Tinsa: Barcelona Leads House Price Recovery With 7% Rise

2 October 2015 – Expansión

The real estate recovery is progressing slowly but surely, at two speeds, but with a clear trend towards stabilisation. Sales are clearly rebounding, the granting of mortgages is starting to recover lost ground and, above all, prices are stabilising. In fact, appraisal values are now increasing in many large cities, especially in Barcelona.

According to data from Spain’s largest appraisal company, Tinsa, homes became more expensive in nine large cities during the third quarter of 2015, led by Barcelona (7.4%). The Catalan capital was followed by Huesca (3.7%), Jaén (3.1%), Segovia (2.3%), Cuenca (2.1%), Lleida (1.9%), Badajoz (1.7%), Las Palmas (0.8%) and Madrid (0.2%). Valladolid, where residential property prices remained stable (0.0%) completed the top 10.

The residential boom in Barcelona is evident when we look at the main sector indicators: the Catalan capital recorded a notable increase in property development activity during the first quarter of the year (the latest period for which figures are available). According to data from the Ministry of Development, the number of new build permits quadrupled with respect to the first quarter 2014. In Madrid, they decreased by 2.6% YoY.

The valuation of residential properties is proving more resistant to increases than the statistics based on house deeds (for example, INE reported an increase in house prices of 4.2% during the same period). That could be because the sales being signed involve homes for which demand is highest, i.e. whose owners have more bargaining power. And that may be being driven by the pent-up demand from buyers who have been waiting for prices to bottom out before making their purchases.

By autonomous region, house prices rose in the Canary Islands (2.3% YoY), the Balearic Islands (0.9%), Madrid (0.7%) and Cataluña (1.4%) during the third quarter and decreased everywhere else. The influence of Spain’s two largest cities in their respective autonomous regions is clearly significant, and the boom in purchases by foreigners is playing a key role in the two island regions, where more than a quarter of the properties were purchased by foreigners, according to data from the Association of Registrars.

Despite the strong data from these four regions, and the Costa del Sol, Tinsa says that “it is still too soon to be talking about a general recovery in house prices” since the word that best defines the current situation in the market is really “stabilisation”.

The largest YoY decreases by autonomous region were recorded in Galicia (-6.4% in July, August and September), Extremadura (-6%), País Vasco (-5.6%) and Murcia (-5.1%). (…).

Original story: Expansión (by J.M. Lamet)

Translation: Carmel Drake

The Bank Makes Credits Easier And Mortgages Cheaper

1 September 2015 – Expansión

FINANCING/ Institutions relax control over granting consumer credit. The price of mortgage loans goes down, although the criteria for getting approval remain unchanged.

Consumer credit has become a key pillar in the growth strategy of financial institutions. In an environment of interest rates at historic lows in which bringing in profitability gets important to sustain balance, the bank makes the criteria for granting credits for consumption and other purposes more flexible.

As follows from the Bank Lending Survey of July, coordinated by the Bank of Spain, which reflects opinions of 10 financial institutions, “in the segment of household loans for consumption and other purposes, approval criteria relaxed slightly between April and June 2015, mainly due to the increased competition and improving economic prospects. “It is the first time since the first quarter of 2014 that the conditions are smoothed out”, says the report regulator. “The standards for approval of loans for home purchases remained unchanged in Spain, while in the euro area they were lessened.”

The institution led by José María Linde makes its assessment: “The improved economic expectations could have induced less restrictive criteria [in the granting of mortgages], but its variation would not have been sufficient for institutions to change their credit policy.”

Recovery

Still, the Spanish mortgage market is leading a sustainable recovery and housing sales increased by 26.3% in June YoY, according to the National Statistics Institute (Instituto Nacional de Estadistica, INE) (see page 16). And, although risk controls to approve mortgage loans do not loosen, it is a fact that competition has resulted in cheaper loans with interest rates of about 1.5% over Euribor (see the chart).

This price reduction is precisely one of the factors that make consumer credit a key product for the improvement of profitability of banks. “As institutions/authorities we need to improve margins and consumer credit is much more interesting than the mortgage. While the former applies  average interest rates of 8%, mortgages are being granted 200 points over Euribor, “says Enrique Barbero,of Ibercaja.

The new family credit operations continue to rise, with a growth of 37,6% YoY accumulated in the seven months of the year, equivalent to 60,978 million, according to the Bank of Spain data collected by BBVA Research. Of these, 26,817 million were for mortgage operations, 16,441million for consumer credit and 17,720 for other purposes. Moreover, if compared with the same month of 2014, data from last July showed increase in new operations exceeding 62%, with more than 9,000 million in loans granted to the households. “This is clearly a positive trend,” concludes BBVA.

Original story: Expansión

Translation: Lee La

Political Uncertainty and Populism Threaten RE Recovery

1 June 2015 – El Economista

The electoral success of Manuela Carmena (Ahora Madrid) in Madrid and Ada Colau (Barcelona En Comú) in Barcelona has started to take its first victims in the real estate sector. Barely a week has passed since the elections and “some investors have already suspended deals to purchase property in Spain”, warn certain sources close to the negotiations.

The uncertainty regarding the possible political agreements has hit the property sector hard, “just when it was starting to recover”. In Madrid and Barcelona alone, large urban projects amounting to €14,000 million have already been called into question.

Major construction companies, financial institutions and large international funds are involved in these developments, including the Chinese magnate Wang Jianlin, who came to Spain with plans to invest around €4,000 million and who now see his real estate plans for the country being endangered.

“Right now, the sector is beginning a process of paralysis in certain segments. All of the investors are waiting for the possible political agreements to be settled so that they can carry out transactions”, explain sources in the sector.

“The is a great deal of uncertainty and considerable ungovernability in many cases, as well as expected increases in taxes and public spending, coupled with the suspension of forecast investments, which may result in the withdrawal of foreign capital”, they warn.

This situation may result in “an important step backwards for the emerging recovery”, given that it comes at a time when the real estate sector was really beginning to take off; record levels of investment were recorded last year. Before the elections, experts predicted that the level of transactions was going to continue (this year), but following recent events, “it is now very difficult to make forecasts”. These warnings coincide with others made this week by several important businessmen, such as the Chairman of OHL, Juan Miguel Villar Mir, who said that (political) groups such as Podemos put Spain’s economic recovery in danger. In a similar way, the markets have penalised the election results and the Ibex 35 recorded a loss of 2.91% last week.

(…)

The urban plans proposed by Carmena and Colau leave most of the major projects, both those already underway as well as those still to be awarded, up in the air. In Madrid, they endanger million-euro developments such as Operación Chamartín, the Madrid Río shopping centre, Operación Mahou-Calderón, the Canalejas complex, Operación Edificio España, la Ciudad de Justicia and even Operación Campamento.

Whilst in Barcelona, projects such as La Maquinista and Heron City shopping centres, the refurbishment of the Nou Camp and urban developments in the surrounding area, the ski slope in the free trade zone of Barcelona SnowWorld and the conversion into hotels of iconic buildings such as Torre Agbar, the Deutsche Bank building on Passeig de Gracia or Project Núñez i Navarro are also at risk.

(…)

Original story: El Economista (by Alba Brualla and Javier Mesones)

Translation: Carmel Drake