Ministry of Development Invests €870M In Housing Plan For 2017

23 November 2016 – Expansión

Yesterday, the Minister for Development, Íñigo de la Serna, announced in the Senate that the State Plan for Housing and Refurbishment 2013-2016, which is due to expire at the end of this year, will be extended for another year. The Government is finalising a Royal Decree to avoid “the subsidies for housing being suspended from 1 January”, said De la Serna. Thanks to this extension, which the Council of Ministers will approve over the coming weeks, the number of families receiving subsidies of up to €200 to pay their rent will increase to 100,000.

The ministry was unable to provide details about how many recipients currently benefit from the Plan, but the initial objective was to cover the needs of 200,000 families. So far, it has not managed to help even half that number, but that is the aim for next year.

The commitment to subsidise rental payments instead of awarding social housing was very well received by all social agents, as well as by the opposition party. Through the State Plan, the Ministry of Development pays for between 33% and 40% of the monthly rent of households with incomes of less than €22,365 per annum who rent homes for less than €600/month.

During the Government control session in the Senate, the Minister revealed that this one-year extension will allow the Ministry of Development to allocate more than €321 million to rental and refurbishment projects in 2017. Moreover, almost €90 million will be contributed by the regional governments in the form of co-financing and €458 million will be provided through induced private investment, taking the total investment to almost €870 million.

“The extension of the term will not only help lots of families pay their rent, but also will continue to incentivise participation in the private sector and create business opportunities, which will result in the generation of employment and, therefore, also in new resources for the State”, said the Minister. In fact, next year, “35,000 homes will be refurbished or renovated”, which will create 13,000 jobs, said De la Serna.

In parallel, more than 70,000 families will continue to receive help with their mortgage payments to acquire social housing properties in 2017. Another €150 million will be allocated to that cause.

The Minister also announced that the Sectoral Housing Conference will be convened on 15 December with all of the autonomous communities, to start to prepare a State Plan for the period 2018-2021. De la Serna said that this will be “the fruit of consensus and dialogue” not only with the autonomous governments, but also with agents, associations and other players in the sector. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Oliver Wyman: Mortgage Lending Will Triple By 2020

7 September 2016 – Expansión

Oliver Wyman warns that the banks are once again “relaxing” their criteria for granting home loans.

There is no going back in terms of the re-awakening of the real estate market. All indicators are pointing in favour of a recovery in the sector: GDP is enjoying annual growth of 3.2%, interest rates remain at historically low levels and the banks have started to ease their criteria for lending money in light of the need to give their income statements a boost.

In this context, the consultancy firm Oliver Wyman forecasts that the number of loans granted for house purchases will triple over the next five years to reach 550,000 signings per year by 2020. That figure would be equivalent to the constitution of 1,500 new mortgages per day, up from the current figure of 600 per day.

Behind this recovery in the real estate sector is a forecast acceleration in the creation of new households – the reduction in the level of unemployment will allow, amongst other things, young people to move out of the family home sooner – as well as the demand for homes that has been pent up during the crisis, which could amount to almost 300,000 homes. This last case involves households who have been waiting to buy a property for years, but who have not taken the plunge yet as they wait for the economic environment to improve and the price per square metre to stop falling. (…).

Oliver Wyman considers that its forecast for mortgage signings by 2020 represents the “equilibrium level” for an economy of the size of Spain’s. In other words, according to this company, the signing of 1,500 home loans per day would not result in the creation of a new real estate bubble like the one seen between 2005 and 2007. Between those dates, 1.3 million mortgages were signed in Spain per year: one for every 35 inhabitants.

Nevertheless, the financial consultancy does warn of a number of risks that could damage the local property market. They are linked to the worsening of the economic environment – in part due to the “political instability” that is paralysing the economy – , a sudden increase in Euribor combined with the gradual withdrawal of monetary stimulus at the world level – which would make monthly payments more expensive and which would increase the rate of default – and the granting of more credit to clients with higher risk profiles.

In this sense, the banks are now under pressure to stimulate their mortgage businesses to boost their income statements and face up to the growing competition from new digital agents who are increasingly operating in the sector.

The real estate market is still purging the excesses left over from the first decade of the century. During the second quarter of this year, 20,927 mortgages were foreclosed, which represents a reduction of 27% compared with the same period last year.

Of the total assets foreclosed, 57.1% were homes, and 30.6% of those were primary residences…according to figures published yesterday by Spain’s National Institute of Statistics (INE). In terms of the status of foreclosed homes, 13.6% were new homes, down by 25.1%, and the remainder (86.4%) were second-hand homes, down by 31.2%.

Original story: Expansión (by Victor Martínez)

Translation: Carmel Drake

INE: Unemployment Falls By 216,700 To 20% In Q2

29 July 2016 – Cinco Días

The number of people employed in Spain rose by 271,400 during Q2, up by 1.51%, according to the Labour Force Survey (EPA), published by INE yesterday. In terms of the creation of employment, it was the weakest second quarter since 2013 (411,800 more people were employed during the same quarter in 2015, and 402,400 more in Q2 2014). In seasonality-adjusted terms, the QoQ variation amounted to 0.29%, the lowest figure in the second quarter since 2013.

In terms of unemployment, the number of people on the dole decreased by 216,700 during the second quarter of the year to 4,574,700, down by 4.5%. The unemployment rate now stands at 20%, one point below its level in the previous quarter. In addition, that figure represents the lowest level since Q3 2010, when the rate stood at 19.59%. The unemployment rate also saw its lowest decrease in Q2 since 2012: during the second quarter of 2015, unemployment decreased by 295,600, in Q2 2014, it fell by 301,400 and in Q2 2013, it dropped by 230,900. During the second quarter of 2012, unemployment fell by 63,100. In seasonality-adjusted terms, the QoQ variation amounted to -1.90%.

Employment increased this quarter in: services (227,300 more), construction (45,600) and industry (15,700), and decreased in agriculture (17,200 less). In the last year, employment has increased in: services (439,100 more) and agriculture (19,800), but has fallen in construction (15,700 less) and industry (8,800).

By autonomous region, the highest increases in employment during the quarter were seen in the regions that receive lots of tourists, such as the Balearic Islands (56,000 more people were employed), Cataluña (53,700) and Murcia (28,400). The number of employed people decreased in the Canary Islands (11,900 less) and Navarra (4,200).

Quality of employment

The total number of wage earners increased by 252,700 during the second quarter (and by 425,500 with respect to the previous year), of which 86,400 signed permanent contracts and 166,300 signed temporary contracts. The temporary rate rose by 68 hundredths to 25.72%.

The number of self-employed workers rose by 15,700.

The number of full time workers increased by 301,100 and the number of part-time workers decreased by 29,300.

Households with every member unemployed

The number of households where all of the members are unemployed decreased by 117,100 during the second quarter of 2016, to 1,493,800, of which 361,000 were single-occupancy households.

At the opposite end of the spectrum, the number of households where all of the active members are employed rose by 151,800 to 9,662,200, of which 1,833,400 were single-occupancy households.

Original story: Cinco Días (by C. Castelló)

Translation: Carmel Drake

INE: 3M New Homes Since 2001, But 62% Not Yet Paid For

26 April 2016 – El Economista

The real estate boom at the beginning of this century caused the housing stock in Spain to increase by almost three million. Most of those homes were acquired as main residences, but the majority have not been paid for yet (they still have outstanding mortgages). That is according to Spain’s National Institute of Statistics (INE), which estimates that 2.974 million homes were constructed between 2001 and 2010. Of those, 1.85 million (62%) still have mortgages pending payment.

Another 562,000 homes constructed in the last decade have also been sold and they have already been paid for, either because they were paid for in cash at the time, have been inherited or because their mortgages have already been paid off. Another almost half a million (482,000) are rented out as main residences and another 79,000 are transferred or low cost homes.

This data corroborates the fact that Spain is still a country of “owners”. In 2015, 77.3% of households lived in homes that they owned, both with mortgages and without, a percentage that was slightly lower than the 78% seen in 2014. By contrast, the number of households that rent their homes increased from 16.6% of the total in 2014 to 17.5% in 2015.

According to INE, although in the case of homes constructed within the last decade, the proportion is much higher, 28% of households live in homes with mortgages, whilst 48.9% of homes have already been paid for.

Only 91,900 homes were built between 2011 and 2015

INE’s data also reflects the slowdown that the property sector has suffered since 2010. Whilst 1.275 million homes were constructed between 2006 and 2010, during the next five year period (2011-2015), that figure was 14 times lower: 91,900. This shows the decline that the property sector has suffered since the burst of the real estate bubble.

The same phenomenon can also be seen in the number of mortgages signed, which, despite the progress made in 2015, still falls a long way belong the level seen during the bubble. Specifically, in 2015, loans amounting to €25,934 million were signed to buy homes, which represented an increase of 24% with respect to 2014. But that figure falls well short of those recorded in 2006 and 2007, when loans worth €180,000 million were granted. In other words, the house loans signed last year had a combined value that was 7.5 times lower than during the years of the boom.

In addition, INE has identified that housing tenure regimes varies by nationality. In this way, 59.7% of households with at least one foreign member rent their homes, compared with 12% of households in which all of the household members are Spanish.

Original story: El Economista (by Inés Calderón)

Translation: Carmel Drake

Sociedad de Tasación Predicts RE Recovery From Mid-2017

25 April 2016 – El Economista

ST Socided de Tasación forecasts that 2016 will mark the year of house price “stabilisation” and the start of improvements in the sector, however the recovery in real estate activity, and therefore in prices, will not come until the middle of 2017.

Those were the predictions made by the CEO of ST Sociedad de Tasación, Juan Fernández-Aceytuno, in an interview with Europa Press, in which he explained that in order to talk about a recovery in the real estate sector, the number of mortgages (which are currently growing at a YoY rate of 35%) have to get closer to the number of house sales (which are increasing by 20%), and he estimates that there is still “between 12 and 18 months” to go in that regard.

Fernández-Aceytuno believes that there is still “potential” for the creation of households, mortgages and transactions, given that this year, it is estimated that 300,000 new mortgages will be granted, compared with 1.35 million in 2006, and around 450,000 transactions will be closed, a figure that peaked at 900,000 during the real estate boom. (…).

He considers that for a country like Spain, a “very reasonable balance” would be 650,000 transactions per year, which would represent a “fabulous” market.

For the time being, the surveyor says he is observing “stabilisation” and the “start of the recovery” in terms of prices, which is now extending to all provinces, and is being led by the autonomous regions of Madrid, Cataluña, the Balearic Islands and País Vasco.

Eight-year upwards cycle

The CEO of Sociedad de Tasación explained that real estate cycles in Spain seem to span periods of 16 years, eight years of decreases and eight years of increases, which means that, in theory at least, the country can now look forward to eight years of increases, although “ it would be better if the growth were not so marked, but more sustained”. (…).

According to Fernández-Aceytuno, the Socimis “will be a very significant investment engine in the rental market”; he also sees a “great opportunity” in urban renovation and regeneration. The “big question” in this recovery process is whether the generation of “millennials” will opt to buy homes or to rent, a market that has been booming in recent years.

“Over the medium and long term, I expect to see a reasonably good market. The growth rate will depend on many factors, but I am reasonably optimistic”, he added.

Uncertainty affects investments, but not purchases

In terms of the impact of the political uncertainty on the real estate market, the CEO of Sociedad de Tasación considers that for now, at the micro level, the repercussions are “limited” and are not delaying purchase decisions, but he warned about the effect on “major investments, shopping centres and funds” as a result of the regulatory risk surrounding urban planning. (…).

Original story: El Economista

Translation: Carmel Drake

Ceprede: Demand For Housing To Grow By 85,000 Units p.a.

8 July 2015 – Europa Press

According to the Centre for Economic Forecasting (‘Centro de Prediccón Económica’ or Ceprede), despite the forecast decline in the population, demand for housing will grow by 85,000 units per year, on average, over the next few years, due to an increase in the creation of smaller households.

The calculations made by Ceprede take into account forecasts from the National Institute for Statistics (INE), which point to a reduction in the Spanish population of more than one million people by 2030.

By contrast, Ceprede predicts that the number of households will increase at an average annual rate of around 145,000 units per year, due to a decline of more than thirty basis points in the ratio of the average household size, from 2.5 people in 2015 to 2.2 in 2030.

Specifically, whilst the population comprises 46.4 million people in 2015, the number of households stands at 18.3 million. Whereas, in 2016, the number of inhabitants will begin to decline moderately, to 46.3 million, and the number of households will increase slightly to 18.5 million.

This trend in terms of the decreasing population will continue until 2030, by which point the population will have shrunk to 45.1 million and the number of households will have increased to 20.6 million.

In this way, Ceprede says that the gap between the net increase in housing stock and new homes will gradually narrow over time, as the accumulated stock of housing is absorbed. This will result in an increase in demand for homes, but at a very moderate rate – around 85,000 units per year.

Meanwhile, the ratio of homes per household will continue at its current level of 1.4 until 2019, at which point it will decrease by ten basis points to 1.3, where it will remain until 2030.

Original story: Europa Press

Translation: Carmel Drake