S&P Warns of Deceleration in Catalan Housing Market

7 February 2018 – El País

The Spanish real estate market is going to continue growing, but the Catalan crisis may have a negative effect on the housing market in the region. “Although Barcelona has recorded some of the highest property prices since the start of the recovery, in 2018, Cataluña could see a recession in its real estate market”. That is what the ratings agency Standard and Poor’s (S&P) thinks, according to its report about the real estate market in Europe, which indicates that “economic growth should continue to be strong this year and next, but the political uncertainty may have a more negative impact on companies and consumers. The main risk is the impact of the Catalan crisis, given that it is the largest economic centre in Spain, accounting for 20% of the country’s nominal GDP”.

Leaving aside Cataluña, the agency indicates that the strong economic conditions in Spain will continue to drive up the volume of house sales and will help to reduce the stock of homes. In fact, it forecasts that the volume of transactions in Spain will grow by around 8% this year.

Moreover, although interest rates bottomed out at the end of last year, they will continue at very attractive levels for house purchases. Nevertheless, the agency points out that accessibility ratios continue to be high, even though the number of years of salary needed to buy a home has decreased from 7.7 years at the height of the boom to 6.6. years in 2016. And it adds that second-hand house prices are going to continue to increase, although to a lesser extent that over the last two years.

The S&P agency considers that the Spanish economy will exceed the figures recorded in 2017, when average prices increased by 4.2% YoY in the last quarter, according to data from Tinsa. The city of Madrid exceeded Barcelona with an annual increase of 17% compared to 14.8% in the Catalan capital, where prices fell by 1.7% during the last three months of 2017. The volume of transactions amounted to 455,000 during the first 11 months of the year, compared with 375,000 in the previous year. Purchases by foreigners accounted for 17% of the total.

Original story: El País (by S. L. L.)

Translation: Carmel Drake

ST: New House Prices Rose By 3.7% YoY In June

3 July 2017 – Expansión

The average price of new homes in Spain’s provincial capitals amounted to €2,156/m2 in June, up by 3.7% compared to the same month last year, which represents the highest increase since 2007, according to the latest report from Sociedad de Tasación.

During the first six months of this year, the rise amounted to 1.7%.

With this average price, a typical home measuring 90 m2 costs around €194,000.

In the other cities included in the report (those that are not provincial capitals), the average price amounted to €1,560/m2, which represents an increase of 0.3% since the end of 2016.

If we analyse house prices on the basis of the population of each city, new home prices rose by 1.2% YoY in cities with more than 100,000 inhabitants that are not provincial capitals.

The rise amounted to 1% in cities with between 50,000 and 100,000 inhabitants; 1.3% in cities/towns with between 25,000 and 50,000 inhabitants; and 0.3% in cities/towns with fewer than 25,000 inhabitants.

According to Sociedad de Tasación, this data shows that the heterogeneity in the market is continuing, as the sector is still developing “at two speeds”.

Barcelona is the most expensive provincial capital, with an average price of €3,631/m2, followed by San Sebastián (€3,353/m2) and Madrid (€3,306/m2).

In the provincial capitals with the highest tourist influx, rental prices are rising at a double-digit pace.

Sociedad de Tasación reiterated its warning about the possibility of that trend having an impact over the medium and long term and generating an increase in the prices of homes and land, as well as in the number of operations.

Sociedad de Tasación’s Real Estate Confidence Index continued its upwards trend, with a rise of 2.1 points during the first half of the year, to 56.6 points.

The index also continued above its neutral position, which is 50 points.

The Real Estate Effort Index, which measures the number of years of full salary that it takes an average citizen to buy a home, increased slightly with respect to the previous quarter to amount to 7.5 years.

Nevertheless, the figure was one tenth lower than the level recorded in June 2016 (7.6 years).

Original story: Expansión

Translation: Carmel Drake

ST: House Prices Rose By 2.5% In 2016

4 April 2017 – El Mundo

The average price of housing in Spain experienced an average annual increase of 2.5%, to reach €1,469/m2, according to the Real Estate Sector Trend Report from ST Sociedad de Tasación. In the second half of 2016 alone, house prices rose by 1.5%. Despite this YoY increase, the average salary required to acquire a home remained stable at 7.4 years.

According to Juan Fernández-Aceytuno, Director General of the appraisal company, “the positive variation experienced over the last 18 months confirms the recovery that we have been predicting since 2015”. “Nevertheless”, he clarified, “the average behaviour of prices is not the same across every province”.

In this way, by province, Barcelona experienced an annual increase of 5.5%, followed by the Balearic Islands, with an increase of 4.6% and Madrid, 4.4%. By contrast, Teruel with a reduction of -2.1% and Álava with a fall of -1.6% experienced the highest price decreases, followed by Pontevedra (-1.4%), Zamora (-1.3%) and Burgos (-1.1%).

By autonomous region, the price of new and second-hand homes are still decreasing in some areas, led by Asturias with a decrease of -0.5%, followed by La Rioja (-0.4%) and Castilla y León (-0.3%). Meanwhile, Cataluña (4.8%), the Balearic Islands (4.6%), Madrid (4.4%) and Melilla (3.3%) recorded the highest annual increases.

7.4 years of salary to buy a home

ST Sociedad de Tasación’s Real Estate Effort Index, which defines the number of years of full pay that an average citizen needs to buy an average home, did not change, remaining stable at 7.4 years in the first quarter of 2017.

The Balearic Islands continued to be the region where it takes the longest to acquire a home (14.4 years), although that figure has decreased with respect to 2016. By contrast, La Rioja is the region where it is easiest to access housing (4.9 years), followed by Murcia, where it takes 5.1 years of full pay to buy a home.

Meanwhile, the Accessibility Index prepared by ST Sociedad de Tasación reflects a slight improvement at the state level for the third consecutive quarter. Based on a benchmark of 100 points for those cases in which the capacity for indebtedness is sufficient, the average level in Spain in the first quarter of 2017 amounted to 107 points, three points above the level in the previous quarter. The state average remained above the minimum salary level for the acquisition of an average home for the fifth consecutive quarter.

By autonomous region, Madrid, Cataluña and the Balearic Islands continued to register insufficient levels for the acquisition of a home, with Cantabria moving into positive territory.

Confidence increases in the real estate sector

ST Sociedad de Tasación’s Real Estate Confidence Index continued its upward trend during the first quarter of 2017, registering an increase of 0.9 points, to reach 55.4 points, out of a total of 100. The index hit its lowest ever value in December 2012, at 30.6 points.

By autonomous region, La Rioja exceeds sixty points, with 60.2, followed by Madrid (58.4) and the Balearic Islands (57.6), which reported the highest confidence indices. By contrast, Castilla y León (50.7), País Vasco (51) and Murcia (51.2) recorded the lowest levels.

Original story: El Mundo

Translation: Carmel Drake

Tinsa: House Prices Soar In Madrid & Barcelona

4 April 2016 – El Mundo

The housing market is becoming increasingly stronger in terms of prices in Spain’s large cities, with Barcelona and Madrid leading the charge. That is according to Tinsa, which has published its IMIE Local Markets Index for Q1 2016. Between January and March, the value of homes (new and second-hand) in Barcelona and Madrid soared by 9.2% and 7.5%, respectively, in YoY terms.

These high percentages sit well above the average increase across the country, which amounted to 1.4%, with the market recording its second consecutive quarter of increases. Cataluña (8.2%) and Madrid (7%) “are still the drivers, thanks to the dynamism of their respective capital cities”, says Tinsa.

After Cataluña and Madrid, the highest price rises were recorded in the Balearic Islands (3.8%), Castilla La Mancha (3.5%) and the Canary Islands (2.4%). During the quarter, Asturias (+2.2%), La Rioja (+2.2%) and País Vasco (+0.4%) joined the group of autonomous regions with positive movements in their YoY prices. At the other end of the spectrum, the highest decreases were recorded in Aragón (-3.5%) and Galicia (-3.1%), but those decreases have moderated with respect to previous months.

In this sense, for the first time since the start of the crisis, more autonomous regions recorded increases during the first quarter than experienced decreases. (…).

House sales takes 10.5 months on average

Meanwhile, it takes 10.5 months, on average, to sell a home. According to data on the housing supply and the rate of sales in each region, the provinces where it takes the longest time to find a buyer are Cantabria (19 months), Ávila (17.1 months) and Álava (16.8 months). By contrast, the provinces where the housing market is most liquid include Las Palmas and Madrid, as well as the autonomous cities of Ceuta and Melilla, with average sales periods there of less than seven months.

Meanwhile, the percentage of salaries required to pay the first year of the mortgage amounts to 22%, and it takes six years salary on average to buy an average home in Spain.

A recovery that is here to stay

During the presentation of the index, Tinsa’s Director of Products and Diversification, Pedro Soria, said that 2015 was the year of revival for the housing market and 2016 marks the beginning of the sector’s normalisation following seven years of deep crisis.

“The recovery is here to stay, we are embarking on a new more rational and sustainable cycle, and the general decrease in house prices has come to a definitive end” said Soria, who also added that the political uncertainty does not seem to have cooled the recovery. Nevertheless, Tinsa warns that regional markets are operating at different speeds. (…).

More sales, mortgages and construction permits

Tinsa’s Director of Research Services, Jorge Ripoll, predicts that interest rates will remain low in the context of low and negative consumer prices. According to Tinsa’s forecasts, house sales will grow by between 10% and 15% to reach between 440,000 and 460,000 this year, and housing permits will recover by between 30% and 40%, to amount to between 65,000 and 70,000.

In addition, mortgages will grow by between 15% and 20%. (…).

Evolution of prices by province

By province, the quarterly statistics reveal YoY price increases in 25 provinces during Q1, including in Barcelona (8.9%), Albacete (7.6%), Madrid (7%), Lleida (6.5%), Santa Cruz de Tenerife and Girona (both 5.9%). The YoY increase also exceeded the Spanish average (1.4%) in 12 other provinces.

The most acute decreases at the provincial level were recorded in Álava, Teruel and Jaén, with YoY reductions of 7.8%, 6.7% and 6.3%, respectively. Price decreases also exceeded 3% in the provinces of Córdoba, Pontevedra, Palencia, Burgos and Zaragoza. (…)

Original story: El Mundo

Translation: Carmel Drake

BdE: House Purchases Are Becoming Less Affordable Again

29 March 2016 – Cinco Días

As well as looking at average house prices in Spain, the experts always like to analyse how many people can pay those prices and with what degree of difficulty. Or to put it another way, how accessible housing is for households. In this way, they assess how much potential demand may be left out (the so-called insolvent cohort) and determine whether social housing policies, amongst other initiatives, need to be developed, such as the ones applied since the end of the 1980s.

When it comes to measuring the accessibility of house purchases, there are two, more or less official, ways of doing it, which are accepted by the consensus of analysts. The first involves calculating the percentage of household income that is used to repay the mortgage. At this point, it is worth remembering that for the banks’ risk departments, the monthly mortgage instalment should never represent more than one third of a family’s income. (…).

The critics of this formula point out that this monthly mortgage instalment figure does not include any money that a family would have had to pay by way of deposit, and nor does it reflect the notary or registry fees, or the taxes that are levied on house purchases.

Removal of the tax deduction

Currently, according to the statistics prepared by the Bank of Spain, families spend an average of 32.5% of their incomes on mortgage repayments, which falls in the range considered healthy by the banks. But just before the burst of the real estate bubble, when real estate prices were sky high and the Spanish economy was growing at a good rate in terms of activity and employment, that percentage exceeded 60% of income, excluding tax deductions, and 48% if we include those incentives. Now that difference no longer applies as the Government abolished the possibility of making deductions from IPRF (income tax) for the purchase of a primary residence in 2013.

The other formula..is based on the relationship between the average house price and average salaries, with the resultant ratio understood to represent the number of full years of salary that would be required to pay for the home in full. The experts believe that accessibility is measured more correctly in this way. Moreover…, they established that this ratio should amount to around four years.

In other words, if it is healthy for a household’s monthly mortgage payment to absorb no more than one third of its monthly income, then in full salary terms, the ideal thing would be for it to take no longer than four full years to pay off the house purchase.

The Bank of Spain has been measuring accessibility using this ratio since 1987 and the historical series perfectly reflects how the effort required to buy a home has increased when prices have risen disproportionately.

In this way, since the end of the 1980s until the year 2002, accessibility ranged between three years of an annual salary and four and a half years, which the analysts classified as acceptable; but since then, a much steeper trend has been observed, to reach the series peak with nine full years of salary to pay for a home in 2007. (…). The minimum seen in recent years was recorded at the beginning of last year, at 6.08 years, but the Bank of Spain recorded slight increases in the ratio during the second and third quarters of 2015 at 6.29 and 6.32 years.

The reason is none other than the change in the trend led by property prices, which after accumulating an average depreciation of more than 40% since the end of 2007 (when they reached their peak), have now been rising again for a year and a half. And although the dominator of the ratio (salary) is also increasing, it is doing so at a lower rate than house prices. (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Santander Reduces Its Mortgage Spread Further, To 1.49%

18 March 2015 – Expansión

The second reduction of the year / The entity has decreased its spread over euribor on its mortgages from 1.69% to 1.49%, to match ING’s offer.

Santander has reduced the cost of its mortgage once more to place its product amongst the most attractive in the market, as the all out war continues in the sector. For the second time this year, the group has reduced the interest rate on its home loans: the rate paid (by borrowers) during the first year hereby falls from 2.45% to 2%; and from the second year onwards, the spread over euribor decreases from 1.69% to 1.49%.

With this move, Santander is now positioned in line with the strategy of (many of) its competitors such as ING, Bankia and Bankinter, which have all lowered the spreads on their mortgages to around 1.5% over the last month and a half. However, it does not match the rate of 1% being offered by Kutxabank, the lowest in the sector.

To obtain these conditions, clients must hold various products with the bank. Mortgage holders will have to receive their salaries in their accounts with the entity and they must earn a minimum monthly income of €2,000. In addition, mortgage holders must pay three bills (direct debits) from their Santander accounts, use the bank’s cards, and also take out home and life insurance policies with the entity.

Mortgages have become a key product for Santander in its efforts to achieve its main goal: namely, to increase the loyalty of its customers. Mortgage (marketing) campaigns targeted at individuals and Project Advance, which focuses on SMEs are the ‘hooks’ with which Santander is seeking to attract and retain customers in Spain, which currently number 12.6 million.

The entity’s mortgage portfolio in Spain amounts €47,000 million. Although the new loan book grew by 64% in 20134, its total stock decreased by 5.8% last year, from €50,000 million at the end of 2013.

Santander holds a market share of 10.2% in the mortgage sector in Spain, having gained 0.2 points between January and November 2014, according to the latest data presented by the bank. This falls below its market share of the Spanish loan sector (in general), which amounts to 13.5%.

Original story: Expansión (by M. Martínez)

Translation: Carmel Drake