Spain’s Banks Recover But Its Toxic Assets Remain

9 January 2017 – Tribune

Hit by a severe crisis several years ago, Spain’s banking sector has recovered but at a cost as thousands are laid off and it struggles to get rid of toxic assets.

“The system is closer to putting most of the crisis legacies behind it,” said analysts at the International Monetary Fund in charge of Spain in a recent report. Still, the ghosts of a crisis that saw the European Union bail out the sector have recently been revived as Italy suffers a similar predicament, with the State having to rescue Monte dei Paschi di Siena, the world’s oldest bank.

The EU lent €41 billion ($43 billion) to rescue the Spanish banking sector in the spring of 2012, compared to some €50 billion in Greece, as an example.

At the time, Spain was waist-deep in a financial crisis caused when a property bubble burst in 2008, after years of euphoria that saw loans granted almost blindly to households incapable of reimbursing them.

Since then, though, the share of problem loans on the balance sheets of Spain’s banks has dropped considerably.

In the second quarter of 2016, it stood at an average of 6%, according to the European Banking Authority (EBA) regulatory agency. This is slightly above the European median of 5.4%, but well below that of Italy, Portugal or Greece, which stand at 16.4%, 20% and 47% respectively.

Spain’s central bank, which is even stricter in its calculations of the share of bad loans, said in November that it stood at an average of 9.2%, against a high of 13.6% at the end of 2013. The Moody’s ratings agency predicts this should continue to drop thanks to “favourable macroeconomic conditions” such as expected growth of 3.2% in 2016, double the eurozone average.

Banks are also much stricter in granting loans now.

But on a darker note, they are struggling to sell the huge amount of property seized during the crisis from households that could not pay, as buyers remain scarce.

“Despite the mild recovery in the housing market observed in 2015, banks’ real estate repossessions continue to exceed the volume of properties that banks are managing to sell,” said Moody’s in a note.

Original story: Tribune

Edited by: Carmel Drake

Citizens Now Perceive Housing Market As Stable

10 February 2015 – El Mundo

51.5% of citizens expect prices to remain stable over the next year.

This stability in the market is driving the demand for home ownership.

8.4% of Spaniards rented properties in 2013; this figure has now increased to 13.3% and is set to continue to rise.

After institutions such as the International Monetary Fund (IMF) and the Bank of Spain (Banco de España or BdE) echoed the end of price decreases, the forecasts made by Spaniards about the real estate market indicates that they expect stability to continue in 2015.

Proof of this is that 51.5% of the 1,510 people surveyed think that house prices will remain largely unchanged over the next year. This is reflected in the Consumer Confidence Index (Índice de Confianza del Consumidor or ICC) prepared by the Centre for Sociological Research (Centro de Investigaciones Sociológicas or CIS).

On the other hand, the feeling that prices will rise is softening, with only 23.9% of those surveyed believing that prices will rise, i.e. 2.2% fewer than last month. This perception differs from the results recorded in January 2014, when up to 30.4% of those surveyed by the CIS strongly expected an adjustment. Furthermore, now only 17.8% expect prices to continue to decrease.

Once this forecast has been drawn for the real estate market, the intention of citizens to buy a home during the next year grows bit by bit, in a very calm way. 3.9% of respondents say that they are thinking about buying a house, in a period that has already been dubbed as the year of recovery in the sector by experts.

With regard to the rental of properties, the indicators reflect the growing prominence of rentals (since April 2013, when the ICC began to ask survey participants about the topic). In 2013, 8.4% Spaniards lived under this regime, whilst the latest data shows that this figure has risen to 13.3%.

It seems clear that high yields, the professionalization of the sector and a change in the mindset of society have helped the rental model to gain strength in Spain. One more sign of the equilibrium towards which the real estate sector is headed.

Original story: El Mundo (by Pablo Ramos)

Translation: Carmel Drake