Tag: housing stock

Andalucía’s Housing Sector Finally Shows Signs Of Recovery

17 March 2015 – Cinco Días

The region has joined the recovery later due to its poor employment situation.

The autonomous community of Andalucía was undoubtedly one of the hardest hit by the burst of the real estate bubble, due to the weight that holiday homes have traditionally held in the region. Attracted by the influence that the areas of Marbella and the Costa del Sol have had on the rest of the Andalucían coast for decades, Andalucía was no exception and also joined the construction craze and the boom in prices.

In fact, according to figures published by the local Government, led by the socialist Susana Díaz, based on census data compiled by the National Institute for Statistics (INE) and estimates from the Ministry for Development, the total stock of real estate in Andalucía currently amounts to around 4.5 million homes.

If we compare this figure with data from 2001 (population census numbers and housing data are compiled every 10 years), the stock of housing has increased by more than one million homes, which represents a rise of more than 25% in relative terms. This means that, just like in the rest of the country, a significant stock of unsold new homes has accumulated (in Andalucía); some sources estimate (that the stock amounts to) 150,000 properties and others, such as the Spanish Confederation of the Construction Product Manufacturers Association (Cepco) estimated (that the stock amounted to) 114,000 in 2009.

What has happened since then? As in the rest of the country, between 2009 and 2013, construction activity (in Andalucía) virtually ceased, prices experienced the largest slump in recent history and house sales dropped to historical lows, dampened by the poor employment situation and the closure of the credit tap.

Foreign buyers

In this context, sales did not begin to take off again until price reductions started to decelerate and the flow of financing started to slowly open up; and since then, sales have evolved unevenly in each region.

Six years on and Andalucía is not known for being one of the regions where house sales have grown the most or where cranes have begun to appear again, since it is still weighed down by the employment situation, which has not improved there as it has done in other autonomous regions. And this is the case, regardless of the statistics that we analyse.

If we take the most recent statistics (published last Thursday) as a benchmark, which were prepared by the Ministry of Development using data from notaries, house sales in Andalucía grew by 21% during the last quarter of 2014 with respect to the same period in the previous year. These figures are roughly equivalent to the national average (19.5%), however according to the Ministry of Development, seven regions experienced increases that exceeded those recorded in Andalucía.

Meanwhile, if we consider the statistical figures compiled by INE, which obtains its data from the property registers, then house sales in Andalucía increased by just 0.3% year-on-year in 2014, compared with an average rate of increase across Spain of 2.2%. This modest growth in Andalucía contrasts with the recoveries of 18.5% and 12% in terms of real estate sales experienced in the Balearic and Canary Islands, respectively, two other regions that are heavily influenced by holiday homes and purchases by foreigners. Even so, the surplus of new homes in Andalucía had decreased by 44.5% to amount to 63,250 new homes as of last September, according to Cepco.

And where is Andalucía in terms of prices? Again, it worth considering the two sets of statistics that are regarded as ‘official’: those published by the Ministry of Development and INE. The department led by Ana Pastor recently published its price statistics relating to the entire year 2014 (compiled on the basis of appraisal values) and although they showed that house prices (in Spain) increased by an average of 0.5% on a quarter-by-quarter basis (the last quarter in 2014 compared with the previous three months), on an annual basis (fourth quarter 2014 compared with the same period in 2013), the most recent figure was negative, with house prices decreasing by 0.3% at the end of last year.

Nevertheless, Andalucía recorded positive rates in both cases, although the increases were very modest: 0.4% QoQ and 0.2% YoY. By province, five ended 2014 with lower prices than they had recorded a year before. Meanwhile, according to INE’s data (compiled using figures from notaries), Andalucía closed 2014 with an average annual price increase of 1.8%, just one (basis) point below the highest figures, which were recorded in Madrid and Valencia, with annual increases of 2.9% and 2.8%, respectively.

Industry experts agree that the recovery in the real estate market has started later in Andalucía than in other regions, but consider that now is the moment to take advantage of the ‘pull of tourism’ to construct there once again, since there is demand, and that will generate activity and employment.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Santander & BBVA Reduced Their Real Estate Stock In 2014

10 February 2015 – El Economista

In 2014, Santander’s real estate stock decreased by 1.8% and BBVA’s dropped by almost 5%.

Banco Santander and BBVA are beginning to shed some real estate weight. For the first time, the economic recovery has allowed the two large banks to reduce their portfolios of homes and land foreclosed from developers and individuals for the non-payment of debt.

The two largest financial groups in the country have managed to halt the entry of property onto their balance sheets and accelerate its exit, thanks to a boost in sales. Thus, the Cantabrian group has decreased the gross value of its real estate portfolio by 1.8% to €7,851 million. After accounting for provisions, which reflect current market prices, this value decreases to just over €3,500 million.

Meanwhile, the bank chaired by Francisco González has reduced its stock by 4.9% to €13,016 million. After applying the appropriate provisions, the value of its real estate portfolio amounts to €6,131 million.

Boost in sales

This decline in the assets of the two main entities has occurred at a time of stability in terms of prices, which seem to have bottomed out having decreased by 40% in the last seven years. This, coupled with the high provisions, which cover between 53% and 55% of the gross value of the assets, has allowed both entities to sell assets, above all, during the second half of last year, without incurring any additional losses.

The increase in the sale of properties and, even some land, also coincides with the war in the mortgage segment that was unleashed in 2014. The entities have launched campaigns to offer loans at the most attractive prices to enable borrowers to purchase homes, including from their own portfolios.

Different strategy

Santander and BBVA’s real estate strategies are different, but both are now starting to bear fruit, after years of burgeoning portfolios of foreclosed assets as developers and families found it impossible to pay their debts.

Santander, like many other Spanish banks, has transferred the management of these assets to Apollo. The Cantabrian group sold 85% of its real estate platform Altamira to the fund, and whereby achieved significant gains with which to strengthen its capital and transfer the management of the entire stock to a specialist company, which has also just been awarded the management of a portfolio by the bad bank or Sareb for the next few years.

BBVA’s plan is different. The entity, headquartered in Bilbao, has preferred to keep the management of all of its unproductive assets in-house, through its subsidiary Anida.

Although prices have now stabilised and the banks are now making some money on the majority of sales transactions after accounting for provisions, the real estate arms of both banks are still weighing down on their income statements. These divisions include not only foreclosed homes, but also loans granted to companies relating to the real estate sector. In the case of Santander, the real estate department recorded losses of almost €600 million in 2014, 8.2% less than in 2013. BBVA recorded losses of almost €800 million.

Both banks hope that these divisions will begin to generate some kind of positive yield within two years and they expect their respective stock balances to have disappeared or been reduced to an absolute minimum within five years. The decreases were more pronounced (in the double digits) in the case of loans to developers than properties due to the divestments performed in the wholesale market.

Original story: El Economista (by F. Tadeo)

Translation: Carmel Drake

The Stock Of New Homes Will Fall By 29% In 2015

9 February 2015 – Expansión

The over-supply of properties is decreasing / The number of unsold new homes will decrease from 662,761 in 2014 to 469,700 in 2015.

The puncture in the paroxysm of greed that was the real estate bubble, left a never-ending mummified trail, a sea of properties strewn haphazardly across the country and without exception. In 2008, when the economy crashed, a squirrel could have crossed Spain from Tarifa to Cadaqués jumping from empty home to empty home. Not anymore. Or not through so many empty new homes at least. The stock of new residential property for sale is decreasing significantly, although in absolute terms the number is still high.

That is the view of the 21st Edition of the Real Estate Heart Rate Monitor (XXI edición del Pulsímetro Inmobiliario) published by the Institute of Business Practices (el Instituto de Práctica Empresarial or IPE). The surplus of homes declined in 2014, for the fourth consecutive year, from 777,000 in 2013 to 662,761. In other words, by approx. 115,000 homes or 14.7% of the total.

Furthermore, the decrease will be even greater in 2015. According to the IPE’s forecasts, the figure will drop down to 469,708 residential properties this year, i.e. 29.7% fewer than in 2014. In other words, almost one third of the stock will have vanished in just 12 months. As many as 193,000 homes.

The over-supply of homes reached its peak in 2010, when the developments that had been started in 2008 were completed – residential construction is a process that tends to take around two years. In 2010, the surplus stock amounted to 931,615 homes, slightly less than twice the number of new, empty homes that will be on the market in 10 months time in Spain (note, stock does not include second-hand homes).

Once again in 2014, Valencia was the autonomous region with the highest number of phantom residential properties and the only one to have more than 100,000. This region, which is heavily influenced by coastal second homes, closed 2014 with a stock of 163,098 units, which will decrease by 27.5% in 2015, down to 118,196, according to the forecasts released by MAR Real Estate and the IPE. Valencia accounts for no less than one in four of all surplus properties, i.e. 25% of the total.

It is followed by Castilla-La Mancha, an unequivocal symbol of the legacy of the years of over-heating, which is expected to have 72,944 homes by December (2015), down 13.6% from a year earlier.

The third autonomous region is Andalucía, which is expected to have 59,563 empty homes by the end of the year, i.e. 41% fewer than in 2014 – not for nothing, the Costa del Sol is beginning to recover. These three regions alone account for 54% of the total stock.

Experts predict that the highest reductions in the over-supply of property will take place in the Community of Madrid and Cataluña, where they expect the figures to decrease by half, i.e. from 27,618 to 13,809 in the case of the former; and from 25,353 to 12,676 in the case of the latter.

“New homes are already being built in Madrid and Barcelona because some areas have been left with very little stock”, says José Antonio Pérez, Director of Real Estate at IPE. However, there are other provinces, especially those in the East “with a large quantity of homes that are going to be hard to sell”, due to the vast number of properties that are suffering from a double hangover: that of the bubble and that of the nearby sea”.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Housing Sector To Improve Region To Region RECOVERY / Large Cities Are Initiating The Climb Out Of The Crisis

26/12/2014 – Expansión

Housing recovery will be asymmetrical, as it is in the real estate market — experts and industry players are convinced. Areas where fewer new homes remain unsold and price adjustments have been significant will take less time to return to normal levels than in the more built-up provinces.

What happens in big cities is often a leading indicator of the coming trend. And in Madrid, housing price adjustment has been more than 40% and things are starting to move again in the real estate market. That is, investors have already become more active, considering that home value drop will not deepen much further. The same thing is happening in Barcelona and major cities in the Basque country. The surprise is that real estate consultants and economists already see the light at the end of the tunnel in Mediterranean tourist destinations such as the Costa del Sol – which always falls and recovers before the average of other Spanish regions – and parts of Levante, the eastern coast.

Specifically, there are already 20 provinces that are on the road to recovery, after seven years of continuous descent. This is much better than the 2013 scenario, in which only eight provinces were showing signs of improvement. This was noted in a report by Deloitte in which the exit speed of the real estate crisis is measured by region.

According to the study, the Spanish provinces with the best real estate score are in order as follows: Madrid, Álava, Barcelona, Guipúzcoa, Vizcaya, Navarra, Cantabria, Zaragoza, Lleida, Baleares, Segovia, Valencia, Asturias, Huesca, Burgos, Valladolid, Palencia and Soria. That is to say, these are the regions where the real estate market will see the greatest recovery, i.e. more and more cranes, construction projects and mortgage subrogation will begin to pop up.

On the opposite end, Almería, Ciudad Real, Toledo and Castellón will take the longest to recover, “due to both their worse relative position in macroeconomic terms and weaker real estate sector activity, heavily penalized by oversupply.” Yes, it is remarkable that this tail-end has shrunk from having 21 provinces in 2012 to only four this year. The remaining areas (25 provinces) are at a midpoint, meaning they will recover in ‘a second phase’”.

It is also important to note that 18 of the 20 provinces that will get out of the housing crisis early are situated in the North. The other two are the Balearic Islands and Valencia (see chart). And none of the southern provinces will recover in the first of the three exit phases of the housing crisis that Deloitte has set. “The North will climb out of the crisis faster than the South, since it is not so contingent upon tourism. Furthermore, in the North, urban residential development has not been as significant as in the South,” said the Director of Deloitte Real Estate, Javier Garcia-Mateo.

The regions with the highest housing stock are Valencia (164,000 homes), Andalusia (102,500) and Castilla-La Mancha (83,700). Together, these three regions account for more than half the housing surplus at the end of 2014, according to the Real Estate Institute Business Practice Pulsometer, which estimates the stock of unsold new homes at the end of 2014 at 652,000, 14.8% less than in 2013. On the opposite side, Extremadura (3,238), Navarra (3,854) and Baleares (7,965) have the lowest number of homes remaining unsold. Catalonia has a surplus of 12,977 homes, less than half that of Madrid (27,198).

Original article: Expansión

Translation: Aura REE