Servihabitat: Spain’s Housing Market Continues on its Positive Trajectory

24 July 2018 – Eje Prime

The housing market in Spain is going to continue with positive figures across all areas in 2018. That is according to a report from Servihabitat, which indicates that prices are going to continue to rise this year, up by 5.4%; operations are going to soar, with a leap of 24%; and new build starts are going to rise by 16.6% (all figures compared to last year).

According to the report, these increases respond to a residential market that “is progressing with clear signs of consolidation”, which is explained by factors such as an improvement in consumer confidence, the containment of unemployment and the positive evolution of companies’ turnover.

These elements “are encouraging the start of housing projects and configuring an expansive cycle”. With a special focus on the largest populations in Spain, such as Madrid, Barcelona, Málaga, Valencia and Sevilla, in the case of homes for regular use, and on regions such as Galicia, La Rioja, the Community of Valencia and the Canary Islands, the number of new home starts will rise by 16.6% this year to 93,895 units.

Meanwhile, the number of finished homes will rise by 15.5% during the course of this year, according to Servihabitat’s forecasts, with a total of 63,744 homes delivered. Despite that, the pull of demand will reduce the new build stock by 4% to 454,939 homes, with a greater reserve in the communities of Cataluña, the Community of Valencia and Andalucía (the three account for 49% of the total stock).

The second major increase will be seen in the number of transactions, in other words, the sale of homes signed at the notaries’ offices. According to the report, the year will close with a total of 669,739 transactions subscribed, up by 24.3% compared to 2017.

Macroeconomic conditions, together with opening up of the financial sector to the granting of mortgages and demand for property investment (thanks to the returns that the rental market is offering) are the three main drivers of demand, which have reduced the average sales period for a normal home to 6.6 months.

Finally, the evolution of supply and demand will lead to a rise in house prices once again this year, up by 5.4%, compared with an increase of 6.2% with respect to the previous year.

Prices are expected to grow by the most in the Community of Madrid, with a forecast increase of 11.5%; followed by Cataluña, 9.6%; the Balearic Islands, 8%; and País Vasco, with an expected increase of 5.2%. By contrast, prices are forecast to rise by less than 1% in the autonomous regions of Extremadura and Castilla-La Mancha in 2018.

The report also reflects the opinions of the real estate agents who form part of Servihabitat’s own network of branches and its collaborating agents. In particular, 64.2% of that sample believes that the price of regular homes (primary residences) will remain stable in 2018, compared with 33.2% who think that they will rise and just 2.6% who consider that prices will fall. In the case of holiday homes, the dispersion is somewhat greater: 34% forecast that prices will rise this year; 62.6% think they will remain stable and 3.4% believe that they will fall.

Original story: Eje Prime (by C. de Angelis)

Translation: Carmel Drake

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