Tag: property purchase

No Tax Benefits For Property Buyers Or Tenants

1/12/2014 – Cinco Dias

Tax incentives for property purchase undoubtedly contributed to the real estate bubble inflation which became one of the main culprits of current Spanish economical situation. The Government decided to eliminate tax deduction for acquisition of a main residence which will be preserved retroactively but will not apply from January 1st 2015 onwards. The same reform approved ten days ago rules out taxable profits arising from main home rental and decreases benefits from the buy-to-lease scheme.

Now, tenants can deduct 10.05% of the annual rental amount in their tax filing, given it does not exceed €9.040 in case of a taxable base below €17.707,2. The allowance is also applicable to higher basis until a €24.107 cap, however, once the previous limit trespassed, the incentive is progressively reduced to zero.

Once the new year begins, tax deduction for both property purchase and lease will disappear but it will apply in a retroactive way, i.e. for the homes acquired before 2013 and the rental contracts signed by the end of December 2014.

In 2015, acquiring a property to lease it afterwards will assure an up to 60% deduction for landlords but they will lose the 100% allowance for renting to under-35 tenants.

Pressured to relax the new taxation conditions for capital gains proceeding from property sales, the Ministry of Finance has amended the reform originally eliminating revaluation rates and abatement coefficients, reduced for homes bought before 1995. The latter decreases the tax liability of the capital gain accumulated from the moment of purchase to January 2oth 2006, turning out extremely beneficial for old property sales. The coefficient goes up back in time. For example, if a home was bought before 1986, accrued capital gains as of January 2006 become exempt to the taxation rules. And if it was acquired in 1987, only 11.12% of the revenue will be a subject to the contribution.

Revaluation rates are set to disappear in 2015. The abatement coefficients will remain in force but will only apply to houses sold for less than €400.000. There will be no allowance for an amount above this topline which additionally will be accumulative. This means that the abatement coefficients enjoyed at a sale for €300.000 may be prolonged only to another sale for €100.000.

Given the amendments, it would be to recommendable to sell a house still this year. One must also crunch the numbers as the complete removal of revaluation rates and the restriction of abatement coefficients will be compensated by a reduction in taxes on capital gains. Thus, proceeds from a home sale now are subject to 21% tax for first €6.000, 25% for next €24.000 and 27% above that amount. From 2015 on, the contribution will be reduced to 20% (first €6.000) and to 19% in 2016, furthermore to 22% for following €50.000 and to 24% for the rest (23% in 2016).

Therefore, an owner should take into consideration that if they sell in 2015, they will pay less taxes and if for less than €400.000, there will be no handicap, except for the elimination of the coefficient recognizing the inflation effect.

 

Original article: Cinco Días (by Nuria Salobral)

Translation: AURA REE

Get Ready For Flat Prices & More Building Sites

1/12/2014 – Cinco Dias

In this last month of 2014, the real estate sector of Spain already notes that this year has been much better than the previous one. All the evidence is that this was the last annus horribilis for Spanish housing, at least for the moment. Both prices and development activity suffered abrupt drop-offs, reflected in, for instance, data showing that from more than 860.000 dwellings started in 2006, only 34.200 were finished till 2013. Secondly, prices have contracted by 30.7% on average since the 2007/2008 peaks, official statistics point out.

And this is the average as in some municipalities depreciation reaches 50%. A slight improvement in employment and recent return of lending seem to be the key factors for ‘the sector’s stability‘. It is predicted that prices will go down ahead but not as sharply as they used to. Moreover, experts await more cranes in desirable areas where ‘reasonably priced’ homes would be welcomed. In spite all these positive signs, specialists agree Spanish housing won’t come back to mid-2000 levels… will it?

The Prices

Over the past months, various statistical sources were repeatedly reporting seemingly contradictory data. Some said houses cheapened, while others claimed there have been first rebounds in prices, first in  month-on-month and then in year-on-year comparisons.

However, all contained a grain of truth. The catch is that each of them employs different periodical information. The calculations coming from the notaries are not equivalent to studies from the registrars (who base on deal figures from 2-3 previous months). Similarly, pricing reports using appraisal data are not comparable to a real-market study involving visits to new building sites.

The proof that all of them are reliable is that all conclude pointing at the same trend, also showing that the free-market laws apply. Thus, they coincide in showing an increase in sales, earlier stock absorption, a slowdown in pricing slump and reapearance of cranes in new property developments.

The Wealth Effect

Let it be the Ministry of Public Works’ data or the Appraisal Association’s, two sources which have been providing reports on Spanish housing for at least the last 20 years, average accumulative decrease of house values in the country posts 30%, meaning the same level as in 2004. As Maria Romero from Analistas Financieros Internacionales (AFI) says, the figures mean a negative equity for those households which acquired a dwelling ever since.

Still, statistics also show that in some geographical areas prices started to rise. Will the trend expand? ‘High unemployment rates and insufficient income especially affect the first-home buyers, as well as prospective demand. In any case, we do not expect any additional, deep adjustments’, claims Mrs Romero. Experts from Sociedad de Tasación portend the prices will continue to go down until finding what they call ‘the balance point similar to end-2000’.

The Stock

At the beginning of this new cycle, prices and sales in in-demand areas level out, whereas in the zones where product is in excess, prices are being squeezed down and new development seems impossible in there.

The increase in transactions contributes to faster absorption of new homes for sale which shrank by one-third since the 2010 peak (700.000 units).

The New Property Development

At the moment, large cities’ centers, excellently located neighbourhoods and those with good infrastructure were the first to see return of house construction. They are very carefully selected projects with 100% sales guaranteed and attractive prices. It is demonstrated by the fact that building permits bounced back in September for the sixth consecutive month (up 31.6% year-on-year).

Logically, developers strike areas of high demand and income per capita which proves better financial ability of the buyers.

Experts forecast further rise in building permits’ number in the next months, triggering a phenomena unseen since the recession began – more homes will be started than finished. In fact, works completion certificates keep steering down (by 35.6% annually in the third quarter). To compare, last year only 4% was started of what was constructed throughout 2006.

The Financing

Like individuals, developers also started to receive the ‘approved’ seal on their loan applications. Thus, as the Bank of Spain reported, not only mortgage lending to eligible customers is returning but also loans to developers become more and more common.

What is more, value added to investment in housing again increased quarter-on-quarter by 1.3% in Q3.

Recent studies reveal that in all European countries where homes regained value also the GDP grew up. That means that better conjuncture is vital for housing sales to confirm a recovery, which in turn feeds up economical well-being: from more real estate transactions, through related industries (decoration, repairs, etc.), vivid activity, more jobs, increased confidence, and here we go again, more housing sales.

 

Original article: Cinco Días (by Raquel Díaz Guijarro)

Translation: AURA REE

Eighty Spanish Shopping Malls Waiting For New Owners

28/11/2014 – Expansion

They reign in the real estate industry of Spain. Big or small, in the outskirts of large cities or in the centers of towns, shopping centers account for most of property deals in the country.

From January 1st to November 15th, almost 30 of them changed hands. According to Deloitte Real Estate, investment in the Spanish retail assets amounted to about €1.63 billion.

5% of Europe’s Total

In the first half of the year, €890 million were spent on shopping malls in the entire Europe. Investments in Spain represented 5% of the total, beaten only by the UK and France.

By transaction volume, over-€200 million amounts were destined for purchases of the Islazul retail park (Madrid) bought by fund Tiaa Henderson for €230 million and the Marineda (La Coruña) sold to Socimi (REIT) Merlin Properties for €260 million. Another Socimi, Lar España, has invested a little bit more than €160 million in five shopping centers.

All the Spanish Socimis, opportunistic funds and institutional investors contributed to the avalanche of deals on the national market.

‘Private equity investors, who accounted for majority of acquisitions last year, now are ceding the ground to more conservative buyers like the Socimis, German property and American pension funds’, explained Javier Garcia-Mateo, Real Estate head at Deloitte.

Among the steps taken by these new players on the Spanish ground, noteworthy are: the purchase of the Castellana 200 complex in Madrid, including a shopping mall and office space, by Canadian PSP, and the acquisition of 50% of the Zenia unit in Alicante, performed by the Alaska Permanent Fund. The two totally different properties prove interest in all kinds of retail assets.

Thus, year-to-date, a package of eight shopping parks was sold to a consortium of funds for €160 million, as well as the Boulevard in Vitoria for an amount of €153 million.

Aside from the January-November investment volume, further deals worth at least €600 million are expected to be sealed still before the end 2014. For instance, the Plenilunio shopping mall in Madrid (pictured), put up for sale by Orion at €400 million. The fund paid €262 million for it in 2009.

As Deloitte Real Estate assures, there are more than 80 more shopping centers in Spain currently up for sale. It is said they will be handed over to best bidders within the next six months and the total amount proceeding from their sales will reach €3.5 billion.

‘Large part of prime assets have depreciated by 30% on average in less than a year, and the secondary by 14%’, says Mr. Garcia-Mateo. ‘And this did not happen because rental prices had gone up but because of the yields’.

Presently, there are 547 shopping malls in Spain, with Madrid concentrating almost 100 of them. Their gross lettable area totals at 15.43 million square meters.

 

Original article: Expansión (by Rocío Ruiz)

Translation: AURA REE

Madrid Sells a Downtown Building to the Aguinagas For €4.5 Mn

26/11/2014 – El Confidencial

The Aguinagas, one of the most powerful Basque Country families, won an auction of a building put up for sale by the Community of Madrid at an asking price of €3.5 million at the beginning of the year. The family offered €4.46 million for it, meaning a bid by 26% better than the central region had expected.

Also other four family offices attended on-line tender of the property located at a minute walk from the Paseo de la Castellana, as well as firm Velapi, a Venezuelan fund and a Swedish investor.

The residential unit has a 1.196 square meter area distributed over six floors above the ground level and no basement level. However, as the advertisement on the Addmeet.com states, it has a mixed-use ground floor: industrial – except for a workshop-, hotel, retail, office and recreational.

Thoroughly refurbished in 1987, the building disposes of a rental obligatory compliance agreeement with the Community of Madrid assuming 7 months of rents until 2016.

The Region’s Sales

Madrid’s Community gave an impulse to its property sales at the end of 2013, when the region sold two Gran Via buildings (numbers 3 and 18) for €26.6 million, 27% above the listing price.

However, next tender took seven months to be closed and at the end of July a unit at 8 Plaza Chamberí square was sold to Línea Directa for €40 million, by €2 million more than predicted. Few days later, the region transferred another building on the Gran Via street, nº 20, to Caja Rural de Almendralejo for €20 million. Also, it sold number 151 of the Embajadores street for nearly €18 million and a unit at 21 Vía Lusitana street for €16.7 million. For the property located at 4 Plaza de San Martín square, the Community earned €3.4 million, while for 19 Fernando VI building it received €3.6 million.

Altogether, the sales contributed to the wealth of the region with a €130 million amount. However, still some operations are pending closing, like the one concerning the 1 Alcala street standing at €14.1 million, as well as two other properties situated on the Los Madrazo (asking price: €9.4 million) and the Santa Catalina (€10.11 million) streets of the capital.

 

Original article: El Confidencial (by Elena Sanz)

Translation: AURA REE

Kelisto.es Forecasts 1.4% Rise For Spanish House Prices in 2014

26/11/2014 – El Pais

Average price-tag of a home in Spain will stand at €157.717 at the end of 2014, up 1.4% from the previous year and marking the first rise since 2008, reports price comparison website Kelisto.es.

According to its latest update, the Spanish economy improvement may be beyond that growth, however mortgage lending for home purchase keeps on the downward track. From January to August, 134.082 loans were granted, hitting the lowest since the recession began.

In spite of that, the combination of rock-bottom prices and prospects of their rise over the next years seem to have an impact on sales to foreigners who already account for 16% of all purchases in Spain.

It is expected that in 2015 housing prices will average at €158.979 per unit, with biggest gains to be observed in Ceuta (4%), the Canaries (2%) and Aragon (2%).

During the years 2016-2016, the values are said to be slightly declining fueled by growth in the population number, its purchasing power and cost and access to financing.

Still, the real estate market has to digest available housing stock currently amounting to more than 560.000 dwellings, or even 740.000 if the REO assets in balances of banks and Sareb added up.

In such a context, no advance in lending is expected either. With a present record-low level of the Euribor rate (0.33%), in mid-term Spanish families would have to face an increased cost of their mortgages.

After three years of continuous cheapening, homes will start to get more expensive in 2019 or 2020. The turn in trend will be driven by a better balance between supply and demand once considerable part of the unsold stock absorbed and lending solidly reactivated, concludes Kelisto.es in its report.

 

Original article: El País (by Paula Cossío)

Translation: AURA REE

There Are 465.635 New Houses Pending Sales – Just Like Before Crisis

21/11/2014 – Cinco Dias

Before the real estate bubble burst, housing market had never used stock or surplus production as relevant growth indicators. Cheap financing and well-faring economy providing jobs have boosted dwelling construction which continued to progress feverously even at the beginning of the recession, deep into 2008.

Already in 2006, the construction sector understood the rapid pace may not be maintained for a long time. The pitfall is that it takes between 18 and 24 months on average to complete a housing development, counting from the moment of obtaining all necessary permits and licences. Halting the process is no small task.

The recession caught many developers in the middle of building works as they had only a part of the houses sold out. Then, majority of them opted for finishing the projects and temping the buyers with completed dwellings. However, many municipalities got marked with skeletons of unfinished or barely started buildings. Cranes disappeared.

Return of Lending

Since mid-2013, the market has been picking up from the ashes step by step. Certain activity was spotted, prices and sales geared up, and the path towards improvement has been inevitably taken. Banks started to finance projects again, somewhat reluctantly though. But this factor was the only missing to stop the price slump reaching 50% from value peaks.

Over the dark years, many developments were brought to an end. And now, sharply increased sales could finally help to reduce the new property stock awaiting their new owners. The Spanish Confederation of Associations of Construction Products Manufacturers (or Cepco by its abbreviation in Spanish) employs the same methodology to estimate the stock as the Ministry of Public Works (i.e. basing on purchases and new home construction data).

Thus, Cepco calculates that as of the end of the second quarter of 2o14, there were 465.635 new and unsold dwellings in Spain. The figure means a 14.3% (or 77.930-unit) decrease from mid-2013.

In 2010, the surplus stock hit highest – 692.560 new homes. Since that time, the volume has shrunk by exactly one third, as it saw 220.000 units finding purchasers. This way, the level comes down to the year 2007, reaching 413.642 dwellings in excess.

Is there any optimum stock level for this market, in which, like in other sectors, trespassing the minimum would result in pricing tensions? Experts have diverse opinions on the matter. They do agree, though, that due to Spain being such a tourist-mobbed country, it could afford to premanently have between 100.000 and 150.000 new homes for sale, like it had in 2004, according to the report.

When will the present 400.000-new home volume be absorbed? It´s difficult to tell. Moreover, the sector is aware that many of the dwellings may never be sold because of their location and infrastructure. But specialists do not portend destruction for them.

What we know for sure is that if improvement in lending and favorable economic circumstances persist, the sector will soon notice another clear recovery sign: started homes will exceed the number of finished units.

As Cepco reports, in July 4.641 new dwellings were initiated and 4.410 finished. This has happened for the first time since mid-2007. Furthermore, from January to August, there were 31.075 completed houses and 24.696 started. The perfect scenario would be to construct only in places where the real demand exists.

 

Original article: Cinco Días (by Raquel Díaz Guijarro)

Translation: AURA REE

Statistics Providers Agree That Spanish Housing Goes Stable

19/11/2014 – Expansion

Sector’s observers find themselves snowed under statistics flowing from many sources which often are inconsitent or even contradictory. One one hand, the Notaries said yesterday the housing prices fell by 4% in the third quarter, and on the other, Property Registrars announced a rise of 1.15%.

Is the data reliable? Well, the most important is that they inform us about certain stabilization in the sector and there are many reasons for their divergence.

The methodology used by the sources varies as the notaries base on deeds, more set in the present, while registrars employ the repeat-sales price indice calculated over a two-month data offset (the time needed to complete all proceedings related to a sale). Appraisers usually use the comparative valuation method, and web portals focus on asking prices. As a consequence, they end up in disagreement.

Both the notary and the registry data, ‘although seemingly contradictory at first glimpse, they prove the cost of homes in Spain floats towards stabilization’, says Beatriz Toribio, Research director at portal fotocasa.es. ‘This doesn’t mean, though, that the slump is over. The values still have a long way down ahead in many areas of the country’, she adds.

Manuel Gandarias, Research chief at pisos.com, explains that ‘there are several months left, given that mortgage approval improves step by step, unemployment rate remains high, the Government may surprise us with the new taxation reform and in 2015 there will be the elections’.

When it comes to property sales, just the opposite happens: the notary data are more optimistic than the registries ones. ‘In the third quarter of the year, the purchases went up 8.6% from a year earlier’, assure the Notaries, while the Registrars say the rise was of 3.5%.

The latter claim the real estate market is currently utterly chopped and they see eye in eye with the Notaries on the matter of steadier monthly sales.

According to the Registrars, the advance was triggered by pre-owned home performance (52.127 units sold), practically doubling new properties’ sales (27.434). The Notaries agree that the first see an abrupt increase (up 31.8%), and the other sharp slump (down 32.8%).

Andalusia won in the transactions number with 16.006 deals, followed by the Valencian Community (12.189), Catalonia (11.975) and Madrid’s Community (10.883), say the Registrars, adding that foreigners accounted for 13.1% of the total, led by the British (18.06%), then the French (10.48%), Russians (7.5%), Germans (6.45%), Belgians (6.19%) and the Swedish (6.08%).

In reference to default on mortgages, the number of notices about home foreclosure initiation posted 13.421, by 5.500 (29%) less than in the second quarter.

Finally, both the Registrars and the Notaries attach information justifying why their data are more trustworthy.

 

Original article: Expansión (by Juanma Lamet)

Translation: AURA REE

NPL Portfolio Sales Beyond Wildest Dreams

19/11/2014 – Cinco Dias

A decade back, who would have thought the REO and NPL portfolios purchase and sales would become such a lucrative business. The more that speculative funds, mainly Anglo-Saxon, decided to come to Spain around 5 years ago to buy what was considered the leftovers of the overdone sector additionally battered by crisis.

In the first two-three years, it seemed they had more equity at hand than they could acquire. They were already experienced in shopping risky assets in Italy, Germany, France or the United Kingdom but Spain looked different. Before spending a penny in the country they had known that Spain was still pending deleveraging a more than €400 billion amount, a chance they just could not miss. However, it also turned out that no one wanted to sell at prices slashed by 75% – 85%.

This started to change three years ago and ever since the business went on spreading like wildfire. So much that during that time it has been beating records to such an extent that even optimists were taken aback.

All experts asked about their opinion on the business put emphasis on the astonishing growth in non-performing portfolio sales. And the funds that only wanted to seal some deals in Spain decided to settle down and expand. From January to September, €22 billion in this type of loans has been transferred for slightly above €6 billion total. But the same specialists coincide in a guess that still before the end of the year, a €10 billion worth of NPLs might be sold, due to an effect usually seen in the last months, a genuine ‘sales boost’.

These figures could not have been predicted by anyone. For the next year, experts forecasted a €20 billion volume. One must remember that many of this year’s transactions were somehow ‘unique and difficult to repeat’, however specialists suppose the same might occur in 2015.

For instance, the sale of a €6.4 billion NPL portfolio by CatalunyaBanc to Blackstone for €3.61 billion. Still, banks ought to reduce the €300 billion load in their balance sheets.

Together with the business expansion and rise in prices the funds are willing to pay, the discounts reach 60%. This way, it is expected that the operations may see revenues of €7 billion in 2015. Moreover, the pricing gap between demand and supply narrows and now large part of these assets is secured.

 

Original article: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: AURA REE

Notaries: September Mortgages Up 49.7%, Sales Up 20.7% & Prices Down 2.9% YoY

18/11/2014 – El Pais, El Mundo

The General Council of Notaries has confirmed a rise in home sales which totalled at 26.778 units sold in the month of September, going 20.7% up in year-on-year terms. If the entire third quarter of 2014 considered, the y-o-y increase posts 8.6% but value drops by 4%.

As per the report, the jump is likely to be explained by the transaction number levelling-out after the end of tax deduction on home purchase at the end of 2012, but also by a certin stability in montly sales.

In September only, mortgage approvals skyrocketed by 49.7% (9.943 contracts in total). Average amount lent rose 4.5% to 111.004 euros, and the loan was enough to cover around 75.5% of the house value. In the third quarter, banks said ‘yes’ to 37.6% mortgagors more.

Deals on homes saw lower prices, though. In case of September home sales, a square meter was sold for 1.187 euros on average, down 2.9% y-o-y.

Existing property traded for 1.294 €/m2 (down 1.2% YoY), whereas new units sold for 1.510 €/m2 (down 3.7% YoY).

Detached homes cheapened most (down 6.8% YoY) and averaged at 969 €/m2 in 5.762 transactions.

From July to September, the sales swang from a 2.1% drop in July to upsurges of 16% in August and of 8.6% in September. The data corresponds to the information complied from the reference period, reflecting daily work of the notaries.

During that period, purchase of flats went up 19.5% with unsubsidized units witnessing a 17.8% YoY improvement. Second-hand homes were bought 31.8% more but the new sufferred a 32.8% loss in popularity. Single-family property sales went up 25.4%.

 

Original article: El País (Sandra López Letón), El Mundo

Translation: AURA REE

Registrars Say Housing Prices Steer Upwards in Q3

18/11/2014 – El Mundo

Popular repeat-sales ‘Case & Shiller’ Home Price Indice estimated by the Official Association of Property Registrars shows a 1.15% advance in the third quarter 2014 from a year earlier. In comparison with the previous quarter, the variation was practically null (down 0.08%). The figures prove a stable outlook for housing prices which fell 32.4% from their 2007 peaks.

Home sales also indicated positive development by reaching 79.561 transactions, up 1.40% over the second quarter, drifting away from the historic lows (72.560) registered in the fourth quarter of 2013.

The promising numbers originate exclusively from existing home sales that totalled at 52.127 units sold, a double of the new housing sales (27.434). In reference to the second quarter, 4.268 pre-owned properties changed hands, marking an 8.92% year-on-year rise, whereas new dwellings were picked by 10.36% less often on the same basis.

Among Spain’s regions, Andalusia sealed most deals (16.006), followed by the Valencian Community (12.189), Catalonia (11.975) and Madrid (10.883). In year-on-year terms, 313.607 purchases were registered, by 2.743 more than in the second quarter which neared to the historic series’ floor (310.864).

The third-quarter sales to foreigners accounted for 13.10% of the total (13.03% in the second quarter).

Traditionally, the British lead in the house purchase ranking with 18.06%, second ranking the French (10.48%), then Russians (7.50%), Germans (6.45%), Belgians (6.19%) and the Swedish (6.08%).

Default on Mortgages

According to information found in the Mortgage Default section, the number of default notices filed in the third quarter of 2014 stood at 13.421, dropping 5.500 (29.07%) from the second quarter (18.921).

The 64.25% of all notices was sent to natural and 35.75% to legal persons. Speaking of nationality of the mortgagor, 10.03% cases concerned foreigners and 89.97% Spaniards. Most initiated foreclosures were recorded in Andalusia (3.176), Catalonia (2.928) and the Valencian Community (2.113).

Mortgage Loans

The 85.36% of the third-quarter’s total of new loans for home purchase was approved by banks and savings banks, and 14.64% by other financial entities. Average mortgage debt stands at €104.078, up 2.49% over the previous quarter. Twelve regions averaged at less than €100.000.

Interest rates on the new mortgages have been declining for last two months. In the third quarter, they showed a mean of 3.60%. To compare, a quarter earlier they settled at 3.80%. Fixed rate was employed for 4.19% of all Q3 agreements, and the variable rate for 92.28% of them.

Terms tend to extend, increasing 2.37% (six months) from the second quarter and averaging at 22 years and 11 months.

In regard to the monthly payments, on average the borrowers had to amortize 556,34 euros (down 0.91% over Q2). Proportion with the income lowered to 29.54% from 29.82% in the second quarter.

 

Original article: El Mundo

Translation: AURA REE