Tag: new mortgages

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

Notaries: House Sales & Prices Rose In Q2 By 14.2% & 5%, Respectively

31 October 2017 – El Mundo

House sales rose by 14.2% on average during the second quarter of 2017 with respect to the same period in 2016, to exceed 142,000 transactions, whereby moderating the YoY increase experienced in the previous quarter (20.3%) by six points, according to data from the General Council of Notaries.

By type of dwelling, flat sales recorded a YoY increase of 15.3% during the second quarter of 2017, and whereby accumulating 14 consecutive quarters on the rise. In terms of prices, the average cost of homes purchased during the second quarter was €1,387/m2, up by 5% YoY. Meanwhile, the price of flats (in general) rose by 5.6% YoY to €1,529/m2.

According to the Notaries, the sale and purchase of homes rose in every autonomous region during the second quarter of 2017, with the exception of the País Vasco, where sales fell by 0.4% YoY. The highest increases were recorded in the autonomous regions of La Rioja (25.9%), Asturias (21.6%) and Castilla-La Mancha (19.6%).

In terms of house prices, they decreased in Murcia (4.3%), Cantabria (3.7%), Aragón(0.5%) and Castilla y León (0.3%) but rose in the remaining 13 regions, in particular in Navarra (17.7%), Castilla-La Mancha (11.1%), Cataluña (9%) and the Canary Islands (8.9%).

On the other hand, the number of new mortgages granted in the second quarter of 2017 fell by 2.4% with respect to the same period in 2016, after having increased by 7.8% YoY during the first quarter.

Original story: El Mundo 

Translation: Carmel Drake

ST: Its Still Too “Early” To Talk About A “Complete Recovery”

21 April 2016 – El Economista

The CEO of ST Sociedad de Tasación, Juan Fernández-Aceytuno (pictured above), said on Tuesday that, despite the clear stability that we are seeing in terms of house prices, it is still “early” to talk about the “complete recovery and normalisation” of the market, and he warned that the recovery will only be an “objective” for as long as the net mortgage volume balance continues to decrease.

Those were the words of Fernández-Aceytuno during the opening session of the XXIII Meeting of the Finance Sector, an event organised by Deloitte, ABC and ST Sociedad de Tasación, at which he presented the five key indicators of the real estate sector.

Fernández-Aceytuno indicated that although there has been a double-digit increase in the number of appraisals commissioned by financial entities to support mortgage requests, the volume of mortgages granted in 2015 was “similar to the volume granted in 1998”, i.e. the lowest level in the series detailing mortgage activity prepared by the Spanish Mortgage Association.

Moreover, he said that in 2015, cement consumption amounted to 11.5 million tons, “similar to the levels seen in the 1930s and almost six times lower than the historical peak”.

“It would be interesting to validate and understand that real estate cycles in Spain are 16 years long, eight years of price and activity decreases, followed by eight years of rises”, said Fernández-Aceytuno, before going on to list the five key indicators for determining at which point we are in the cycle.

The five key indicators of the real estate sector

The first is the relationship between mortgages and transactions, regarding which he noted that during times of growth and recovery, the number of mortgages exceeds the number of transactions. “In Spain, that relationship was reversed in 2011; the good news is that since 2015, the number of mortgages granted has grown more quickly than the volume of house purchases”, he said.

Similarly, he indicated that the relationship between the percentage of appraisals commissioned by financial institutions for own assets and loan collateral has varied “significantly” from those commissioned by end clients to support new mortgage applications.

In terms of the creation of new households, Fernández-Aceytuno highlighted that, according to sources at La Caixa, almost 75,000 new households were created in Spain last year, which represents just 20% of the historical maximum. According to the Bank of Spain, the reference figure should amount to around 250,000 new households per year.

Similarly, he said that the New Home Census for 2016 compiled by ST-Sociedad de Tasación reported around 5,400 new homes for sale, compared with the 45,000 resulting from the calculations published by the Ministry of Development.

The variables that determine this difference are: the age of the home, its rental yield and the preference of property developers and banks to sell their homes in more favourable economic environments.

Finally, in terms of the evolution of outstanding mortgage balance, he said that currently the figure for the volume of loans being repaid exceeds the figure for the granting of new mortgages. “Although the latter increased at a higher rate in 2015, for as long as the net mortgage volume continues to decline, the recovery will just be a goal”.

Original story: El Economista

Translation: Carmel Drake

INE: Mortgages Increased By 1.6% In 2014

27 February 2015 – Expansión

The number of mortgages granted for homes increased by 1.6% in 2014 with respect to the previous year, to 202,954, which meant that the mortgage market returned to positive growth after seven consecutive years of decreases; and so a change in the sector’s cycle begins.

The signing of new mortgages for the purchase of homes rose by 1.6% in 2014 to reach 202,954, the first increase after seven years of decline, according to extracts from the Mortgage Statistics published by INE today.

The number of new mortgages had not increased on a year-on-year basis since 2007, a year in which more than a million more mortgage contracts than last year were signed – 1,238,890, to be exact – therefore, despite the recovery that appears to taking place in the sector, the market is still well below its pre-crisis figures.

The signing of mortgages has fallen steadily since 2007: in 2013, the number decreased by 27.1%, whilst in 2012, 2011 and 2008, they fell by more than 32%. In 2009, they dropped by 22.2% and in 2010 and 2007, the declines were more moderate, with decreases of 6.6% and 7.7%, respectively.

Last year the size of the average mortgage taken out over homes also grew, by 2.1% to €102,130, whilst the total amount of capital loaned rose by 3.8% during the course of the year to reach €20,727 million.

In December 2014 alone, the number of new mortgages recorded in the property register grew by 28.9%, compared with the same month in 2013, whereby completing seven consecutive months of increases. During the last month of the year, 15,962 contracts were signed in total, for an average value of €124,059, also higher than a year earlier.

Overall, in 2014, the total number of mortgaged properties increased by 11.7%, to amount to 314,018. Of those, 22,342 were urban (+12.5%) and 1,054 were rural (-3.2%).

For Fernando Encinar, Head of Research at Idealista, “this increase in the number of mortgages granted represents good news for the sector. Banks have started to hang the “mortgage” sign in their branches once again and demand is beginning to respond, encouraged by the economic recovery and the suppression of prices”.

Manuel Gandarias, Director of the Research Unit at pisos.com offered a similar view: “Everything seems to indicate that the mortgage market will reactivate briskly. Following the significant decreases observed since 2007, the data in 2014 represents the first annual increase in the granting of loans, and the second half of the year really stood out in terms of growth”.

“Similarly, the average size of mortgages has experienced an increase, which is indicative that the banks have recovered the financing role that the sector was has been asking for”, he continued.

“Competitiveness between entities to win the best clients has returned to the mortgage sphere and offers will continue to attract sales and purchases. Everyone will have to pay attention to the evolution of Euribor and the movements of the European Central Bank (ECB), whose measures have accelerated this opportunity. Although the future looks brighter, we should remember that this is the principle of stabilisation. Financing is a fundamental element for families and it is a clear indicator of the process of improvement.

Andalucía, Madrid and Cataluña lead the increases

As usual, the autonomous regions with the highest volumes of mortgages granted in 2014 were Andalucía (36,860), Madrid (35,461) and Cataluña (30,261).

The regions in which the most capital was lent to constitute mortgages were Madrid (€5,134.9 million), Cataluña (€3,439.1 million) and Andalucía (€3,219.0 million).

Original story: Expansión

Translation: Carmel Drake

Spain’s New ‘Property Kings’

2 March 2015 – El Mundo

2006 was a key year for Fernando Martín. Not only did the Chairman of Martinsa hold the presidency of Real Madrid for a short time, he also acquired the real estate company Fadesa for €4,000 million. Two years later, the burst of the (real estate) bubble put an end to his reign. Since then, the businessman has tried to resist (his downfall) until this week, when the banks and Sareb put an end to his adventures, by plunging Martinsa into bankruptcy. His creditors say that throughout the bankruptcy negotiations, Martín has demanded that he continue in his role as Chairman of the company and also retain his company car, his secretary and his salary of around €1.5 million, even though the company’s activity has been minimal.

With this defeat falls the last of the property lords who led the Spanish economy’s most important sector during the boom years, with negotiation tactics that many associate with lobster lunches and (VIP) boxes at football matches.

However, Martín’s fall coincides with the rebirth of the empire. Last year, institutional investors closed transactions amounting to €14,000 million in Spain (a volume of activity that was only exceeded in 2006 and 2007) and data from the housing market also shows that the property sector has turned the corner towards recovery. In fact, in 2014, the number of new mortgages taken out increased for the first time, after six years in decline.

This rebirth is accompanied by new businessmen with profiles more akin to those of bankers than (property) developers. The property kings’ successors are more used to having canopes for lunch, in true British style, and many of the important decisions about the future developments that will see the return of cranes to Spain’s landscape, are no longer being made in (VIP) boxes at the Bernabéu, but instead in offices in Madrid, the City of London, Dallas, New York and Beijing.

Former developers, such as Fernando Martín, Enrique Bañuelos (Astroc) and Rafael Santamaría (Reyal Urbis) have now made way for Wang Jianlin (Wanda), Ismael Clemente (Merlin Properties), Juan Pepa (Lone Star) and Concha Osácar (Azora).

These are executives who no longer depend on the banks to finance their projects; instead they are backed by large insurance companies, sovereign funds and even highly qualified investors, such as George Soros and Carlos Slim.

“We are facing a paradigm shift. During the boom (years), developers wanted to make more than they were able to and they focused on stocking up on land, due to the peculiarities of that raw material. However, (property) development is like manufacturing and no manufacturer purchases (his) raw materials 10 years in advance. When we hit economic difficulties, that model collapsed. Now, we are seeing different management and development models exist side by side. We are moving towards a more professional model, in which fewer developers compete, with stronger brands”, explains Luis Ruiz Bartolomé, co-author of the book ‘Return, property, return’ (‘Vuelve, ladrillo, vuelve’).

Under this model, the large investors, cooperatives and local developers that have managed to survive the difficult years, are going to co-exist. All of them will compete with a different mentality and with new ways of managing assets.

“The new players in the real estate sector will have to analyse the current key factors (effectively) to enable them to have a more global profile through increased specialisation and professionalization”, says the partner responsible for Real Estate at KPMG, Javier López Torres.

Wang Jianlin (pictured above)

On his trips to Spain, the Chinese tycoon has enjoyed evenings at the Teatro Real, but he also likes football. In fact, his first investments in this country were in the Torre España – a building he bought from Santander – and a stake in Atletico de Madrid. Now, the owner of the Wanda Group wants to launch the development of the so-called Wang mega-complex, a residential and leisure park that may be constructed on land that used to house former barracks in Madrid. Nevertheless, to date, the Asian millionaire’s investments in Spain have merely represented a token gesture, in the context of the global figures for his real estate business. The Wanda Group is the largest land-owner in China and it is constructing the largest residential skyscraper in London, next to the Thames. According to the Chinese press, Jianlin is also considering the purchase of the AC Milan football team.

Jaime Echegoyen

It is likely that when the Chairman of Sareb was CEO at Bankinter and Head of Barclays in Spain, he never imagined that it would end up holding the reins of the bad bank. This banker, who always works with office door open, is responsible for managing the real estate giant that was created in 2012 with 200,000 assets (80% financial and 20% property) amounting to €50,781 million. Echegoyen’s team is working on the completion of 1,000 homes (which it received ‘unfinished’ from the banks) across 52 sites. In addition, it is studying the development of some of the 5,000 plots of land that it received as inheritance, to be able to better market them before 2027, when the semi-public company will have to be dissolved.

Juan Pepa

This Argentine, who lives in London, is the Managing Director of the North American fund Lone Star and in 2013, he managed to convince US investors to back Spanish property. When Pepa comes to Spain and announces that his is going to launch the largest developer in the country this Spring, he does so with a level of enthusiasm that may surprise (people) after the hard times experienced in recent years. “We are going to fill the country with cranes”, he likes to declare. In recent years, Lone Star has purchased the real estate company Neinor from Kutxabank and Eurohypo’s loan business (together with JP Morgan) to launch this project. With a financial background and an MBA, Pepa plays polo and is the patron of the Pro Alvear Foundation, which works to promote education and technology in the La Pampa province of Argentina. This executive, who is less than 40 years-old, does not like the press referring to his fund as a vulture; he assures them that he has not come to Spain with a short-term view and although, he does not provide any details about his project, he says that the proof will be in the fact that it will generate value for the Spanish economy.

Ismael Clemente

Also a banker by trade – he used to work at Deustche Bank for example – but more closely related to property than Echegoyen and Pepa, Clemente founded Magic Real Estate during the worst year of the crisis (2012) and now is the head of Merlin Properties, the Socimi that debuted on the stock exchange in an IPO that raised €1,250 million.

George Soros and Carlos Slim

The tycoon who devalued the pound in 1992 and the Mexican multi-millionaire represent the many international investors who want to get involved in the recovery of the (real estate) sector through their financial investments. Soros is one of Hispania’s shareholders, whilst Slim has taken a stake in FCC. From there, he wants to acquire Realia to complete his business empire, which includes valuable assets from around the world, in many different sectors; América Móvil is one of the jewels in his crown.

Leopoldo Moreno

In addition to the businesses of large investors, cooperatives are also proving themselves to be a successful formula for development, as banks have closed the (financing) taps. The CEO of Ibosa has known how to take advantage of this model with numerous developments in the Community of Madrid.

Santos Montoro

This businessman from Murcia is a good example of how a family developer can compete in the (new) real estate model that has been imposed by the investment funds. In fact, his company, Monthisa (which was created in 1968) has managed to reinvent itself during this crisis to form a partnership with the fund H.I.G. to manage the Bull portfolio, a batch of apartments and garages that the US vehicle purchased from Sareb.

Enrique Bañuelos

After the fiasco involving Astroc, this deposed king has resumed his activity in London. From the City he wants to develop (property) in Spain through his new company called Veremonte and participate in BCNWorld, the tourism and leisure macro project that the Catalan authorities are looking to build

Original story: El Mundo (by María Vega)

Translation: Carmel Drake