BBVA Research: The New Rental Decree & AJD Law Will Dissuade Investment in Housing

15 April 2019 – Expansión

BBVA Research is predicting a slowdown in the increase in residential investment this year and next, with forecast growth of 4.6% in 2019 and 4.3% in 2020, after the sector closed 2018 with growth of 6.9%.

According to the Spain Watch report compiled by the research house, the main driver behind the expected slowdown is the regulatory changes that “are affecting the sector and increasing legal uncertainty for landlords, which are reducing the incentives to entry for large investors and making purchases in regions with exposure to the tourist sector less attractive”.

The legal uncertainty first emerged at the end of 2018 when changes were made to the rental law and to who is responsible for paying Stamp Duty (AJD). Previously it was the purchaser; now it is the lender bank. That has resulted in a deceleration in residential sales, which may only be temporary, but at this stage is too early to say.

Meanwhile, BBVA Research has revised down its forecasts for the construction sector for this year and next, with increases of 4.8% and 4.7%, respectively, in light of the above.

Original story: Expansión

Translation/Summary: Carmel Drake

INE: House Sale Growth Slows Down In Cataluña

14 November 2017 – Expansión

The negative consequences of the crisis caused by the “independentistas” extends to every sector of the economy. And one of the most affected is the real estate sector, as the data published on Monday by Spain’s National Institute of Statistics (INE) shows. Cataluña was the third autonomous region where house sales grew by the least during the month of September, with a YoY increase of 2.1%, equivalent to 6,146 operations.

With that percentage, Cataluña fell well below the average YoY growth rate for Spain as a whole, which amounted to 11% in September. That increase – below the rate recorded in August, of 16% – was driven by Castilla-La Mancha (47%), Murcia (27%) and Extremadura (24.2%), which experienced the highest rises. Unlike Cataluña, the other economically powerful regions, such as Madrid (11.4%), Valencia (13.2%) and País Vasco (13.3%), were above the national average.

This data partially reflects the impact of the events that took place in September, with the approval by the Parlament of the so-called disconnection laws. But given that most operations are negotiated several weeks in advance, Manuel Gandarias, CEO of Civislend, indicates that the deceleration was due primarily to “expectations” – many people postponed their purchases as a precaution, in case the situation deteriorated, which is what ended up happening.

This explains why Cataluña has gone from being one of the drivers of house sales in Spain to bringing up the rear of the ranking. In this way, in May, the region came in above the national average, with an increase of more than 30%. In June and July, the first signs of the deterioration could be seen, when the rate stood at around 17%, broadly in line with the rest of the country. But in August, it decreased below the national average (7.4% vs. 16%), and that decrease was further strengthened by the data published yesterday. In absolute terms, it means 6,720 operations were recorded in August, 7,020 in July and 7,039 in June; in contrast with 6,146 in September (…).

The growth recorded in Cataluña during the month of September was distributed unequally by province (…). The worst hit was Girona, which saw house sales decrease by -2.9% in September. Barcelona and Tarragona saw very limited rates of growth, with 1.9% and 4%, respectively, whilst the best figures were seen in Lleida, with a rise in house sales of 16.3% (…).

The negative trend indicated by this data will probably be made worse when the indicators relating to the next few months are revealed, as they will reflect the impact of the events that took place after the illegal referendum on 1 October. According to José Antonio Pérez, Professor of the Real Estate Department at IPE, the greatest effect is being felt “in investments from overseas”, which have reacted in the face of the legal uncertainty. Gandarias said that the situation will also have its impact on operations involving families, given that those who have decided to buy a home “will probably wait now until after the (regional) elections”.

The “independentista” crisis is also affecting property prices. According to a report published last week by Fotocasa, the price of housing in Cataluña slowed down its rate of growth from 10.6% in September to 6.1% in October.

Original story: Expansión (by Ignacio Bolea)

Translation: Carmel Drake

As House Sales Rise & Stocks Fall, Should We Build More Homes?

3 June 2016 – Idealista

In 2016, the number of house sales is forecast to rise by 10% to 440,000 operations, almost 40,000 more than last year. This increase in the volume of transactions is also expected to result in a 25% reduction in the stock of unsold new homes, without exerting excessive pressure on house prices, which are predicted to rise by 3.8%. That is the outlook described by Servihabitat for the next few months. (…).

In this vein, the number of unsold new homes has been gradually decreasing in recent years. According to Servihabitat, the stock will decrease by 125,000 properties during 2016, to 367,500, which represents a decrease of 25% compared with 2015. By contrast, construction of 44,600 homes will be started this year and another 50,800 residential properties will be finished.

The statistics have opened a debate over whether the rate of residential construction should be increased or not. Like everything in this life, it depends. The post-crisis real estate market is moving at double speed and, whilst in some places everything that is being built is being sold; in other areas, there is barely any demand and there is a huge stock of homes constructed during the boom years, for which there are no buyers.

“The reduction in stock is not uniform across the country. The major cities have experienced a gradual reduction in the number of homes up for sale to reach the so-called technical stock”, explained Juan Carlos Álvarez, Director General of the Real Estate Business at Servihabitat.

That means that in the autonomous regions of Madrid and Cataluña, the difference between finished homes and new homes sold amounts to a balanced figure of 1,000 units. The forecasts show that the stock of new homes in Madrid will decrease by 64.2% this year, to 4,792 homes. In the case of Cataluña, the reduction will amount to 23.3%, leaving 10,553 recently constructed homes.

There is little doubt that in certain areas of the major capitals, everything that is being built is being sold. “Nevertheless, that is not happening in the metropolitan areas or peripheral towns. There is still an abundant stock in some areas that will be difficult to get rid of, given that current and potential demand is not looking for new homes in those areas”, says Álvarez.

For that reason, we need to differentiate between pre-crisis stock – which is generally poorly located, has little demand and is very difficult to sell – and the post-crisis stock, which is better placed and has better sales prospects. (…).

The problem of uncertainty

Although the data is positive and, according to Julián Cabanillas, “the current political uncertainty is not affecting the sector”, the CEO of Servihabitat identifies a problem that may weigh down on the good performance of the real estate market, “which is the sensitivity to the legal uncertainty that results from the lack of homogeneity in decision making by local and regional governments, which affects investors’ interest in real estate. (…).

Sources in the sector say that since the new government arrived in the Town Hall of Madrid, the time it takes to obtain the necessary permits to begin construction of housing developments has doubled “from four months to eight”, which represents a huge cost for property developers and which inevitably impacts the final price of homes.

Servihabitat is calling for the different authorities to employ “greater balance in the protection of the rights and duties of all agents in the market and a greater balance in terms of decision making”.

Original story: Idealista (by David Marrero)

Translation: Carmel Drake

New European Setback For Spanish Mortgage Law

14 May 2015 – Cinco Días

The European court considers that the legal period granted to challenge evictions (under Spanish legislation) was illegal.

The ruling is just one of half a dozen negative sentences from the EU regarding mortgages.

The European Justice system has again called into question Spain’s legislation regarding mortgages. A ruling published yesterday by Maciej Spunzar, the attorney general of the European Union’s Court of Justice, considers that (the legislation) “is not reasonable” and that the period and way in which the mortgage reform permitted those affected by evictions to oppose foreclosure on the basis of the application of abusive clauses, contravenes EU regulations.

That possibility, to paralyse eviction proceedings arguing that they are based on an illegal clause, did not exist in Spain and was one of the pillars of the mortgage reform that the Government supported in 2013 when adapting Spanish legislation to EU law.

That is what the European Court demanded in a key ruling, which preceded another preliminary sentence similar to the one published yesterday. These are the basis of the final judgements that, in 80% of cases, the institution issues with the same findings a few months later.

That mortgage reform, which came into effect on 15 May 2013, established that any new people affected by an eviction would have a period of 10 days to oppose it from the date of notification.

However, for mortgage foreclosure processes already underway, the regulation established a transitory provision, which obliged all interested parties to oppose the measure within a period of one month following the publication of the law in the Official State Gazette (BOE), i.e. no later than 15 June 2013.

According to the letter issued by the Court of Justice yesterday, the problem is that the EU directive on abusive clauses “precludes any national provision, like this one in Spain”.

Although it considers the period of one month to be sufficient, “what causes problems is precisely the fact that the period started from the day after the publication of Law 1/2013 in the BOE, when the parties involved in the foreclosure processes had not been notified”, detailed the document.

The European ruling responds to a question raised by the Judge of First Instance nº4 in Martorell, involving two people subject to a mortgage foreclosure by BBVA, who logged their opposition to the eviction on 17 June 2013, i.e. two days after the period expired. The affected parties complain that the aforementioned limit violated their EU rights.

The fact that they were given one month without being notified directly “made it impossible or too difficult to exercise the rights granted to consumers” and generated “a high degree of legal uncertainty, unadmissible in the field of consumer protection”, argued the attorney general of the European Court.

“The period was not sufficient to (allow affected parties to) prepare and lodge an effective appeal”, insists the general attorney, underlining the importance of procedures in which consumers risk losing their properties in an irreversible way.

A definitive decision in this sense would have consequences for the “hundreds of thousands (of people)” affected by the foreclosure procedures resulting from the approval of the mortgage reform. The Court considers that they should have been notified about the period, as well as about the options that they had to oppose (the decision).

Original story: Cinco Días (by J.P.C.)

Translation: Carmel Drake