Tag: lending

INE: Mortgage Lending Rose by 16.5% YoY to €42.7bn in 2018

27 February 2019 – La Vanguardia

Last year, 345,186 mortgages to purchase homes were signed in Spain, up by 10.3% compared to 2017, but the banks again refrained from fully opening the financing tap: the average loan amount increased by just 5.6% to €123,727, according to data presented on Wednesday by Spain’s National Institute of Statistics (INE).

The growth in the average amount is only slightly higher than the increase in house prices (which rose by 3.9% on average last year, according to data from the Ministry of Development, albeit by much more in the large cities and their metropolitan areas, where the bulk of demand is concentrated). “The banks are adopting a conservative strategy, that’s for sure”, said Oscar Gorgues, Manager of the Chamber of Urban Property in Barcelona – “because they are still very mindful of the excesses of the boom years. For that reason too, we can say that the real estate market is healthy and there is no risk of a bubble”.

The data from INE shows that after five years of recovery in the real estate sector, the number of mortgages granted is still 71% lower than the 1.24 million mortgages granted by the banks in 2007, the last year before the burst of the real estate bubble.

According to real estate firms, the caution on the part of the banks means that the main factor causing families, and especially young people, to rent, is the fact that it is impossible for them to obtain a mortgage loan. By contrast, according to the real estate firm Forcadell, around one third of homes are now purchased without a mortgage, in operations undertaken by investors (…).

According to data from INE, the value of all of the new mortgages constituted to purchase homes last year amounted to €42.7 billion, up by 16.5% compared to 2017, due to the combined effect of increases in the number of operations and the average loan amount (…).

Original story: La Vanguardia (by Rosa Salvador)

Translation: Carmel Drake

Hispania Will No Longer Be a Socimi & Blackstone Will Channel its Future Profits via the Cayman Islands

13 June 2018 – El Confidencial

Following the green light granted by the CNMV – Spain’s National Securities and Exchange Commission – for Blackstone’s takeover of Hispania, the countdown has begun for the US fund to take control of the company, a milestone that is dependent upon it obtaining 50% plus one share and which, if no rival offer prevents it, could start to take shape on 13 July, when the term for the acceptance of the offer comes to an end.

From that moment on, Blackstone plans to exclude the Socimi from the stock market, which means that it will lose the benefits of the special tax regime, whereby it has been exempt from paying corporation tax in exchange for distributing at least 80% of its profits in the form of dividends, which are taxed at between 19% and 23%.

Blackstone’s decision will, therefore, have a direct impact on the public coffers, given that the conversion of Hispania into a limited company (SA) means that it will now be taxed as a company. Nevertheless, as is typical amongst these large investment vehicles, the fund has created a company structure aimed at financially optimising its tax bill for the duration of the investment period.

According to confessions made by Blackstone itself to the CNMV, the offer is being made through the company Alzette Investment Sarl, which was constituted on 2 February in Luxembourg for the purposes of this operation. Its only shareholder is Alzette Holdco Sarl, also a Luxembourg-registered company and itself wholly owned by BRE/Europe 9NQ Sarl, which is in turn controlled by BREP Investment 9NQ LP, an exempted limited partnership registered in the Cayman Islands.

As such, the ultimate parent company operates under a tax haven that ensures that it will be free from paying taxes for 50 years (…). In fact, the shareholders of BREP Investment 9NQ LP are different offshore companies owned by Blackstone, which are also covered by the exempted limited partnership structure of the Cayman Islands, with the exception of two, which are headquartered in the US tax haven of Delaware, and which are the entities that really benefit from this structure.

Flagships of opportunistic investment

Blackstone’s BREP funds are the US giant’s “flagships of the opportunistic investment funds”, according to its own definition in the takeover prospectus “with USD 75 billion of investment capital, a net return of 16% since 1991 and 1% of losses over 27 years”.

In order to raise the €1,589.6 million that Alzette will have to hand over if all of Hispania’s shareholders accept the terms of its offer (the fund already controls 16.5% of the share capital after it acquired the stake previously owned by George Soros), the different Blackstone funds have committed to contributing the money, either through capital, shareholder loans or other intra-group financing instruments.

In these types of company structures, the different loans arrangements made between the parent companies and their subsidiaries allow them to decrease the overall tax bill in the different countries in which the corporate chain operates in the form of the interest payments that the funds make to themselves and which allow them to “repatriate” the money invested to the Cayman Islands, at the same time as reducing the profit, and with it, the tax charge.

In the case of the takeover bid for Hispania, in addition, Blackstone is also planning to resort to lenders to raise financing amounting to €850 million, referenced to 3-month Euribor, plus a margin of up to 2.25% per annum, and with a maturity date of 15 May 2021, and with the option of being renewed for one more year.

Business plan

Similarly, in order to acquire the stake from Soros, Blackstone signed a financing agreement with Morgan Stanley for a maximum amount of €250 million, although in the end it only drew down €128.6 million. In terms of the financial commitments that Hispania currently has (€894.8 million), Alzette says that it is analysing different refinancing options, including both raising new debt and increasing the level of leverage.

In terms of the business, Blackstone’s plans for Hispania include completing the sale of the office portfolio, which the Socimi had to put on hold at the last minute, even though it had already reached an agreement with Tristán to sell it for more than €500 million, due to the presentation of the takeover bid.

By contrast, in terms of the hotel assets, which are the jewel in the Hispania’s crown, its intention is to hold onto the majority of them for between three and seven years, and transfer their management to the team at HI Partners, the company that the US fund acquired last year for €630 million and which it will likely end up merging with the Socimi.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Bank of Spain: Real Estate Loans Account for 40% of All New Lending

3 May 2018 – El Confidencial

The Spanish economy is returning to its roots. New real estate loans granted to households, in other words, lending that does not include the renegotiation of existing loans, is now growing at an annual rate of 17.4%. In total, such lending amounted to €36.5 billion in 2017.

And this is not a one-off blip. So far this year, although the rate of growth has softened, it still rose by 11.1% during the first quarter compared to the same period last year. That explains how real estate loans now account for 37.4% of all lending that households requested in 2017, which amounted to €97.5 billion in total.

Those €36.5 billion that were used to buy properties exceeded the amount spent on the purchase of consumer goods (€29.1 billion) and the amount that was financed through credit cards (€13.3 billion), whose growth was very significant.

Paradoxically, the most expensive financing – financial institutions apply significantly higher interest rates when consumer acquire goods using credit cards – grew by 20.3%. Therefore, by five times more than the increase in nominal GDP (with inflation).

Data from the Bank of Spain leaves no doubt about the recovery in real estate lending boosted by low interest rates, which explains that the number of renegotiations is still very active, although it has decreased with respect to two years ago, when many households changed the conditions of their loans to benefit from the European Central Bank (ECB)’s ultra-expansive monetary policy.

Specifically, between 2015 and 2017, Spanish households renegotiated loans amounting to almost €18.0 billion, which allowed them to benefit from the extraordinary monetary conditions. In fact, 1-year Euribor remains at -0.1890%, which has encouraged increasingly more households to opt for fixed-rate mortgages over variable rate products.

The average interest rate on new operations for the acquisition of homes amounted to 2.21% in February, which represented a slight increase of 16 hundredths with respect to the previous month. In any case, these are tremendously favourable real interest rates (with respect to inflation), which boost property sales.

Property bubble

The credit map reflecting the Bank of Spain’s statistics reveals two very different realities. On the one hand, as described, new real estate lending has soared, but on the other hand, the amount granted before 2008, which is when the real estate bubble burst, is continuing to fall very significantly. In other words, families are continuing to repay their loans and, therefore, reduce their indebtedness, but, at the same time, new operations are growing strongly.

A couple of pieces of data reflect this clearly. In 2011, the outstanding loan balance dedicated to real estate activities amounted to €298.8 billion, but by the fourth quarter of 2017, that quantity had decreased to €110.0 billion (…).

The importance of the real estate sector in the Spanish economy is key. And, in fact, the double recession was very closely linked to demand for housing, which fell by no less than 60% between 2007 and 2013. In particular, due to the drag effect on the other components of private consumption (…).

The data on real estate lending are logically consistent with those offered by Spain’s National Institute of Statistics (INE) on the constitution of mortgages, which reflect an increase of 13.8% in February (the most recent month for which data is available) compared to a year earlier. In total, 27,945 mortgages, with an average loan value of €119,708, were granted (…).

Original story: El Confidencial (by Carlos Sánchez)

Translation: Carmel Drake

Registrars: Mortgage Lending Increased by 10.9% in 2017

23 April 2018 – Eje Prime

The number of mortgages signed to buy homes in Spain during 2017 rose by 10.9% with respect to 2016. According to the Real Estate Yearbook 2017 from the College of Registrars, 310,640 mortgage loans were signed, a figure that represents an increase of 56% compared to the minimum level recorded in 2013. But, despite that significant gain, the figure is still well below the 1.3 million mortgages signed in 2006.

The study reveals that the number of residential mortgages increased in every autonomous region last year, with double-digit growth rates in eight of them. The largest increases were recorded in the Community of Madrid (17.8%), La Rioja (17.8%), Asturias (16.5%), Andalucía (11.7%), Cantabria (11.5%) and the Community of Valencia (11.3%). The regions where the greatest volume of mortgages were signed included Andalucía (60,026), the Community of Madrid (56,866), Cataluña (50,848) and the Community of Valencia (32,408).

In addition to domestic buyers, international purchasers also become more active. In fact, 6.9% of the residential mortgages signed last year were formalised by foreigners, exceeding 21,000 contracts in absolute terms, although three times as many overseas buyers purchased a home in Spain without any financing at all.

The nationalities with the highest percentage weight in terms of residential mortgages signed over the total number of mortgages formalised by foreigners were Romanian (11.6%), British (9.3%), Chinese (8.4%), Italian (5.8%), French (4.6%), Moroccan (4.2%) and German (4%).

Original story: Eje Prime 

Translation: Carmel Drake

CaixaBank to Lend €3bn to Hotel Sector

15 March 2018 – Expansión

CaixaBank has declared the hotel sector strategic for increasing its credit investment. Through its new line of business CaixaBank Hotels & Tourism, the entity has just signed an agreement with the Spanish Confederation of Hotels and Tourist Accommodation (Cehat) to make available a specific financing line of €3 billion to its 13,000 establishments over two years.

The bank led by Gonzalo Gortázar closed 2017 having granted €1.5 billion in loans to the hotel sector, where it has a portfolio of 14,000 clients – two out of every three hotels in Spain – and €5 billion in terms of business volume. With the launch of the new division, CaixaBank expects to grow its loans to this segment by 20% during the first year.

Original story: Expansión

Translation: Carmel Drake

Mortgage Default Rate Drops To 4.73% In June

19 October 2017 – Expansión

The default rate on loans granted to buy homes decreased from 4.79% to 4.73% in June, whilst the default rate in the property developer and real estate sector fell from 24.12% to 21.47%. These figures represent the lowest levels recorded since December 2011.

Original story: Expansión

Translation: Carmel Drake

Activity Abounds In Spain’s Second-Hand Home Market

13 September 2017 – El Confidencial

Second-hand homes are the undisputed star of the Spanish residential market. Despite the fact that the volume of transactions involving second-hand homes plummeted following the burst of the real estate bubble, they now account for 8 of every 10 sales closed in Spain. In addition, more second-hand homes were sold during the first seven months of this year than between January and July 2008. The renewed appetite for these types of homes has resulted in an upwards rally in prices. In fact, over the last year, prices registered their highest increase for the last 10 years.

There are several factors behind this furore. Even though the construction of new properties has grown in recent months, it is not sufficiently voluminous to meet demand, which, having overcome the crisis and after emerging from its lethargy, now wants to purchase. Moreover, the gap in prices between both types of homes (new and second-hand) has led many buyers – including investors – to opt for second-hand homes.

According to data from the notaries, the square metre of a new build home is €569/m2 more expensive, on average, than of a second-hand dwelling. At the national level in June, the average price of a second-hand home amounted to €1,478/m2, whereas that of a new build residence stood at €2,047/m2 (…).

The sale of second-hand homes hit rock bottom in 2012 when 160,000 units were sold, compared with almost 450,000 in 2007. Nevertheless, with the exception of 2009 and 2010, more second-hand homes are always sold than new builds. In 2008, the first year after the bubble burst, the figures about equal. But, a definitive gap emerged again in 2015, to the extent that last year, 8 out of every 10 homes sold in Spain were second-hand.

Prices rise by 5% in one year

This buyer appetite has had an immediate impact on prices. During the month of August, prices rose by 4.9%, the greatest YoY increase in the last 10 years. As such, the average price per square metre now amounts to €1,708/m2, according to data from Fotocasa (…).

Once again, the behaviour has been very irregular throughout the length and breadth of Spain. There were significant increases in the Balearic Islands (16.2%) and Cataluña (11.6%), the only autonomous regions that saw prices rise by more than 10%. They were followed by price rises in the Canary Islands (5.6%), Andalucía (5.4%), Castilla-La Mancha (4.7%), Madrid (4.2%) and Extremadura (3%).

Nevertheless, we should not forget that the decrease in house prices from their peaks is still very significant across the vast majority of the country. The average price of second-hand homes in Spain has recorded a cumulative decrease of 42.2% since the peak of April 2007 (€2,952/m2). In this sense, 11 autonomous regions still record cumulative decreases of more than 40% compared to the maximum prices recorded nine years ago. They are led by La Rioja (-56.8%), and followed by Navarra (-53.8%), Aragón (-51.4%), Castilla-La Mancha (-51.3%), Murcia (-49.4%), Asturias (-46.8%), the Community of Valencia (-45.7%), Cantabria (-43.1%), Cataluña (-42.1%), Madrid (-40.9%) and Extremadura (-40.6%).

“Meanwhile, the housing market is registering levels of activity that we have not seen for 10 years, as a result of the improvement in the economy and employment, as well as of a return of confidence to the sector (…)”, explains Beatriz Toribio, Head of Research at Fotocasa. Nevertheless, Toribio points out that “despite the chunky growth in the number of mortgages, transactions and prices, the sector is still at much lower levels than during the golden years” (…).

General increases in Madrid and Barcelona

Madrid and Barcelona, two of the most active markets from a real estate perspective are by no means unaffected by the rise in the prices of second-hand properties. Prices rose in 19 of the Spanish capital’s 21 districts in August (…). In terms of the most expensive and cheapest districts, Salamanca is the most expensive for buying a home, with a price of €4,923/m2. It is followed by Chamberí (€4,681/m2), Centro (€4,453/m2) and Chamartín (€4,448 /m2). At the opposite end of the spectrum, Villaverde is the most affordable district for buying a second-hand home, with an average price of €1,518/m2.

Meanwhile, in Barcelona, house prices rose in seven of the 10 districts analysed by Fotocasa in August (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

House Prices: How Much Upwards Wiggle Room Is There?

13 June 2017 – El Mundo

In many respects, the housing sector has been restored to its former glory: house sales are rising at an increasingly faster rate, the development of new homes has resumed and the granting of mortgages is growing apace. However, the jubilation in the residential market can be felt, above all, in the significant increase that prices are experiencing in the new real estate cycle.

House prices rose by 7.7% in YoY terms during the first quarter of 2017, according to Real Estate Statistics from the College of Property Registrars. In the historical series published by that body, that figure represents the highest increase in house prices since 2007, in what is now the third consecutive year of increases in the market after seven years of severe decreases. (…).

The Registrars highlight the favourable behaviour of the real estate and mortgage markets, but warn that this strong dynamism “does not justify any intensification of growth towards double digits anytime soon”.

The registrars reiterate in their analysis that “From a global perspective, the market is debating between sustainable growth and an intensification towards forgotten figures”. They attribute the significant increase in house prices to the consolidation of economic growth, creation of employment, low interest rates, activity in the mortgage market and overseas demand.

The main consequence of the variables listed by the registrars, which work in favour of rising prices is, clearly, the increase in the number of potential buyers of homes, as highlighted by Julio Gil, Managing Partner at Horizone Consulting Inmobiliario. “The factors that are driving the appreciation in house prices nowadays are demand-driven, with three very clear facets: pent-up demand from previous years, which is now coming into play, demand to reposition and demand to invest”, reflects Gil. (…).

Moreover, all indications are that prices will continue to rise, at least, in the medium term (…). What is not so clear is the intensity of that increase. (…).

According to the registrars “Our predictions are based on forecasts of moderate growth rates, defined to be YoY rates of around 5%-6%, although there may be cyclical periods of more intensive QoQ rates. It would seem that “the social and economic reality does not justify an intensification much greater than these amounts”. And they highlight: “The evolution in terms of the number of inhabitants, wage levels, the outlook in terms of interest rates etc. ought to put the brakes on the upwards trend, to a certain extent”.

That prediction is not shared by Gonzalo Bernardos, Economist and Director of the Masters in Real Estate Management and Development at the University of Barcelona. “House prices will rise by around 8% in 2017 if the net credit available to purchase a home does not increase; and will soar by around 13%, if lending rises by 5%”. For the time being, this expert does not see an obvious risk of a bubble and recalls that that only happened a decade ago after net credit had been increasing for 10 years by almost 20%. (…).

Looking ahead, Bernardos takes it for granted that the steep rise in house prices will be contained when the price of money increases (it currently stands at 0% in Europe). He calculates that, provided nothing changes in the international environment, this turning point in interest rates will happen at the end of 2018, which means that by 2019, the average YoY increase in house prices will be sustained at around 3%-4%-5%. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake

Price Rises Continue To Rock Spain’s Rental Home Sector

6 June 2017 – El Mundo

The housing market is trembling and not, like in the past, because of the high degree of sale and purchase activity. The residential sector in Spain is facing an unprecedented phenomenon: a boom (not a bubble) in the rental sector. In a short space of time, this residential regime has gone from being almost residual to accounting for more than 20% of the housing market. And that figure is rising. This leap is driving up prices, significantly. Above all in Madrid and Barcelona.

According to the experts, a change in the mentality of young people and employment mobility are the main factors driving this formula for accessing a home. (…).

Not since the 1960s has the percentage of rental properties been so high in Spain, but, despite the increase, the figure is still well below the levels seen in other European countries – which reach 50% in some places – although it is moving closer to the Eurozone average – 30%. (…).

The cornerstone of this growth in rental properties has been the spectacular boom in demand, which has come up against an unprofessionalised sector, with minimal supply owned, primarily, by individuals. The real estate portal Fotocasa now registers more searches for property rentals than it does for property purchases. The result of this imbalance? An earthquake in terms of prices. How long will this earthquake last? Where are its epicentres? What intensity will it reach? What measures should be taken to soften its effects? (…).

The latest evidence of the rental earthquake has come in the form of the Fotocasa’s price statistics for April, which show that the average rent in Spain rose by 10.2% in one year, to €8.04/m2/month. That cost takes the market back to its 2011 levels but it is still well below (-20.7%) the peaks of 2007 (€10.12/m2/month). (…).

“It is a question of supply and demand”, said Economist and Director of the Masters in Real Estate Development and Management Advisory at the Universidad de Barcelona (UB), Gonzalo Bernardos. “Demand is increasing due to the recovery. There are more jobs and, therefore, more families and young people as potential tenants. By contrast, the supply is decreasing (…)”. In his opinion, this situation will change when the banks start lending again en masse to families who earn less than €2,500/month. “From then on, maybe from 2018 onwards, the rental sector will suffer, as demand will transfer to the purchase market”, he said. (…).

Fotocasa has prepared a seismic map of the rental market. It reveals the evolution of rental prices by autonomous region. Prices decreased in YoY terms in Galicia only (in April) (by -0.7%), whilst they rose in all of the other regions, with marked rises in Cataluña (17%), Madrid and the Balearic Islands (12.1% in both). Together with the Canary Islands (11.9%), these regions are undoubtedly the large epicentres of the increase in rental prices.

“The increase in rental prices is happening across the whole country, but the strong average increase is due to Cataluña and Madrid”, said Beatriz Toribio, Head of Research at Fotocasa. “According to our Real Estate Index report for 2016-2017, these two regions account for 43% of the activity relating to demand”, she said.

In absolute terms, the most expensive rental prices are also in Cataluña, where the price per m2 stands at €11.96/month. In other words, a typical apartment measuring 90 m2 costs around €1,075/month. Next in the ranking, and still in the double digits, are Madrid (€11.36/m2/month), País Vasco (€10.59/m2/month) and Baleares (€10.05/m2/month). These values are even higher in the main municipalities.

Barcelona – the great tip of the iceberg

(…). In the city of Barcelona, the average rental price amounts to €15.14/m2/month. That amount is higher than the figures registered in Sant Cugat del Vallés (€13.61/m2/month) and Castelldefels (€13.58/m2/month), the next two most expensive towns for rental properties in Spain. In Madrid and San Sebastian, rental prices stand at €12.81/m2/month and €11.96/m2/month, respectively. (…).

The analyst at Fotocasa thinks that rental prices will regulate themselves over time. “We are still well below the peaks. The market is normalising”, she concludes. Meanwhile, Bernardos predicts that the rate of growth in rental prices will gradually calm down in Barcelona and Madrid. He forecasts price rises of 12%, 9% and 5%-6% over the next three years in the capital and of 8%, 5% and 3%-4% in Barcelona. (…).

Original story: El Mundo (by Jorge Salido Cobo)

Translation: Carmel Drake

Moody’s: House Prices Will Rise By 4.7% p.a. Between 2017 & 2019

30 May 2017 – El País

The risk rating agency Moody’s expects house prices to rise in Spain by 4.7% per annum between 2017 and 2019, in line with their evolution in 2016. This will have a positive effect on the balance sheets of the banks and on the behaviour of mortgage securitisations.

Those are the conclusions of a report on the real estate sector in Spain, prepared by analyst Antonio Tena, which nuances these promising forecasts by reminding readers that the number of units sold is just as important as the price at which those units are sold for.

Even if GDP grows at a lower rate than currently predicted, the US agency believes that the rate at which it will likely close the year (2.3%) will undoubtedly sustain this recovery in house prices.

But it is important to “decouple” house prices from the number of operations, given that although the volume of properties is decreasing, it is true that some of the new homes (…) date back to 2006 and 2007 and still have not been sold”. However, those now account for just 10% of operations, well below the pre-crisis levels, when new and second-hand homes accounted for half the market each, reported Efe.

The agency also commented that there is no risk of “overheating” in the mortgage market, said Tena, or of a mortgage bubble happening, given that nowadays just one euro is being loaned for every four euros that were being loaned back in 2007.

Last week, the President of the European Central Bank (ECB), Mario Draghi, spoke along the same lines. He ruled out the danger of a new real estate or credit bubble in the euro zone.

The banks are now a lot more restrictive when it comes to granting a mortgage, said the Moody’s analyst, Antonio Tena. He added that it is important to distinguish between the granting of mortgages and the sale of homes; in 2007, more mortgages were granted than homes were sold, whereas, in 2016, the volume of house sales was much higher than the volume of mortgages signed.

The sale of homes is growing in a sustained way, at around 14% p.a., but that still represents half of the volumes sold in 2007; the data from Moody’s shows that house sales are not decreasing in any city where there are more than 200,000 inhabitants; and that Madrid and Barcelona – and their peripheral regions – as well as the Mediterranean arc, are accounting for most operations.

Borrowers are increasingly older

Another positive indicator, according to Tena, is that the average age of mortgage applicants has increased from 34 years in 2007 to 38 years in 2017. Borrowers now have a greater capacity for saving and financing. (…).

Along with the report about the mortgage market, Moody’s has published another study about covered bonds, which are known here as “mortgaged bonds”. The product plays an important role in Spain, given that for every euro of that type issued, there are €2.50 of mortgage loans, whereas, that ratio barely amounts to 1.10 in other countries. (…).

Original story: El País

Translation: Carmel Drake