Moody’s: The Average LTV on Residential Mortgages Amounted to 64.6% in Q1 2019

30 May 2019 – El Diario

According to the latest data from INE, more and more people are taking out a mortgage to buy a home in Spain. 30,716 mortgage contracts were signed in March, up by 15.8% YoY.

Many buyers are attracted by rising house prices (investment growth), which the ratings agency Moody’s considers is something “positive”. However, with personal savings rates in freefall, banks are having to lend more than ever to enable families to afford their homes.

Specifically, the percentage that the loan granted represents over the appraisal value of the property (LTV) amounted to 66.5% in Q4 2018, its highest figure ever. That figure moderated slightly to 64.6% in Q1 2019 but many families are now asking to borrow 65%-70% of the value of their homes, which means a greater risk for banks and a higher probability of defaulted payments.

According to Moody’s, whilst a portfolio with an average LTV of more than 80% has a default rate of more than 6%, a portfolio with an average LTV of less than 60% has a default rate of 1%.

Nevertheless, although some banks are now lending mortgages with LTVs of 100% in certain cases, the percentage of loans with LTVs of more than 80% is lower than it was before the crisis. Such mortgages currently account for 13.1% of the total compared with 17% in 2006.

Moreover, according to Moody’s, mortgage borrowers are better off today than they were at the outbreak of the crisis as they are in a better position to afford interest rate rises and other changes in the market thanks to the strict criteria that the financial entities have applied when granting loans in recent years.

Original story: El Diario (by Marina Estévez Torreblanca)

Translation/Summary: Carmel Drake

Ghost Homes: 200 Buyers Lose €3M in Mallorca’s Biggest Real Estate Scam

30 August 2018 – The Local

Scores of budding homeowners on Spain’s biggest Balearic island have been defrauded out of their life savings after putting forward money for apartments that were never built or never existed.

On paper, real estate group Mallorca Investments offered clients the chance to buy apartments through local developer Lujo Casa for a price below the market average.

Budding homeowners would then give an advance of at least 10 per cent of the property price to the developer in order to supposedly tie down one of the apartments before it was built.

The new proprietors would even check that the plans were presented at city councils on the island, which would often instigate a request for a higher percentage from the developer, El País reported.

Some people put forward as much as €200,000 to own a luxury home in a coastal neighbourhood of Palma, Mallorca’s capital.

However, as time passed, construction work on the commissioned apartment buildings never seemed to get off the ground.

When the buyers demanded explanations from developer Lujo Casa, whose offices were shared with Mallorca Investments, no proper explanation was given.

“When we went months later to ask for explanations, the real estate agency had changed address and there were no employees from the building company either,” one of the buyers who put down first €23,500 euros and then €70,500 euros when the plans were presented at a town hall, told the Spanish daily.

“When we managed to contact them the real estate agency would ignore us or tell us they had no new information and that they had also been cheated.

“Nobody at the developer’s answered our e-mails either”.

This nonchalant and evasive reaction was part of the modus operandi of the property group, which according to Spanish Civil Guard sources could be behind the biggest real estate scam in the history of Spain’s Balearic Islands.

Following numerous official complaints from 50 of the disgruntled buyers – young, old, local and foreign – a covert investigation was carried out by Spanish authorities which led them to understand how the estate agency and the developer were operating together and how they were run by the same businessman.

A quick check online confirmed that the suspected scammer, an Italian man, was continuously sharing pictures on his social media accounts of his ostentatious jetsetter lifestyle, travelling business class to Dubai, popping bottles of the most expensive champagne and driving lavish sports cars through Mallorca.

The man, called M.P. by Spain’s Civil Guard, has been arrested and is awaiting trial for numerous counts of fraud.

But for the 200 people who put money forward for the ‘ghost homes’, many of whom sacrificed their life savings, there is little indication as to whether they’ll ever see their money or their properties materialize.

Original story: The Local

Edited by: Carmel Drake

 

Spain’s Housing Sector is Heading for Another Golden Cycle

6 February 2018 – Cinco Días

Ten years ago, the largest real estate bubble of the democracy was about to burst, and although it was not the first, it was by far the most spectacular:  not only were residential property prices extremely high, everything relating to property was excessive: the volume of homes built, the amount of credit granted and the number of sales recorded. And although there were those who warned that the bubble would burst and the consequences would be dire, no one guessed how dramatic they would actually be.

Now, a decade later and four years after the recovery began, the consensus amongst analysts is that we are starting a new golden cycle that shares almost no similarities with the one that burst in 2008. The most optimistic observers even forecast five years of stable and sustained increases in house prices, as well as an increase in house sales and in the construction of new properties boosted by the global economic recovery.

In terms of prices, the forecasts for 2018 range between a conservative 3% increase and an average of 6% for the whole country. Nevertheless, regardless of the figure projected for the country as a whole, all of the studies agree that house prices will rise at different speeds this year. Madrid, Barcelona (but not the rest of Cataluña) and the Balearic Islands will clearly perform better than the rest, with price increases in the double-digits. And although they will record their fifth consecutive year of rises, prices will still be around 27% below their former peaks, on average, according to Eduard Mendiluce, CEO of Anticipa Real Estate.

The forecasts for this year are not surprising if we take into account the latest figures for 2017, relating to the third quarter, which show an annual increase in house prices of 6.7% YoY (…).

In terms of the areas that will see the most activity, Victor Pérez Arias, Managing Director of the international real estate fund manager ASG Iberia, says that the Mediterranean Arc will continue to account for a great deal of activity, spurred on by the pull of overseas demand (..).

According to the CEO of Servihabitat, Julián Cabanillas, given that more than 470,000 homes were sold in 2017, the psychological barrier of 500,000 is going to be exceeded again this year, something that has not been seen since the fateful year of 2008.

One of the determining factors in the return of house purchases to positive rates was the reopening of the credit tap. Nevertheless, access to financing is still a long way from the free bar decreed at the beginning of the 2000s. The granting of a mortgage now requires certain solvency criteria, which forces future borrowers to have savings – and that requirement was avoided in the past on too many occasions. This prudence on the part of the banks is one of the keys that, according to the experts, differentiates this cycle from the previous one and distances the ghost of a new bubble.

In fact, the CEO of Sociedad de Tasación, Juan Fernández-Aceytuno, says that whilst the volume of mortgages granted is considerably below the volume of purchases, the market will be healthy and that is what happened in 2017. With the official figures yet to be published, all indications are that around 470,000 house purchases were recorded in 2017, whilst the banks granted no more than 320,000 mortgages (…).

The previous crisis also hit property developers hard, given that demand was stopped in its tracks from 2008 onwards, following the outbreak of the global economic crisis, whereas just two years earlier, the number of new housing permits had set a new record, with more than 800,0000. Numerous companies had started projects without any presales, convinced that they would sell all of the units quickly. Given that it takes between 18 and 24 months to build a housing development, many buildings were finished only to spend years unoccupied. In this way, construction was suspended, above all, from 2009 onwards and even today, just 10% of the record volumes reached twelve years ago are being built.

Nevertheless, given that in the large cities and certain areas along the Mediterranean Coast, the absorption of stock has evolved at a good pace in recent times, for the experts, it seems that the time has come to increase the rate of construction once more. That is what the National Director of Residential and Land at CBRE, Samuel Población, thinks. He expects the supply of new homes to start to increase from the end of this year, although its impact will be greater in the second half of 2019. That consultancy firm is sure that despite this rise in supply, prices will not increase by less than 5-6%, with Madrid, Barcelona and a large part of the coast as the most dynamic markets (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

AGV: Almost One Third Of Madrid’s Citizens Think More New Homes Are Required

20 November 2017 – Observatorio Inmobiliario

Almost one third of Madrid’s citizens believe that there is not sufficient housing in the city to meets their needs in terms of prices and features. This perception increases as the respondents’ annual salary and age decrease. Similarly, more than half of future buyers believe that there is not sufficient supply to allow them to choose the most appropriate home and almost 45% think that more housing needs to be built. Those are some of the findings of a study conducted by the Association of Housing Managers (‘Asociación de Gestoras de Viviendas’ or AGV) amongst citizens of the capital, which reveals the needs of house buyers in the city of Madrid.

The people surveyed, of whom 3 out of 4 were buyers aged between 31 and 39, revealed that buying a home or apartment in a building is their preferred option. The vast majority confirmed that they would choose to buy a private home (rather than a subsidised property). In fact, almost 80% stated that they are most tempted by that type of home; 90.5% of them are aged 40 or over (86.3%), compared with the younger population, where only 56.7% said that they would be able to buy a private home.

The youngest people who do not own their current homes stated that they will invest less than €160,000 in the purchase of a home as they cannot afford more expensive properties. Moreover, only 11% of the respondents said that they would spend a maximum of €300,000 to buy a property in Madrid.

Price and location are the top priorities

Both price and location stood out as the main factors to take into account when it comes to buying a home. More than half of Madrilenians (63.4%) rank price as one of the most important considerations, along with the characteristics of the home. The study confirmed that price and the lack of help or tax incentives are the main obstacles preventing the majority of Madrileños from affording to buy a new home.

In terms of the housing market, potential future house buyers claim to be those who have planned their savings (29.6%), have good prospects in terms of employment (23.9%), and monthly earnings that allow them to afford the expense (35.7%). Of the latter, the population aged between 31 and 39 stands out, with annual earnings of more than €36,000.

Limited information and a sensation of complexity when accessing social housing

The survey confirmed the existence of a firm interest in social housing properties in the city of Madrid, even though only 30% of those surveyed said that they were informed about subsidised housing, and 61% consider that the application procedures are too complex. In fact, almost 60% of women and 63.3% of young people (under 30) consider that they will have to go down this route.

Juan José Perucho Rodríguez, President of AGV, declared that “we are facing a critical situation given that demand from citizens is clear and the situation is not adapting to reflect what is happening in Madrid. The construction of social housing properties is vital for citizens, who have seen their purchasing power diminish, to be able to afford to buy a home. In this sense, we think that starting to discuss the option of creating more homes is necessary to cover the needs of the citizens who demand them”.

Original story: Observatorio Inmobiliario

Translation: Carmel Drake

Tinsa: House Prices Rise By Most In Madrid & Barcelona

18 July 2016 – Expansión

The Balearic and Canary Islands are featuring in the housing recovery, but Madrid and Barcelona are leading the way; there, the number of transactions has picked up pace and prices are growing strongly once again. Most of these increases are due to the economic recovery, but the savings factor is also playing a major part.

In fact, the influence of private investors is still playing a crucial role in the strengthening of the two major real estate regions, whose central districts are the most sought-after by companies and individuals, both Spanish and foreign.

It is precisely the influence of these investors that boosted property prices in both capitals in the first place, firing the starting gun for the reactivation of the sector, as they committed to the prime areas before anyone else. These central districts, which are well-connected and offer good services, used to offer a certain degree of security for investors, and a great deal of potential for appreciation, even when everyone in the market was still searching for land.

Both cities were amongst the leaders of the increase in house prices during the second quarter of the year, according to data from the appraisal company Tinsa, published recently. Nevertheless, these increases were concentrated in some of the most expensive areas, as shown by the analysis by district of the local markets. Specifically, many of the neighbourhoods where prices stand at around €3,000/sqm in Madrid and Barcelona are also those where prices have risen by the most in the last year, whereas prices in those neighbourhoods that fall below the average have grown more moderately.

For example, prices in the Madrilenian neighbourhood of Salamanca have risen by 9.8% in the last year, whilst in Chamberí they have increased by 8.9%. Meanwhile, in Barcelona, the following districts stand out: Gràcia (where prices have risen by 12.7%), El Eixample (10.9%) and Les Corts (8.1%). These statistics show that the prime areas are recovering better than the rest. They are central, well-connected areas with very solvent demand, where returns are high and there is significant retail activity, which means they have significant potential for appreciation both for those buying to invest as well as those looking to put their properties up for rent. As with everything, there are notable exceptions, such as the Retiro area in Madrid and Sarrià-Sant Gervasi in Barcelona, which are increasing by below the average.

Other areas

Nevertheless, the real estate expert José Luis Ruiz Bartolomé indicates that the real estate market has now entered a new phase, in which the recovery is spreading to more and more areas. “Before, properties were only being sold in the best districts, but now the increases have spread to the most popular areas, as supply is limited and there are increasingly more buyers looking for homes to live in, rather than to buy as investments”, he explains.

For this reason, the most popular neighbourhoods have become more attractive with the recovery of the labour market and the opening of the bank financing tap. In this way, house prices in the Madrilenian neighbourhood of San Blas have risen by 9.9%, making it the second highest price rise district in the capital; meanwhile, Sant Andreu is also boosting prices in Cataluña, with an increase of 8.2%. Similarly, prices in all of the districts of Madrid that cost less than €2,000/sqm have increased by more than the average, with the exception of Villaverde, the cheapest of all, where prices have remained stable. Something similar is happening in Barcelona where the most popular areas, such as Nou Barris and Sants-Montjuïc, also grew by more than average. (…).

Moreover, Tasaciones CBRE indicates that the profile of investments funds “has evolved rapidly from being opportunistic to value-added, choosing instead to back development, the renovation of properties and, given that they have perceived the potential for refurbishments, they will gradually start managing plots of land in urban areas, with the aim of obtaining higher returns”. With this, the increase in demand and prices will increasingly move to more remote areas. (…).

Original story: Expansión (by Pablo Cerezal)

Translation: Carmel Drake

Madrileños Are Willing To Invest More In Homes

14 July 2016 – Expansión

The average amount that Madrileños are willing to pay to acquire a property in the Community of Madrid currently stands at €306,000, which represents an increase of 28%  compared to 2015, according a study, ‘Demand for housing in Spain’, compiled by Casaktua, based on more than 1,100 interviews.

The study also found that the average price Madrileños are willing to pay to rent a property is €584/month, which represents a 10% increase compared to last year, when the figure amounted to €532/month.

According to the document, “(On average), Madrileños have saved 37% of the cost of the property they want to buy, showing that few expect to be able to obtain financing for 100% of their properties when it comes to buying a home”. Nationally, average savings amount to 35%.

On the other hand, the study reveals that “the average budget that Madrileños allocate to the purchase or rental of a home has increased by 19% in the last twelve months, above the average (increase) for Spain as a whole (12%).

In addition, “the number of Madrileños (renters and owners) who are thinking about moving home in the short and medium term, has increased by three percentage points in the last year (from 48% to 51%)” says the report.

On the other hand, “73% of the residents of the Community of Madrid who want to move home started looking less than two and a half years ago” and the main reasons Spaniards wish to move home are “the number of bedrooms in the home and the area in which it is located”.

Meanwhile, the Consumer Price Index (CPI) in the Community of Madrid increased by 0.5% in June with respect to the previous month, whereas prices decreased by -0.8% compared with the same period last year, according to data published on Wednesday by the National Statistics Institute (INE).

At the national level, CPI rose by 0.5% in June with respect to the previous month and increased its YoY growth rate by two tenths to -0.8%, as the price of electricity, petrol and organised trips all rose. In this way, CPI recorded two consecutive months of YoY increases.

Original story: Expansión (by Roberto Bécares)

Translation: Carmel Drake

Pisos.com: House Prices Rose By 1.3% In Q1 2016

5 July 2016 – El Economista

The average price of second-hand homes in Spain amounted to €1,555/sqm in June, which represented an increase of 1.3% compared with December 2015, according to data from pisos.com, which show that the housing market experienced “good health” during the first half of the year.

Nevertheless, according to the CEO of pisos.com, Miguel Angel Alemany, citizens should continue to make a “significant effort” to become home owners, above all, at the beginning of operations due to the amount of savings that they require to cover the non-financed part of their purchases and the additional costs associated with property acquisitions.

“Monthly mortgage payments are more affordable than they used to be”, confirmed Alemany, indicating that fixed rate mortgage are providing borrowers with “more piece of mind” as they are able to enjoy fixed mortgage instalments for the duration of the repayment period. “Although Euribor is negative, fear of a possible increase in that reference index has made people much more cautious”, he added.

By autonomous region, the Community of Valencia (+4.49%), Galicia (+4.14%) and Aragón (+4.10%) recorded the highest price rises during the first half of the year, whilst the most marked price decreases were registered in País Vasco (-2.91%), Cantabria (-2.48%) and Andalucía (-1.82%). Meanwhile, the most expensive region in June 2016 was the País Vasco (€2,740/sqm) and the cheapest was Castilla-La Mancha (€952/sqm).

Original story: El Economista

Translation: Carmel Drake

New Investment Formula: Buy-To-Let Cooperatives

5 March 2015 – Expansión

Investing in the Spanish real estate sector has been not only an option, but almost an obligation for large investors in recent years, both Spanish and international. But, what about small savers? Do they have any options left to fall back on?

Away from the real estate companies that are listed on the stock market, there is an investment proposal that involves buying homes to let them out. Nevertheless, this model has not been operated on a professional basis in the past. Now, the Spanish company Alquiler Seguro, which specialises in the management of rental contracts for both tenants and landlords, has decided to launch a cooperative project involving homes intended for rental, which are designed precisely for that purpose from the outset. “Last year, we realised that our most frequent transactions involved clients who were owners of some properties and at the same time, tenants of others”, explains Gustavo Rossi, Chairman of Alquiler Seguro. “A change is happening in the market, whereby young people, who are accessing housing through the rental market, are becoming good savers whilst also being tenants”, adds Antonio Carroza, CEO of the company.

The executives of Alquiler Seguro propose that these tenants use their savings to purchase homes, for an average price of €120,000, which offer investment returns after 18-24 months (the time taken to construct the properties). “These are homes that are designed to be rented out; they are expected to generate returns of between 3.5% and 6% and achieve an investment return within ten years”, says Carroza.

Currently, the company has two developments underway, both located in Madrid, in the neighbourhoods of Carabanchel and López de Hoyos. “We have chosen areas where there is demand from tenants and prices (of the properties) are affordable”.

Both developments offer financial support. “Our model is 50% equity and 50% bank financing. Entities are willing to subsidise some of the land purchase since the properties have (already) been sold to the cooperative members”.

“In the case of these two projects, each investor has acquired one home, but the goal is to move towards a model that does not involve horizontal divisions, but rather one in which many investors buy the whole development. We already have several plots of land in our portfolio that we intend to develop in this way”, says Rossi.

It is not the only buy-to-let investment project that the company is working on. “We are also evaluating the possibility of creating a Socimi, where investors contribute assets instead of capital but, at the moment, that is not a profitable model, due to the expenses associated with municipal gains”.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake