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

College of Registrars Creates New CPI Indicator for RE Sector: the IRAI

4 December 2017 – El Confidencial

The recovery of the real estate sector is now a reality that nobody doubts. In fact, activity in the sector in Spain has been growing in a sustained way since 2014, far from the minimum levels of 2013, but also a long way from the peak heights. The volume of – new build and second-hand – transactions is rising; more mortgages are being granted; property prices are recovering; and new build permits are increasing. Moreover, the number of companies linked to the sector filing for creditor bankruptcy is also decreasing. Each one of these parameters has its own indicators proceeding from different sources (e.g. Spain’s National Institute of Statistics (INE), real estate websites, appraisal companies, Ministry of Development…), that show the evolution of those specific parameters.

Nevertheless, from now on, there is going to be a new indicator that groups them all together and, through a complex weighting system, shows the overall evolution of activity in the real estate sector. This new indicator is the Real Estate Activity Registry Index (IRAI), compiled by the College of Registrars. According to its creators, it is set to be called the CPI of the real estate market, given that its preparation adopts a very similar methodology to that used by INE to measure inflation.

The indicator takes the year 2003 as the base year (100); it serves as the reference for analysing the evolution of real estate activity. In this way, for example, during the third quarter of this year, the IRAI amounted to 98.26% points, 30% below the maximum levels of 2007, the year the real estate bubble burst. During the first 3 months of that year, the index reached its maximum, 139.90 points. Nevertheless, since the historical minimum of 68, to which it fell in 2013, the sector has risen by 45% to date. Like in the case of CPI, the IRAI can be softened or purified to avoid seasonality, in which case, it amounts to 94.34 points.

This new index is a synthesis of different indicators. It includes real estate transactions, mortgage financing and, in addition to the above, another set of commercial activity indicators, such as the number of company constitutions, economic variables from filed annual accounts and bankrupt companies, in all cases relating to the construction and real estate sectors. For its launch, the College of Registrars has constituted a Committee of Experts, advisors from the college in each aspect listed above, who have been responsible for preparing the index and determining the weighting of each one of the indicators in the index. The IRAI will be prepared on a quarterly basis (…).

Evolution of the IRAI so far this year

The variation in the IRAI since January has been an increase of 10.12%, representing the cumulative impact of the ownership element (9.55%) and the commercial element (0.57%). In other words, the part corresponding to house sales and financing has pushed up the index by the most, compared to the boost from commercial activity. In December last year, the IRAI amounted to 89 points, compared to 98.26 now.

In this way, the groups with the greatest positive cumulative impact so far this year have been sales (cumulative impact of 6.98%) due to the significant rise in the number of sales (cumulative impact of 6.11%), especially of new and second-hand homes with growth rates of 31.87% and 27.06% and cumulative impacts of 1.19% and 4.14%, respectively.

Sales prices also grew by 3.74% (impact of 0.87%) with the price of second-hand homes having a greater impact (impact of 0.9% with a growth rate of 5.91%). Meanwhile, mortgages (cumulative impact of 2.56%) due to the significant increase in the number of mortgages (cumulative impact of 2.05%), especially for new and second-hand homes with growth rates of 21.65% and 15.42% and cumulative impacts of 0.92% and 0.94%, respectively.

From the commercial perspective, the greatest boost to activity has come from the decrease in the number of creditor bankruptcies involving both construction companies, which have decreased by 83%, and real estate companies, which have fallen by 57% (…).

Original story: El Confidencial

Translation: Carmel Drake

Idealista: Rental Prices Grew By 24% YoY In September

11 October 2017 – Eje Prime

Rental prices are continuing to climb in Spain. In September, the average price of rental homes rose by 24%, to reach €9.40/m2/month.

By contrast, in cumulative terms during the quarter, the index only rose by 0.5%, according to the real estate portal Idealista.

Eleven autonomous regions saw their residential rental price rises over the summer. The Canary Islands is the region where rental prices grew by the most (3.8%). It was followed by Madrid (3.7%) and Cataluña (3.1%). Meanwhile, the Balearic Islands was the region that saw the most significant decrease in rental prices during the last quarter (-5.9%). By provincial capital, Valencia recorded the highest rental price rise (6.1%), followed by Guadalajara (6%) and Sevilla (5.8%).

Barcelona is the Spanish city with the most expensive average absolute rental price, of €18.3/m2/month. It is followed by Madrid, at €15.3/m2/month, whilst Zamora and Ávila, which both have an average rental price of €4.5/m2/month, are the two cheapest cities in which to rent a home in the country.

Original story: Eje Prime

Translation: Carmel Drake

Tinsa: Appraisal Values Rose By 3.6% Across Spain In May

7 June 2017 – Expansión

The appraisal value of homes rose by 3.6% in May, according to the appraisal company Tinsa. This increase was primarily due to the good times being enjoyed in the sector in Spain’s major cities and provincial capitals, which saw price rises of 6.1%. This shows that the most populated areas are the regions experiencing the greatest buyer impetus, which are, in turn, boosting the main residential sub-markets, above all in Madrid and Barcelona.

“Prices are rising a lot, it’s true”, said José Luis Ruiz Bartolomé, Partner at Chamberí AM. “The rises are being concentrated in certain areas in which there is a risk of the market heating up again because there is little land. It is already happening in Madrid and Barcelona”. But, is there a risk of a bubble? “Not yet”, he answers.

Sources at Tinsa agree, given that its latest forecasts show that house prices will rise by 2% this year, according to Jorge Ripoll, Direct of Research at Tinsa, who recently spoke to this newspaper.

Each month, the IMIE index, which is calculated on the basis of house appraisals performed by the company, reflects the YoY variation in the value (per square metre) of residential properties and its level with respect to the year 2001 (base 1,000). The 1,387 points in the general index reached in May “reveal that the average price in Spain has returned to its December 2013 level”, according to data from the appraisal company. If we compare this with the previous cycle, before the outbreak of the crisis, house prices now are equivalent to those last seen in September 2003.

After the capital cities and Mediterranean Coast, the YoY growth seen in the Balearic and Canary Islands (2.9%) also stands out. The two island regions were the forerunners of the recovery, but now they are experiencing moderate growth rates, which indicates that they could be close to reaching their cruising real estate speeds.

They are followed closely by smaller towns (+2.2%), which are grouped together in the Index into a category that Tinsa calls “Other towns”. Meanwhile, the metropolitan areas saw prices remain relatively stable compared to May 2016, recording just a slight decrease of just -0.3%.

House prices are still reducing the gap generated since the end of 2007. The cumulative price decrease still amounts to 39.2%, according to Tinsa’s statistics. On the Mediterranean Coast, the area that has been hit the hardest over the last 10 years, the cumulative decrease still amounts to 45.6%, just one point higher than in the metropolitan areas, where prices have fallen by 44.5% on average since their peak. In the capitals and major cities, the cumulative decrease amounts to 41.3%, just above the national average. Homes on the Balearic and Canary Islands have depreciated by 27.7% over the last ten years and those in other towns have fallen by 35.9%.

Inflationary fears

But, even though prices in the residential market are still well below the levels seen during the bubble, inflationary fears are returning. “Players are afraid of coming last and there is a shortage of land, so property developers are buying up plots so as not to miss out”, said Ruiz Bartolomé (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Solvia: 71% Of Spaniards Think Now Is A “Good Time” To Buy A Home

19 April 2017 – El Mundo

71% of Spaniards think that now is a “good time” to buy a home, according to a study conducted by Solvia, a subsidiary of Banco Sabadell, and the research institute Kantar TNS, which have prepared a real estate confidence index to quantify the perception and expectations of Spaniards regarding buying a home.

According to the results of the index, which ranges between values of zero (for the most unfavourable perceptions) to 200 (for the most favourable), the situation in terms of real estate confidence amongst Spaniards is “positive”, since the index value currently stands at 112. The index, which has been prepared on the basis of interviews with 1,000 people, reveals that 71% of those surveyed believe that, in general, now is a “good time” to buy a home. The report’s authors highlight the following main arguments as justification for respondents’ answers: “the decrease in prices that the housing market has seen; the notion that buying is a good investment; and the fact that the market is currently offering some genuine opportunities”.

By contrast, the study adds that the interviewees’ perception changes when they are asked about their personal circumstances. In this sense, 61% of Spaniards consider that from their own individual perspective, now is a “bad time” to buy a home.

In this regard, employment conditions and the limited capacity to save, with the consequent difficulties involved in accessing financing, explain the negative perception held by Spaniards when it comes to acquiring a home now. Nevertheless, the people interviewed hope that, within two years, they will be in a better position financially to buy a home, thanks to improvements in their employment conditions.

In terms of the evolution of house prices over the last year, 35% of Spaniards think that prices have risen, compared with 43% who believe that house prices have remained stable and 22% who consider that they have decreased.

Finally, buying a home is the option that the majority of those interviewed (55% of the total) would recommend to family and friends thinking about their primary residence.

Original story: El Mundo

Translation: Carmel Drake

Fotocasa: Rental Prices Rose By 4.8% YoY In June

18 July 2016 – Expansión

Over the last three years, the prices of most goods and services have remained stable, to the extent that many economists have come to fear that Spain will enter into a period of deflation. Nevertheless, in the midst of these “doldrums”, there is a market where prices have already started to pick up pace: the residential rental sector. According to the latest data from Fotocasa, residential rental prices rose at a rate of 4.8% YoY in June, just two tenths below the historical maximum, recorded in 2006, when the index was first compiled. (…).

As with everything, this market also reflects the two speeds that are being seen in other segments. In this way, prices grew by 15.7% in the Balearic Islands, but remained stable and even decreased in La Rioja, Extremadura and Castilla-La Mancha, reflecting the demographic and tourist pressures in one of the areas and the lack of strength in the others. After the islands, comes Murcia, where rental prices rose by 11.3%, followed by Cataluña (10.7%), Comunidad Valenciana (10.5%) and Madrid (9.9%). All of the other regions fall a long way behind, well below the average.

Something is changing in the rental market. “There is no longer a single market, but rather areas that vary significantly by district and even by street. For example, in Barcelona, rental prices have risen by more than 20% in several neighbourhoods: Gràcia, Sants and Ciutat Vella”, says Beatriz Toribio, Head of Research at Fotocasa. In addition, whilst before the highest rental price increases were seen in those cities with the highest economic growth, now prices are rising by the most in the most popular tourist destinations. That is because tourists are increasingly opting to stay in private accommodation instead of hotels, and increasingly more owners are putting their homes up for rent for this purpose, given that they offer higher returns.

Although this type of housing does not enter into Fotocasa’s calculations, the use of residential properties for this purpose significantly limits the supply of homes, which drives prices up. For example: rental prices rose by 7.1% in the capital of Valencia with respect to last year, but soared by 19.6% in Peñíscola, 21.6% in Gandía, 25.6% in Benidorm and 49% in Santa Pola. (…).

The major exception to this changing pattern in the Canary Islands, where rental prices grew by 3.8%, below the average. That rate of growth was in line with Andalucía (where prices rose by 4.3%, also driven by many towns along the coast), Navarra (where prices also rose by 3.8%), Cantabria and Galicia (3.5% in both cases). There were also significant price increases in Asturias (3.2%), Aragón (3%) and Castilla y León (2.4%).

Finally, prices remained stable or decreased in just four autonomous regions: País Vasco (where rental prices rose by 0.8%), Castilla-La Mancha (0.6%), Extremadura (where they remained stable) and La Rioja –where they decreased by -0.2%.

As a result of the price increases in the last year, Madrid and Cataluña have joined the league of autonomous communities where rents now cost more than €10/sqm, following the path set by País Vasco. These regions are followed by the Balearic Islands (€9.16/sqm) and then Navarra (€7.11/sqm). The cheapest rents are found in Castilla-La Mancha and Extremadura, at less than €5/sqm, followed by La Rioja, Murcia and Valencia (between €5/sqm and €6/sqm).

Original story: Expansión (by P. Cerezal)

Translation: Carmel Drake

Tinsa: House Prices Rose By Just 0.1% In April 2016

11 May 2016 – Expansión

House prices remained stable in April, increasing by just 0.1% with respect to the same month last year, according to Tinsa’s IMIE index.

“The average price of finished homes, both new and second-hand, continued to increase, but in a more moderate way, after registering YoY rises of 0.8% and 2.1% in March and February, respectively”, said the appraisal company.

However, the positive balance continued during the first four months of 2016, with an average increase of 1.9% between January and April. In addition, the index has recorded a cumulative decrease of 41% since the peaks of 2007 and has now returned to the level last seen in Summer 2003.

Metropolitan areas

Following YoY growth of 4.4% in the Mediterranean Coast, the next best YoY movement in April was reported in towns clustered close to metropolitan areas, which in April reported stable prices, in line with those recorded a year ago.

The capital and large cities showed a slight YoY decrease, of -0.2%, followed by the Balearic and Canary Islands, where prices fell by -0.4%. The group of other municipalities (small and medium towns not included in other areas) reported a decrease of -0.9%, although they have performed the best out of all of the groups during the year, with a cumulative increase of 3.8% between January and April.

The average price of homes across every area was higher in April than at the end of 2015. The following areas reported above-average price growth between January and April (for Spain as a whole, the average was 1.9%): other municipalities (+3.9%), the Balearic and Canary Islands (+2.9%) and the Mediterranean Coast (+2.7%). At a slower pace, growth in the metropolitan areas amounted to 1.1% during the first four months of the year and to 0.7% in the capitals and other major cities.

The average decrease in Spain since the peak of 2007 now amounts to 41.1%. The Balearic and Canary Islands (-30.6%) and other municipalities (-35.8%) recorded below-average cumulative decreases. The Mediterranean Coast continued to reduce the difference with respect to the peak of the cycle, with the average cumulative decrease there now amounting to -46.7%, followed by capitals and major cities (-45.1%) and metropolitan areas (-44.4%).

Original story: Expansión

Translation: Carmel Drake

Idealista: RE Sector Is More Profitable Than A Year Ago

23 July 2015 – El País

Investment in real estate in Spain are more profitable now than it was a year ago, according to a report published by Idealista about the second quarter of the year. And even in the worst of cases, the return on property is twice as high as the yield currently offered on 10-year State Bonds (2%).

Retail premises continue to represent the most attractive real estate investments. In fact, buying a shop or store to let in Spain now generates a gross yield of 7.6%, compared with 6.2% a year ago. The highest returns are obtained in Córdoba (9.2%) and Granada (8.5%), followed by Las Palmas de Gran Canaria (8.3%), Málaga (8.1%) and Zaragoza (8%). Yields in Madrid and Barcelona amount to 7.6% and 7.5%, respectively. Castellón offers the least attractive premises for investors (with an average return of just 4.6%), followed by Salamanca (5.3%) and Cádiz (5.6%).

By contrast, garages offer the lowest yields – they ended the second quarter of 2015 with an average return of 4.6%, up from 3.6% in June 2014. Even so, the returns are still more attractive than those offered by 10-year bonds. The highest yields on garages are obtained in Toledo (5.3%), followed by Las Palmas de Gran Canaria (5.3%), Santa Cruz de Tenerife (5.3%) and Pamplona (5.1%). The towns with the least profitable garages are A Coruña (1.6%), Barcelona (2.3%) and Salamanca (2.6%). The yield on garages in Madrid is 3.3%.

Investment in buy-to-let housing has increased over the last twelve months. Such properties offered a gross return of 5.5% at the end of the second quarter versus 4.9% twelve months ago. Lleida is the most profitable of the Spanish capital cities, with an average return of 7.8%. It is followed by Las Palmas de Gran Canaria (6.2%), Palma de Mallorca (5.8%), Huesca (5.7%) and Huelva (5.7%). The rental yield in Madrid is 5%, just above that of Barcelona (4.8%). Nevertheless, the lowest yields in Spain are those received by the owners of rental properties in Ourense (3.3%), A Coruña (3.6%), San Sebastián (3.8%) and Lugo (4%).

Offices generate an average yield of 6.3%. Offices generate the highest returns in Vitoria, where the gross average yield stands at 7.5%. It is followed by Sevilla (6.6%), Santa Cruz de Tenerife (6.5%), Zaragoza (6.3%) and Las Palmas de Gran Canaria (6.1%). In Barcelona, offices yield a return of 5.8%, whilst in Madrid they average 5.6%. At the other end of the scale are the returns in Valencia (4.8%), A Coruña (4.9%) and Alicante (4.9%). The office market is not as uniform as those of other products, and so it is impossible to obtain statistical data about more than half of the Spanish capital cities.

For the preparation of this study, Idealista has divided the ‘average sales price offered’ by the ‘rental price asked by owners’ in different markets for the quarterly indices of homes, retail premises, garages and offices relating to the second quarter of 2015. The result obtained is the percentage gross yield that owners earn from letting out their homes.

Original story: El País

Translation: Carmel Drake

Fotocasa: Second-Hand House Prices Increase In 15 CCAA

6 May 2015 – Expansión

The price of second-hand homes increased by 1.1% in April compared to March, after seven months of continuous inter-monthly decreases. The increases were widespread: they were recorded in no less than 43 provinces and 15 autonomous communities, according to statistics from Fotocasa and the IE Business School.

Moreover, house prices increased in April in 460 of the 733 municipalities analysed in this report – 63% of the total, i.e. two thirds. Meanwhile, prices remained stable in 17 municipalities and decreased in 256.

The average cost per square metre of second-hand homes amounted to €1,636 last month. In terms of the quarterly variation, the price of second-hand homes (those aged more than two years old) increased by 0.4% with respect to January 2015.

Second-hand homes got more expensive last month in 15 autonomous communities, i.e. everywhere except for the País Vasco (-0.2%) and Navarra (-0.6%). The greatest increases were recorded in the Canary Islands (up by 3% in just one month) and the Balearic Islands (+2.3%).

This index shows the stabilisation of house prices in Spain. The fact that prices are continuing to increase month after month is an indicator of a trend towards recovery.

The quarterly variation was 0.4%, something not seen since February 2010, a rate that exceeds the variation recorded 12 months ago by 1.8 percentage points.

In terms of the evolution of house prices by province, of the 43 provinces in which price rises were recorded in monthly terms, the highest growth was seen in Toledo (7.4%). Prices decreased in just three provinces: Vizcaya (-0.1%), Navarra (-0.6%) and Palencia (-0.7%). House prices did not vary in four autonomous communities.

Unsellable stock

Meanwhile, BBVA Real Estate’s Research Department said yesterday that the stock of unsold homes is going to decrease significantly, although around 300,000 homes are practically “unsellable”. Despite that, the sector’s contribution to GDP will amount to around 5% in 2015.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Fitch Confirms The Credit Recovery In Spain

23 April 2015 – Expansión

Over the last month, Fitch Ratings has revised upwards its growth prospects for Spain in 2015 and 2016, to 2% and 2.3%, respectively. In this context of recovery, the agency notes that “new credit growth has been more robust during the first quarter of 2015” and it expects this trend to continue for the rest of the year. Although, the pace will depend on “the strength of the economic recovery and consumer confidence”. “The banks’ healthier balance sheets and initiatives being taken by the ECB to improve liquidity, including the TLTRO (long-term auctions) should support this increased lending”.

Fitch makes these reflections upon publication of its Fitch Spanish Fundamentals index, which analyses changes in the fundamentals of credit, taking into account the key indicators of the Spanish economy: the evolution of mortgages, SMEs and securitisations, the expected EBITDA (gross operating profit) and capital expenditure (capex) of companies, ratings outlook, CDS forecasts, new credit, unemployment prospects and trends in transport. The index ranges from 1 to 10 and Spain is awarded a six, which shows that “its recovery is holding up”.

Unemployment

In terms of unemployment, another one of the key variables that Fitch uses in its new index, the agency forecasts that the rate will amount to 22.5% and 21% in 2015 and 2016, respectively. “This positive trend in employment will support domestic demand. The increase in real disposable income, together with the fall in oil prices, should also drive economic growth”. Nevertheless, in the agency’s opinion, unemployment continues to be too high and, as a counterpoint, it warns that the non-financial corporate sector is continuing to deleverage.

The agency confirmed Spain’s BBB+ rating in October last year with a stable outlook.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake