with its variable rate mortgages, Kutxabank is looking to foster loyalty from its customers and achieve maximum links (with them) through this aggressive offer . As such, the entity requires them to have their salaries, which must amount to at least €3,000/month, paid directly into their accounts; make payments with the bank’s cards amounting to more than €3,600/year; make contributions to pension plans or social welfare institutions of more than €2,000/year, and take out life assurance contracts with Kutxabank. The set-up fees for the mortgage will be 0.25%, with a minimum charge of €400.

According to the Basque entity, fixed rate mortgages “provide greater security and stability” for customers, as they allow them to know what their instalments will be, at all times, regardless of (variations in) interest rates (in the wider market).

Kutxabank has a 35% share of the mortgage market in the País Vasco and almost 70% of its total loan book is concentrated there, amounting to €31,000 million. The bank is working on the assumption that the mortgage market is in full recovery, after increasing its home loans by 24% in 2014.

Original story: Expansión (by M. Á. F.)

Translation: Carmel Drake

Financial Institutions See 2015 As “Year Zero” Of The Recovery

9 February 2015 – El Mundo

Many banks (49%) believe that financing will return to normal between 2016 and 2018

Although many large banks are already taking positions in the real estate sector to benefit from its recovery, with transactions such as Operation Chamartín led by BBVA, or Santander’s increase of its stake in Metrovacesa, the financial sector does not believe that 2015 will be the year that marks the full recovery of the real estate sector. That is the conclusion of a study conducted by the consultancy KPMG, based on the views of more than 200 sector experts in the Spanish market.

According to the document, 2015 is going to be “year zero” in terms of the start of recovery of the Spanish real estate sector in Spain – 80% of Spanish banks and Sareb do not expect credit for housing and other real estate activities to flow normally this year, despite the fact that according to data published by the Bank of Spain, consumer loans and mortgages recorded a slight increase towards the end of 2014, for the first time since 2007.

Many financial institutions (49%) expect that financing will return to normal between 2016 and 2018, whilst 31% do not expect that it will happen for more than two years.

By that time, i.e.. from 2018 onwards, 79% of the banks surveyed (plus Sareb, the bad bank) expect that the stock of real estate assets, which is still being accumulated in Spain and which continues to weigh down on the results of the financial sector, will be absorbed.

Nevertheless and despite the high levels of unemployment, demand could increase significantly from 2016, according to 51% of the financial institutions that have participated in the study.

The sector is divided in its assessment of how this demand will behave and there is no consensus as to whether there has been a change in the mindsets of young people following this economic crisis. 50% of the banks surveyed (plus Sareb) believe that young people (aged less than 35 years) in Spain will continue to prefer to buy a home rather than rent one and most of the rest (44%) think that there will be a change in the home buying trend and that young Spaniards will chose to rent rather than buy as we learn from the past.

Nevertheless, there is complete consensus amongst respondents as to the involvement of financial institutions in supporting the recovery of the real estate market and the importance of their role as lenders, given that the other methods that are currently being used to close transactions – such as direct lending or investment by specialist funds – are necessary but not sufficient for the sector to fully recover.

There is also strong consensus (85%) that the old financing model of high leverage, which generated the property boom in Spain will not be repeated.

Construction reduces its weight over total GDP

According to estimates by the National Construction Confederation (Confederación Nacional de la Construcción or CNC), the construction sector accounted for around 23% of Spain’s GDP in 2007; by 2013, that weight had decreased by more than half (to 10%). The study, conducted by KPMG’s Real Estate team, concludes that 82% of the players involved in this business (banks, Sareb, companies, investors and the public sector) believe that construction’s contribution to national wealth will exceed 10% within five years, however it will have to reach 15% for it to really constitute a recovery. The majority of the participants in the survey agree that employment will be generated in the sector over the next five years. More than half think that the construction sector will provide work for more than 7% of the active population and more than a third believe that this figure will amount to 10%. But everyone agrees that the figure will not reach the level (14%) seen before the crisis.

Original story: El Mundo (by María Vega)

Translation: Carmel Drake

Engel & Völkers’ Business Grows By 60.7% In Spain

30 January 2015 – La Vanguardia

E&V brokered property sales worth €699.25 million in 2014 compared with €435.1 million in 2013.

The luxury real estate agent Engel & Völker increased its business in Spain by 60.7% in 2014, when it brokered property sales worth €699.25 million, compared with €435.1 million in the previous year.

During 2014, it closed 1,071 sales, an increase of 77.6% on the 603 transactions completed in 2013. Nevertheless, the average sales price decreased by 9%, from €719,759 to €652,894, said the firm.

As for the rental market, the number of homes handled by the firm in Spain increased by 66.4% in 2014 with respect to the previous year, as it closed 724 transactions.

As with house sales, the average price of rental accommodation also decreased, by 7.6%, in line with the trend in the market to amount to €2,305 (per month).

During the course of last year, Engel & Völkers opened 14 new offices in Spain: its Market Centers in Madrid and Valencia; and 12 offices located in San Sebastián, Vigo, Tarragona, Benidorm, Calpe, Denia and in several parts of Madrid, including Conde de Orgaz, Majadahonda, Las Rozas, Alameda, Sanchinarro and Aravaca, amongst others. In addition, 16 new licences were sold.

According to Philipp Neimann, the CEO of Engel & Völker in Europe, the Middle East and Africa, the market in Spain is a key priority for the company at the international level.

Having opened its Market Centers in Madrid and Valencia last year, with a total investment of €4.5 million, the prestigious property firm considers that there are still many business opportunities in the country.

Globally, the Engel & Völkers group increased total income from commissions by 10.1%, to €300.3 million, the highest amount the company has ever recorded in its 35-year history.

In 2015, it plans to employ 2,000 new real estate agents around the world, with Spain and the USA earmarked as the priority markets for the firm.

Original story: La Vanguardia

Translation: Carmel Drake