Q1 2016 Saw Property Prices Fall 0.7%

Prices have gone up and down across the country
Prices have gone up and down across the country

Property portal Idealista have released data showing the prices of resale property in Spain fell an average of 2.8% during Q1, 2016, when compared to the same period in 2015.

A square metre will now cost an average of 1,552 Euros compared to 1,597 Euros 12 months ago.

However, the results are very different when looking at different areas of Spain.

In Barcelona, for example, you will now see an average cost per square metre of 3,478 Euros, an increase of 6.6% on the inter-annual rate. However, prices in the city are still 26.9% lower than during the peak of 2007.

Madrid saw a 2.2% average increase leaving a square metre at 2,832 Euros. Again, this is far below the pre-crisis peak when the same space would have cost you 4,035 Euros.

Despite the community of Valenciana seeing a drop of 2.2% in the inter-annual rate, property owners in Valencia city have seen their property values increase during the first quarter by an average 2.9% over the same period in 2015, leaving a square metre costing 1,471 Euros. This is 47.5% lower than the pre-crisis peak prices.

The two island communities, The Canary Islands and The Balearic Islands both saw increases in the average cost of a square metre with inter-annual increases of 4.1% and 3.9%, respectively.

Andalucia and the Costa del Sol

In Andalucia, the average price has fallen a slight 0.2% in the inter-annual rate, leaving a square metre costing 1,385 Euros.

Of the Costa del Sol areas it appears most are well into the recovery and many have seen price increases, some quite substantial. For example, in Manilva, prices have increased 15.7% in the last 12 months meaning you will now be looking at 1,324 Euros per square metre.

Estepona, Torremolinos and Coin also saw increases well above average with prices going up 7%, 6.3% and 5.6%, respectively.

In Marbella, arguably the most famous area of the coast, prices have increased by an average of 4.8% leaving a square metre with a cost of 2,425 Euros. At the end of Q1 in 2015 this cost was 2,313 Euros.

Of all the towns in Andalucia the majority finished the quarter on a positive with the exception of Antequerra, Caleta de Velez, Cártama, Ronda, Torre del Mar and Torrox.

This confirms the general feeling amongst agents here on the coast who have noticed a renewed interest in property for sale, as well as a very notable increase in tourist numbers. Some of the increases are due to security concerns in other countries with many tourists feeling Spain is the only “safe” option for a European holiday. These threats are not likely to continue indefintely and we will surely see a drop-off in tourist numbers as people start once again to visit Turkey, Tunisia, Greece, Cyprus and Egypt, all countries that have suffered of late. Hopefully, by the time that happens Spain, and specifically the Costa del Sol, would have had a great year for both tourism and the beleaguered property market.

You can see the full report from Idealista here.

Mortgage borrowing falls in April

Fewer mortgages granted in April
Fewer mortgages granted in April

Following falling property sales the number of new mortgages approved in April fell by 7.5% compared to the same month in 2011.

A total of 977.061 million euros of new mortgage loans were approved compared to 1.056.325 million euros in April of the previous year.

The Spanish Mortgage Association released the figures which confirm April as a slow month with property transfers also falling 5.7%.

The month closed with the total mortgage balance down on the previous month by 8.780 million euros, 20.000 million euros less than in February. The year-on-year balance dropped by 73.264 million euros, putting the total balance at 966.514 million euros which  includes a figure of 176.058 million euros in securitised mortgage assets.

Banks and savings banks accounted for 887.416 million euros of the total while credit unions recorded 65.409 million euros representing a 4.95% fall for them. However, it wasn’t bad news for all with credit institutions accounting for 13.689 million euros representing a massive year-on-year growth of 35%.

The figures show with some clarity the continued slowdown of the country’s real-estate sector which has been suffering since the property bubble burst in 2007, when property prices were at their peak and property sales figures also hit record levels.

You can see the report here: Mortgage Credit Activity April 2012

Retail sales in record fall

Retail sales fell 9.8% in April
Empty shopping malls tell a story

Figures released today by the National Statistics Institute (INE) show retail sales in Spain fell by 9.8% in April, compared to the same period in 2011, showing the biggest fall since the figures started being collected in 2003.

Summary of results

  • The General Retail Trade Index at constant prices showed an interannual variation of -11.3% in April, more than seven points below that registered in March.
  • The average rate of retail sector sales stood at –5.9% during the first quarter of the year,as compared with the same period of 2011.
  • All Large chain stores experienced a decrease in sales, as compared with the same month of 2011.
  • Employment in the retail sector decreased 0.9% as compared with April 2011.
  • All Autonomous Communities showed negative interannual variations in their retail sales.
  • Employment decreased in all autonomous communities, except in La Rioja.

Evolution of trade, in general and by type of product

Sales in retail trade at constant prices (that is, after eliminating the prices effect) registered an interannual variation of -11.3% in April, indicating a decrease of 7.3 points, as compared with the rate from March.

Sales, excluding service stations, presented an annual rate of -11.1%. The breakdown of these sales by type of product showed a negative rate in food products (-6.7%) and non-food products (-14.7). Among the latter, Household equipment (–20.2%) registered the greatest decrease.

In turn, sales in service stations, after adjusting the prices effect, decreased 11.3%, as compared with April 2011.

The average rate of the General Retail Trade Index during the first quarter of the year presented a –5.9% variation as compared with the same period last year. By type of product this rate was negative in food products and in non-food products.

Evolution of trade, adjusted for the calendar effect

After adjusting the calendar effect, that is, the difference between the number of working days in a given month in different years, the Retail Trade Index registered an interannual rate of –9.8% in April, six points below that registered in March.

Evolution of employment, by distribution class

The employment index in the Retail Trade sector in April showed an annual rate of –1.2%, two tenths below that registered in March. Employment decreased 0.2% in Service stations.

By distribution class, only Large chain stores registered a positive interannual rate, 0.4%.

In the retail sector as a whole, average employment registered a rate of −1.1% in the first quarter of the year, as compared with the same period the previous year.

Results by Autonomous Community. Variation rates in sales 

Retail sales decreased in the interannual rate in all Autonomous Communities in April. The greatest decrease was registered in Castilla-La Mancha (−14.6%).

Extremadura (−8.3%), Canarias (-8.7) and Illes Balears (−8.8%) showed the lowest decreases.

You can download the complete report here: Retail Trade Indices – April 2012

Banesto net profit down 88%

Banesto announce 88% fall in profits

As the Spanish banks announce their Q1 results Banesto have started the ball rolling with an 88% fall in profit.

The bank, controlled by Santander, reported a fall of 88% to 20.2 million euros in the first quarter of 2012, compared to 170 million in the same period last year.

Banesto said the results could be attributed to extra provisions set aside to cover bad property loans, provisions that were demanded by Mariano Rajoy’s new centre-right government, which took power last year, as part of efforts to clean up the banks’ balance sheets.

Banesto say they have 475 million euros set aside in the first quarter, which amounts to almost 50% of the amount needed to cover the whole year.

The bank have made some 365 million euros partly from the sale of shareholdings and loan assets. Without this the bank would have recorded a loss. A 4 million euro tax credit applied to the banks net profit also helped to prevent a loss.

Spanish banks have been curbing their lending of late and Banesto say their total lending fell 8.3% in Q1, as well as customer deposits which dropped 10%, the bank reported.

“The Spanish economy needs to de-leverage and the de-leveraging needs to be seen in the Spanish banks’ balance sheets,” chief executive José Antonio Garcia Cantera said, adding “We think that is going to continue for quite a while.”

Mr Cantera said the bank had sold more than 1,500 homes in March “… at an average discount that was less than the provisioning rate of 45 per cent applied to the assets.”

“That demonstrates that at a certain price there is significant demand for housing in Spain.”

Property sales figures lowest since 2006

According to reports from the housing department in the Ministry of Public Works, property sales in Spain fell in 2011 by 29.3%, in terms of volume.

There were 347,305 registered property transactions in 2011 which is the lowest level recorded since the crisis began. It is a fall of 64% since the peak in 2006 when just short of one million property transactions were recorded.

During the fourth quarter of 2011 there were 105,560 property sales in Spain, representing an increase of 37.9% from the previous quarter but, more importantly, a decrease of 29.9% over the same period in the previous year. It is the first quarterly figure to top 100,000 transactions, following three consecutive quarters below this figure.

In the autonomous regions Andalucía recorded the highest number of sales with 67,018, closely followed by Valencia with 48,028, Madrid  with 45,020 and Catalonia where 44,961 properties were sold. Madrid, Barcelona, Alicante and Valencia recorded the greatest increase in sales.

In terms of sales to foreigners, by province, Alicante came out on top with 2,532 sales, followed by Málaga with 1,158.

Of the Q4 total, 43,974 sales were for new homes, representing 41.7% of the total, leaving 61,586 resale properties, 58.3% of the total.

For the full year, new housing accounted for 126,840 transactions, 36.5%. Resale properties made up 220,465 sales, accounting for 63.5% of the total transactions. This data shows that since 2008, the second-hand housing market has achieved some stability, with annual transactions over 220,000.

Spanish banks report fall in profits

IMS - International Mortgage SolutionsThis week has started to see the Spanish Banks publish their results for 2011.

La Caixa, now renamed CaixaBank, and floated last year, has reported profits are down 13%.

Sabadell group profits are down 39% and Banesto has seen profits tumble by three quarters.

On the positive side they all at least still made a profit.

Most of the down turn in profits is due to the drop in income between the interest payable and interest earned and the higher provisions they have been forced to make to cover bad assets on their balance sheets.

Loans in default, as a percentage of their loan books, continue to rise each month partly driven by more defaulters and partly driven by the fact that every bank is decreasing its loan book size.

Risk departments who were on the back foot during boom times and forced to bow to commercial pressures are now very much ruling the roost. They are by nature normally cautious and, with no pressure being applied from sales, are wielding their new found power in a dictatorial and intransient manner.

There is on most occasions little common sense or commerciality being applied. Any deviations from criteria are rejected and ability to look at an application in its entirety to assess  risk properly  has all but disappeared. A well constructed challenge to an initial decision can still bear fruit but experience and a good understanding of risk managers psyche is paramount to making this happen.

Many branch staff are finding it difficult to come to terms with the new world and often still over promise direct clients both in terms of what is possible and costs. We are back to the days of Spanish banks working on the basis that if a client applies for a mortgage, no matter what is finally agreed, the client will complete even if the terms bear no resemblance to what the client was expecting to get.

Many, including Lloyds and Barclays, are focusing solely on a certain type of client by having minimum levels of income required, minimum value of property or minimum loan sizes but have pricing that a “vanilla client” would not want, or need to pay. It is difficult to see how these banks are going to square the hole on pricing against the type of borrower required.

Loans above two hundred thousand euros are becoming more difficult to find, whatever the strengths of the client’s situation. Again this makes no sense as there is no evidence that one larger quality loan is worse to have than 10 poorer quality loans, in fact for most sensible people the reverse would seem to be true.

Potential borrowers can expect the Banks to be very pedantic on paperwork requirements, to request what clients may feel is unnecessary, to have unusual and unfathomable idiosyncrasies to their risk assessment and appear on many occasion to have issues with perfectly good applications.

Matching a clients profile to the current banks available has now become one of the most important things upfront. There is no point in applying as a single applicant to a bank that will only lend to married applications. There is no point in applying to a Bank that will not lend if more than one property in the applicants country of residency is owned, if you own more than one property. There is no point in applying to a Bank if you are self employed if they will not take into account dividend income.

Once access has been ascertained the next consideration is best terms of those lenders available for that application. The rate range from worst to best is the largest it has ever been. Margins above Euribor range from 1.70% at bottom end to a massive standard rate of 3.85% at top end.  The linking of compulsory products also means all costs need to be taken into consideration. It may be better for instance for certain clients to have a higher rate and no life costs versus another client who may find it more beneficial to have life cover and a lower rate.

Any clients who want to brave the battlefield without professional assistance need to make sure the bank explains all the terms clearly and they should shop around.

International Mortgage Solutions

( p.s. Many thanks to Heather at International Mortgage Solutions for her informative updates. )

House prices continue to fall

Prices fallSpanish property prices have continued to fall during the third quarter according to figures published by the country’s Ministry of Public Works.

According to the figures the average value of homes in Spain fell by 5.5% during Q3. A quarter-on-quarter fall of 1.3 % was also recorded.

Speaking to the Wall Street Journal, Nomura banking analyst Daragh Quinn predicted that the Spanish real estate sector was likely to fall further. He estimates up to 100,000 new homes will be sold in Spain this year, less than half of the 326,000 properties that were bought during 2007, a year that many refer to as “the boom year”.

However, according to Tinsa’s General IMIE Index, house prices throughout Spain fell by an average of 7.4% between September 2010 and September this year. The report also showed that capitals and major cities, along with coastal areas, have suffered most from the decline registering drops in values of 8.9% and 8.2% respectively.