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

The Housing Market Recovery Will Strengthen In 2017

9 January 2017 – Expansión

Expansión interviews a panel of real estate experts / Analysts expect house prices to rise by around 5% on average in 2017, but that figure is likely to be even higher in the large cities. Moreover, sales will grow at a higher rate than prices, even though the comparison will be performed against 2016, when around 400,000 transaction were completed. (…).

The property sector started to reverse its negative trend in 2014; it really emerged from the darkness in 2015; and the improvement started to be felt across the country in 2016, albeit in the shadow of the political paralysis. For this reason, and with the macroeconomic improvement to boot, 2017 is set to be the year in which the real estate recovery finally takes hold. The consensus of the experts consulted by Expansión is that house prices will rise moderately, by around 5% during 2017; sales will increase by even more – around 10%; and mortgage lending will flow a lot better than last year. All of this provided that interest rates do not rise.

The reasons for this realistic optimism are primarily macroeconomic. The increase in employment (above all), the growth in GDP, the improvement in consumer confidence – a more important indicator for the real estate sector than many people think – and the gradual opening of the mortgage tap are juxtaposed in a virtuous way for property, which will not only become attractive again for those looking to reposition themselves on the property ladder, but which has also become a major focus of returns for investors. At the same time, there is still some uncertainty hanging over this recovery. For example, the scarcity in terms of the demand for new households.

In this context of a “slow, moderate but constant recovery”, as defined by Beatriz Toribio, Head of Research at Fotocasa, house prices will definitely rise, but not very significantly, according to all of the experts that have responded to our survey.

For example, Aguirre Newman estimates “price growth of around 6% for new and second-hand homes”, according to Juan Riestra, Director of the Residential Division at the real estate consultancy. Maurice Kelly, Director of the Residential area at JLL, thinks that established areas, such as the centres of major cities and exclusive locations along the coast will see “increases of more than 6%”.

Almost all of the forecasts indicate price rises of around 5% and highlight the disparity between the different real estate markets around the country. (…).

José Luis Ruiz Bartolomé, Managing Partner at the consultancy Chamberí AM, notes that “prices will rise by around 5%…” but adds a new and different perspective: “These price rises will not be driven by the central districts of Madrid and Barcelona (like until now), but rather by the more peripheral regions and other cities that have not been performing particularly well so far”.

Moreover, not all of the analysts agree with the forecast of 5%. Jorge Ripoll, Director of Research at Tinsa, thinks that the increase will be less marked, ranging between 0.1% and 2%. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake