Tag: Ireland

Eurostat: House Prices Rose by 6.2% in Spain in 2017

11 July 2018 – Eje Prime

The acceleration of the housing market has placed Spain amongst the leading countries in Europe in terms of price rises. In fact, in just one year, the country has risen from 21st position, with an average increase of 4.6% in 2016, to 12th , with an average increase of 6.2% last year.

In 2016, Spain already exceeded the average rise for the European Union as a whole, which amounted to 4.6% at the time, but in 2017, it distanced itself further from the average, moving closer to the group of countries with the highest rises in prices: whilst in Spain, the increase amounted to 6.2% in 2017, the average rise for the European Union as a whole was 4.4%.

Spain outperformed Austria, where prices rose by 8.5% in 2016 (in 2017, they only increased by 5.3%); Norway, which went from an increase of 7.9% in 2016 to 5.4% in 2017; and the United Kingdom, where house prices increased by 7% in 2016 and by 4.5% in 2017.

Iceland, the Czech Republic and Ireland were, in that order, the three markets where house prices rose by the most in 2017, with rises of 19.5%, 11.7% and 10.9%, respectively. Iceland was the only country to feature in the top 3 in both years; in 2016, it was joined by Hungary and Sweden.

Several countries from Eastern Europe, such as Lithuania, Latvia, Bulgaria, Slovenia and Hungary (with high volatilities in terms of the evolution of house prices) were amongst the most inflationary in terms of house prices in 2017, together with countries in Western Europe, such as Portugal, where prices rose by 9.2%; the Netherlands (7.5%) and Sweden (6.4%).

At the opposite end of the spectrum, the only European country where house prices decreased in 2017 was Italy, with a reduction of -0.8%. It was accompanied by moderate price increases in Finland (1.6%), Cyprus (2.2%), France (3.6%) and Croatia and Poland (both 3.8%).

The figures from Eurostat, the European Union’s statistics office, include purchase prices of new and second-hand homes. According to the EU entity, these prices “have fluctuated significantly since 2006”. “The annual growth rate in the European Union as a whole was close to 8% in 2006 and 2007, followed by decreases of 4% as a result of the financial crisis”, it continued.

Prices started to increase in 2014, with an average cumulative rise across the whole of the European Union of 11% between 2010 and 2017, and of 6% in the Eurozone during the same period, according to Eurostat. In the case of Spain, despite the increases in recent years, the country has registered a cumulative decrease of 17% since the start of the century.

Original story: Eje Prime (by Christian de Angelis)

Translation: Carmel Drake

The ECB Demands Higher Provisions For Doubtful Debts From 2018

10 October 2017 – Cinco Días

The ECB has proposed a tightening of the provisions required by banks for any loans that they classify as doubtful from 1 January onwards. The ECB has subjected the draft legislation, currently posted on the body’s website, to public consultation. The standards that the supervisor is preparing complement those published in March of this year. In this way, banks will have to set aside more money from 2018 onwards to cover 100% of the loans that they reclassify, in other words, those that go from being standard to doubtful. The ECB will establish different terms depending on the type of loan: those that are secured by a real estate asset may be provisioned at 100% over seven years from the date of their reclassification. For loans without any type of guarantee, entities will have just two years to constitute the 100% provision.

The provisions will be applied on a linear basis from the date of recognition of the doubtful debt until the date the coverage ratio equals 100%, but national supervisors may require the recognition of provisions more quickly in certain cases. Moreover, loans that are partially covered by real estate assets must be provisions in two parts and with two doubtful rates.

In March, the ECB published a handbook for doubtful loans to be applied to portfolios of doubtful loans already in existence. It demanded that entities undertake procedures to reduce this load that, in its opinion, is restricting banks’ ability to grant new loans. The handbook is not binding, but banks will either have to “comply or explain”. In other words, they will have to comply with the handbook or explain why they are not complying with it. It also requires that they set specific objectives to reduce their existing portfolios.

Based on the response from entities and the evolution of doubtful balances, the supervisor will present new proposals,at the end of the first quarter of 2018, to attack the excess volume of toxic loans in the banking sector. According to the supervisor, the so-called “significant entities” (almost all of the banking system in Spain and 130 in total in Europe) held €865,000 million in doubtful assets during the first quarter (after that balance decreased by almost €100,000 million in one year). “Many entities have made significant progress and have submitted credible strategies that include reduction plans, but others still have a way to go to improve”, said the ECB.

In March, doubtful loans accounted for 47.05% of the total bank loan book in Greece, 17.75% in Ireland, 19.82% in Portugal and Italy. Based on this criteria, the figure for Spain amounted to 5.86%, but its level of foreclosed assets was very high.

Original story: Cinco Días (by Nuño Rodrigo Palacios)

Translation: Carmel Drake

Spain’s Bank Sold €15,800M In Non-Core Assets In 2015

18 February 2016 – Cinco Días

Spanish banks sold non-core assets amounting to €15,800 million in 2015. Spain accounts for 17% of transactions in Europe. Sabadell, Bankia, CaixaBank and SAREB were those most active. The sales pace will go on in 2017.

Investors keep betting on the purchase of non-core assets sold by European banks, with UK on the lead. In total, these sales in Europe accumulated a record of EUR 104,000 million over the past year, the highest level since 2008 according to the European Debt Sales report prepared by KPMG.

Spanish financial institutions divested some EUR 15,800 million, representing 17% of total asset portfolio transactions considered non-core carried out in the continent. Despite these sales, the financial sector still has some 238,000 million in non-performing assets (including doubtful and foreclosed), according to June Data from International Financial Analysts (AFI).

Sabadell, Bankia, CaixaBank and SAREB are so far the Spanish entities making the greater efforts to clean up their balance sheet through divestments of non-core asset portfolios. Bankia and Sabadell remain, however, the hottest sellers in the Spanish market, with one third of the transactions. As a novelty, BBVA has made its first sales over the past year, which brought its first market secured portfolio, an operation called Proyecto Liceo. And BMN with two projects, Neptuno and Pampa.

United Kingdom was the country with the highest sales activity during past year. Debt portfolio divestments totaled EUR 39,000 million. KPMG´s report, one of the most active companies in this type of transaction keeps that Spain has embarked on a path of deleveraging and economic recovery which makes it an interesting country for investors, this way competing closer to UK and Ireland – the latter with sales of EUR 25,000 million over last year. The same applies to Italy, where the amount of transactions totaled 13,300 million, largely from sales of real estate assets owned by its banks. Divestments in UK and Ireland are related to assets included in their “bad banks”. As an example, the study notes that the British entity managing problematic assets in the UK sold through Granite Project a portfolio of EUR 18,000 million to Cerberus Fund.

Despite strong sales, investors keep their interest in Europe in general and particularly in Spain, especially in the purchase of loan portfolios. Ongoing projects in the continent total 44,000 million. The report also reveals that the pace of this activity will go on in 2017, partly due to access to funding at very low interest rates.

The partner responsible for the sale of KPMG´s Corporate Finance portfolios in Spain, Carlos Rubí, stressed that Spain and Italy, “are increasingly active and attracting the investor´s appetite at the expense of UK and Ireland.”

Original story: Cinco Días (by A. Gonzalo)

Translation: Aura Ree

Deloitte: House Prices Up By 9.5% In Madrid & 15% In BCN

1 October 2015 – Expansión

The signs of recovery in the Spanish real estate sector are strengthening. The first sign was the arrival of international funds interested in investing in real estate assets in Spain; and now the residential market is also beginning to show the first signs of recovery.

House prices in Spain increased in 2014 after six years of decreases. According to a Europe-wide study prepared by Deloitte, average house prices in Spain’s two main cities, Madrid and Barcelona, increased by 9.5% and 15%, respectively, between 2014 and 2013. “Prices in Spain are increasing at an annual rate of 10%. The Spanish market was last in the line, in terms of the recovery in Europe, but now that trend has been reversed” explains Javier García-Mateo, Partner at Deloitte.

These signs of recovery are clearer if we analyse the results for new builds in isolation. The product has been particularly badly hit in recent years due to the over-construction that took place during the boom. “The gap between new builds and second-hand homes has increased with respect to last year and this is a sign of recovery” says García-Mateo. “New build prices are beginning to rise compared with previous years when the difference with respect to second-hand homes was less as vendors had to reduce prices to find buyers”.

Despite this growth, house prices are still below the levels seen before the crisis. In this way, house prices in Spain increased by 4% between 2002 and 2014, compared with 7% in Germany and the USA, 50% in France and 52% in the UK, according to Deloitte. “It is the start of a change in the trend, but we are not going to see a return to the boom figures. We are seeing a recovery because prices decreased so significantly (during the crisis)”.

Ireland

Since 2007, a record year for the sector, house prices in Spain have decreased by 39%, compared with an increase of 18% in Germany. In Europe, the most similar market is Ireland, where house prices have fallen by 41% over the last seven years. “Ireland is one or two years ahead of Spain; as such, it is possible that over the next few years, we will see similar data to that being seen in Dublin this year, where the price per m2 has risen by 34%”, say the Partners at Deloitte. (…).

Construction

The increase in house prices will have an effect on the launch of new developments, which reached minimum levels of 35,000 units in recent years. “We think that the recovery in the construction of homes will take place in 2016, starting from very low levels. Between 2006 and 2007, 7,000,000 homes were constructed in Spain, the same figure as in Germany, which has 90 million inhabitants”, says García-Mateo.

The construction of new developments will be reactivated despite the fact that Spain still has a stock of around 535,000 unsold homes. According to Deloitte, the stock of homes decreased by 3.2% last year and has recorded a cumulative decrease of 18% since 2009, when there were 649,780 unsold homes. “There are still a lot of homes to be sold because the population is not growing”.

In this sense, Spain, together with Italy and Portugal, is the country with the highest volume of stock at the European level.

Most of Spain’s provinces are now showing signs of recovery

The Spanish real estate market is very heterogeneous and that is reflected in the location of the stock of more than 500,000 unsold homes in the country.

According to the study prepared by Deloitte, the recovery of the residential sector is happening at three speeds across the country. The recovery will be seen first in Madrid, the Catalan provinces, Valencia and the majority of Castilla y León; meanwhile Almería, Huelva, Teruel and Castellón will be the last regions to recover.

Only three provinces still have a stock that is more than 10% larger than in 2009: Guipúzcoa, Teruel and La Rioja, which the supply of unsold homes has increased by 38%, 26% and 10%, respectively; meanwhile ten provinces have reduced their stock by less than 10% in the last five years.

At the other end of the spectrum the provinces of Cantabria, Cáceres, Badajoz and Navarra have pretty much reduced their unsold stock levels by 100% over the last five years.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

The Economist: Homes In Spain Are Still Overvalued By 8%-18%

22 April 2015 – El Confidencial

Five years ago, housing in Spain was overvalued by more than 50% and every year since then, the Economist has considered that house prices still need to decrease further.

House prices in Spain have decreased by between 30% and 50% – the range varies depending on the source consulted and the type of assets being considered. According to the statistics and the experts, this decrease has now come to an end. But, what if prices are still inflated?

That is what the weekly British publication The Economist thinks; and it has been warning against the overvaluation of house prices in our country for the last five years. The publication says that house (prices) in Spain are still inflated by between 8% and 18%. By almost 10% on the basis of the net income of citizens and by almost 20% if we take into account the relationship between the price of house sales and rentals. This overvaluation comes despite the fact that the publication calculates that prices have decreased by 31.3% since the peaks recorded in the fourth quarter of 2007.

In 2010, The Economist created an index that was based, precisely, on the relationship between the sales price of properties and rental, and the net income of citizens in different countries to calculate reasonable house prices. Then, homes in Spain were overvalued by more than 50% and in every year since then, the publication has considered that house prices still need to decrease further.

Having said that, our country is not unique in this sense. Not surprisingly, homes are much more overvalued with respect to the average earnings of their citizens in countries such as Canada (by between 35% and 89%), France (25%-29%), Belgium (50%-55%) and Australia (39%-61%).

However, the data from The Economist reflects that if any further decrease takes place, then it will come in dribs and drabs – prices (in Spain) have decreased by just 0.2% in the last year, the smallest decline recorded in any of the countries analysed, and below those registered in Greece (6.1%), China (-5.6%), Singapore (-3.9%), Italy (-3.8%) and France (-2.1%).

By contrast, Ireland, a country that had a very similar real estate bubble to that experienced in Spain and where prices have decreased by almost 40% from their peak levels, heads up the ranking for highest price increases with a 16.2% year-on-year rise, followed by Turkey (16%) and Hong Kong (11.9%).

Original story: El Confidencial (by Elena Sanz). Refer to original story for table showing ‘The Economist House Price Indicators’ by country.

Translation: Carmel Drake

Popular Places A €1,000M Mortgage Bond Issue At 1%

25 March 2015 – Expansión

The entity has completed a 10-year mortgage bond issue amounting to €1,000 million.

The placement carries a coupon of 1%, the lowest historical rate for Popular in the last ten years. The most recent bond issue made by Popular in April 2014 carried a coupon of 2.125% and had a five and a half year term.

Specifically, 78% of the demand for the bond issue has come from international investors. It has managed to attract a lot of investors and achieve an oversubscription of 1.4 x.

In terms of the nationalities of the international investors: 31% were from Germany and 15% were from the UK and Ireland. Demand for the bond issue was highly diversified, comprising 80 orders. By type of investor, 47% were fund managers, 32% were central banks and 19% were banks.

Original story: Expansión

Translation: Carmel Drake