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

RR de Acuña: Spain Still Has 1.6M Unsold Homes

19 October 2015 – ABC

A common remark between experts in the real estate sector is that the market will not fully recover until the residue of unsold homes originated during the boom years has been fully absorbed. The actual number we are talking about is difficult to quantify. In July, the Ministry of Development said that the number of unsold new homes decreased last year to 535,734 properties, 5% fewer than during 2013.

In the context of a strong slow down in the sale of new homes (down by -36.6% until July), the number of unsold second-hand homes becomes particularly important when we want to determine how long it will take the sector to absorb the legacy left over from the real estate bubble.

A few weeks ago, the real estate consultancy RR de Acuña y Asociados published this year’s version of its annual statistics on the Spanish real estate market, in which it indicated that this excess amounts to 1.6 million homes. Specifically, the consultancy firm estimates that the balance of unsold new homes amounts to 502,000 (261,000 fewer than in 2011) and the balance of unsold second hand homes amounts to 1.15 million, 189,000 units more than four years ago. Of all of those homes, 688,000 are located in metropolitan areas, 331,000 in coastal regions and 657,000 in other regions, where there is “no demand whatsoever”, a cutting finding from the study.

Two-speed market

On the basis of these figures, taking into account the stock of homes and the current demand volumes, the report estimates that it will take an average of six years to absorb this stock. However, the variation by geographical region is significant: in the areas along the east coast, especially in Valencia, Castellón, Murcia and Almeria, the estimated time for the absorption of the real estate stock ranges between 6.5 and 10 years. Whereas, in Madrid, the País Vasco (Vizcaya and Vitoria) and certain parts of Cataluña, such as Barcelona and Gerona, the time is notably less, ranging between 1.5 and 3.5 years.

“Spain continues to be a two-speed market….” Says Fernando Rodríguez de Acuña, Project Director at RR de Acuña y Asociados. Madrid, Barcelona, Málaga and Alicante account for most operations: together they accounted for 39.4% of all activity during the second quarter of the year. The capital (Madrid) is particularly significant, as it accounted for 14% of all transactions. (…).

What needs to happen to completely drain off this stock of homes? The report forecasts that this excess will decrease by 120,000 homes over the next two years, albeit at a slow pace. Growth in potential demand depends on the financial institutions completely eliminating “the credit restrictions”, as well as the ability of “solvent” potential buyers to take on debt. The study points out that “half of the jobs created in 2014 were temporary, part time and poorly paid”. Rodríguez de Acuña says that “salaries need to be doubled to achieve the right balance” and he cites a study performed recently by his firm, which concludes that almost 60% of people cannot currently afford to buy an average home.

Original story: ABC (by L. M. Ontoso)

Translation: Carmel Drake

Fitch: Banks Selling Foreclosed Homes With Discounts Of 67%

14 October 2015 – Expansión

Banks are now selling homes with an average discount of 67% of the value they had before they were foreclosed. This data, which relates to the first half of the year, represents a historical record, according to a report that Fitch will publish today, to which Expansión has had access.

“The depreciation of properties sold after they have been foreclosed is high, at around 67% of the initial valuation”, says the credit ratings agency.

Given this reality, Fitch believes that the recovery of the residential sector has not yet affected the market for houses sold by banks, and that “it is unlikely that it will benefit” from this improvement in the real estate market “in the short or medium term”, according to the report, prepared by its analysts Juan David García, Christian Gómez and Beatriz Gómez.

“Unsellable” homes

Fitch emphasises that there is still an enormous stock of “empty and unsellable” homes, above all “in areas that are expected to suffer from the structural imbalances in the Spanish economy for longer”.

“Given their poor locations and conditions, a considerable number of new homes have little hope of securing a buyer”, says the agency, which increases its estimate of the number of unsellable new homes to around “150,000”. That figure represents a quarter of the 600,000 unsold new residential properties in Spain.

Not surprisingly, the agency notes that the recovery in the housing market is happening “at two speeds”, in such a way that the trend will vary. “Whilst the properties in prime locations in city centres will enjoy a gradual recovery – influenced by the improvement in the economic environment and the recovery in credit –, those “problem” properties linked to mortgage foreclosure procedures and those located in peripheral areas with low levels of economic activity, will continue to see price adjustments and high losses” on their valuations.

Political risks

Fitch’s report also warns about the possible negative effect that the new legislation (against vacant homes owned by banks) may have on the value of those properties. Moreover, the associated (political) risk is on the increase”. The analysts cite the case of Cataluña by way of example, where the Generalitat has introduced a new annual fee for homes that have been unoccupied for more than two years without adequate justification.

On the other hand, the agency believes that this will result in “aggressive mortgage foreclosure strategies by creditors looking to get rid of problematic real estate assets from their balance sheets”. And that will also affect the banks, of course.

Finally, Fitch addresses the rising trend in mortgage lending, something that “is driving prices up”. “Mortgage lending is growing at an annualised rate of 20%”, says Fitch, whose analysts think that this increase will continue over the coming months.

The agency expects competition to intensify between lenders, but under no circumstances does it foresee a return to the figures recorded during the real estate boom.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

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