Tag: refinancings

BBVA Research: RE Sector Makes “Good Start” To 2017

6 June 2017 – El Mundo

BBVA Research has given the real estate sector a “good mark” for the first quarter of 2017, following a “positive” trend in terms of sales, which accelerated the growth in prices. However, the organisation indicated that the sector showed signs of a “significant heterogeneity” by region once again, and that there was a loss of “momentum” in terms of new loans in April due to a decrease in refinancings.

That was according to the latest Real Estate Observatory for Spain report, prepared by BBVA Research, the financial entity’s research service, which acknowledges a “positive trend” in terms of house sales, given that, based on data from the Centre for Statistical Information from Notaries (CIEN), 48,695 homes were sold during the month of March.

This means, after correcting the series for seasonal variations and calendar effects (CVEC), there was a stagnation in sales with respect to the previous month, but an increase in sales (19.5%) in YoY terms. In this way, sales during the 3 months to March rose by 16.2% YoY, above the average for 2016, in large part thanks to the fact that the main determinants of demand “continued their positive tone during the first quarter of the year”, said BBVA Research.

In this sense, it highlighted that employment is continuing to evolve positively, given that the number of people registered for Social Security in April and May grew at an average MoM rate of 0.4%, above the average monthly rate recorded during the first quarter (+0.3%) (…).

Fewer new loans

Nevertheless, the report warns that new loan operations to buy a home stagnated in April, due to a sharp decline in the number of refinancings. According to data from the Bank of Spain, during the fourth month of 2017, new loans to buy a home decreased by 41.6% YoY, a reduction that actually reflects the high volume of refinancings that took place in April 2016. As such, if we exclude refinancings, the number of new loan operations remained stable with respect to the same month last year (-0.1%).

BBVA Research is “certain” that the stagnation is related to the fact that Easter fell in April this year. In fact, the sum of new operations in March and April rose by 13.1% YoY. With this, during the first four months of the year, new loans to buy a home rose by 10.6%, with respect to the same period a year earlier. Excluding refinancings, which decreased by 86% during the same period, the increase in new mortgage loans amounted to 16.5%. (…).

Heterogeneity in terms of price rises

Meanwhile, the growth in house prices accelerated during the first quarter of 2017. According to the Ministry of Development, the average house price amounted to €1,525.80/m2 during the first quarter, up by 0.7% in QoQ terms, after correcting for seasonality (CVEC), in other words, 0.2 percentage points higher than during the fourth quarter of 2016. Moreover, the YoY evolution saw an acceleration in the growth rate to 2.2% during Q1, up by 0.7 percentage points compared to the previous quarter.

In any case, BBVA Research indicates that the evolution of house prices was still “significantly heterogeneous by region” between January and March. After correcting the series for seasonality, price rises were reported in nine autonomous regions (Andalucía, Canarias, Cantabria, Cataluña, Comunidad Valenciana, Madrid, Murcia, Navarra and País Vasco), with particularly noteworthy rises in Cantabria, Navarra and País Vasco – the three regions have shown less activity in previous quarters.

By contrast, average house prices fell during the first quarter with respect to the previous quarter in all of the other autonomous regions, led by Aragón and La Rioja, which saw QoQ decreases of around -2%. (…)….whilst the price increases being recorded in the Balearic Islands, Madrid and Cataluña exceeded 10% in all three cases.

Housing permits on the rise again

Finally, the first quarter of 2017 closed with a renewed growth in construction activity. (…). The number of housing permits rose by 18.7% during Q1 2017. In this way, almost 20,000 new homes were approved during the first three months, up by 3,141 compared to the same quarter in 2016. (…) .

Original story: El Mundo

Translation: Carmel Drake

Big Banks Record Losses Of €3,600m, Hit By Real Estate

9 February 2015 – El Mundo

The Ibex-listed financial institutions have doubtful balances and a portfolio of foreclosed homes amounting to €120,000 million.

During 2014, they sold more than 20,000 properties for a combined value of €11,700 million.

It will take Spanish banks two more years to “digest” the property binge that they enjoyed during the years of economic boom. The annual accounts of the listed entities – with the exception of Bankia, which has not yet published its results – show that, despite the recovery in the banking sector, the real estate sector continues to be a heavy burden – it generated losses of more than €3,600 million in 2014.

The indicators show signs of optimism, including the decrease in the default rate – which currently stands at 12.75% for the sector as a whole – and the decrease in doubtful assets by more than €20,000 million over the last year. However, the banks recognise that their exposure to the real estate sector will continue to be a hindrance throughout 2015 and 2016 at least, two years during which the market is expected to absorb most of the foreclosed assets (amounting to €60,000 million) accumulated by Santander, BBVA, Caixabank, Bankia, Sabadell, Popular and Bankinter.

The gross credit exposure to developers of these seven entities (all of which are listed on the Ibex) amounted to €103,000 million at the end of last year, although it should be noted that the figure for Bankia relates to the third quarter 2014.

From this quantity, just over €61,000 million is classified as doubtful (i.e. a non-payment of some kind has been recocorded) or sub-standard (credits that are currently being paid, but which are expected to go into arrears). According to the entities, this figure is lower than last year, due to the refinancings, recoveries and maturities that have taken place over the last year. But it is still a volume that requires a significant provision balance to cover the potential losses. Overall, the seven banks analysed recorded a total coverage against doubtful debts of €38,900 million at the end of 2014.

Last year was the first year in which the entities significantly reduced their provision coverage, following five years of crisis. “The results from the real estate sector clearly show the less negative impact that has resulted from the clean up of loans to developers and foreclosed real estate assets” says BBVA, a bank that recorded losses of €876 million in this area. Despite the size of the figure, it is 30% smaller than the €1,252 million losses recorded by the entity a year earlier.

Caixabank is the entity whose results have been hardest hit by the activity in the real estate sector. On 30 January, its CEO, Gonzalo Cortázar, predicted that the housing burden would have an impact on its financial results in 2015 and 2016 that this impact would “still be significant, although the digestion will be prolonged on a decreasing scale.

Santander has managed to reduce its loans to developers by 34% in the last year and has increased its coverage to 54%, but its annual results are still negative, with the entity led by Ana Botín recording a loss of €583 million.

Sabadell’s losses were even greater – €999 million and it has a gross exposure to the real estate market of €26,958 million, the highest in the sector, taking into account the foreclosed assets of CAM.

Fewer discounts

Bankia, Bankinter and Popular do not publish results about their respective real estate businesses. Popular is the bank that holds the greatest number of problem assets (doubtful and foreclosed assets) in proportion to the size of its balance sheet. It has loans amounting to €13,061 million in this category, with a coverage level of 44%. But the figures that really jump out are the volume of foreclosed homes, developments and land (€14,169 million) held by the entity, which closed the year with sales of €1,503 million.

Last year, some entities sold some of their house sale divisions. Altogether, these seven entities offloaded more than 20,000 units for a total value of €11,700 million. Sabadell was the most active bank in terms of house sales, generating €2,744 million. Various sources agree that 2014 was characterised by a reduction in the discounts applied, which in some cases, meant that the income received was actually higher than the recorded book value.

Some entities, such as BBVA and Sabadell, have an Asset Protection Scheme (Esquema de Protección de Activos or EPA) in place, following their acquisitions of Unnim and CAM, respectively. This insurance allows them to cover any additional deteriorations on their balance sheets over the next few years, through the Frob. Sabadell has recognised that it may start to use this financial cushion this year.

With the exception of Bankia, none of these companies has transferred assets to Sareb, the bad bank that absorbed loans to developers, and foreclosed homes and land, from entities that received public aid in the rescue of 2012.

Original story: El Mundo (by Javier G. Gallego)

Translation: Carmel Drake