House Prices Return to 2004 Levels

Prices now similar to 2004
Prices now similar to 2004

According to data from the Ministry of Development, the average price of housing stood at 1,606.4 euros per square metre in the second quarter, with a drop of 2.6% over the previous quarter and falling by 8.3% over the same period of 2011.

This house price data reflects an acceleration of the falling prices shown in 2011 and remains far from the maximum level reached four years ago when the price per square metre exceeded 2,000 euros.

According to this statistical series released by the Ministry of Development, the average price per square metre has fallen 23.6% since its peak in the first quarter of 2008.

Meanwhile, Cinco Dias reported that the average price per square metre of private housing of up to two years old stood at 1,645 euros, with a decline of 7.1% year-on-year. As for private housing over two years old, the price reached 1,593.3 euros per square metre, down 8.4% year-on-year.

The average price per square metre of protected housing in Spain was 1,157.1, almost the same price as registered in the first quarter of 2012. The variation over the same quarter of 2011 shows a drop of 0.4%.

The number of real estate valuations for the calculation of housing prices was 85,911 in the second quarter of 2012, representing an increase of 2.0% compared to those carried out in the first quarter of 2012.

The regional distribution shows year-on-year declines above the national average (-8.3%) in Andalusia (-10.8%), Catalonia (-10.8%), Madrid (-9.7%), Aragon (-8.9%) and Valencia (-8.4%). With falls below the national average are Cantabria (-0.6%), Ceuta and Melilla (-2.0%), the Basque Country (-2.4%), Murcia (-5.4%), La Rioja (-5.6%), Navarra (-5.8%), Asturias (-6.0%), Castilla y León (-6.2%), Extremadura (-6.7%), the Canary Islands (-6.8%), Galicia (-7.1%), the Balearic Islands (-7.1%) and Castilla La Mancha (-7.3%).

For municipalities with populations of more than 25,000, the highest prices per square metre were in San Sebastian, 3,856.7 euros, Getxo, 3,282.0 euros, Leioa, 2,935.0 euros, Majadahonda, 2,923.6 euros, Errentería, 2,780.3 euros and El Prat de Llobregat, 2,755.5 euros.

In towns with more than 25,000 inhabitants the lowest prices per square metre were recorded in Elda, 736.8 euros, Tomelloso, 740.4 euros, Crevillent, 740.6 euros, Hellín, 744.8 euros and Villarrobledo, 746.8 euros.

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IMF Forecasts Two Years of Recession for Spain

In its review of data global growth, the International Monetary Fund (IMF) reported that the Spanish economy fell back less than expected in 2012, but that it will not return to growth in 2013, and Spain’s GDP will contract by 0.6% in that year.

The IMF has also revised global growth in 2012 downward to 3.5%, and that of Latin America from 3.7% to 3.4%, on detecting “new signs of weakness,” especially in the eurozone and the United States.

“In the past three months, the global recovery, which in any case was not very pronounced, has shown new signs of weakness,” the IMF stated.

The Global Economic Prospects report notes that the Spanish economy retreated by 1.5% in 2012 and not by 1.8%, as they indicated in April, and will remain in recession in 2013, with a fall of 0.6% instead of the 0.1% growth predicted in the previous report. The improvement expected by the IMF for Spain in 2013 will be delayed with a contraction of six-tenths, after the quarterly review of the growth data in April presented a picture of a modest departure from the recession.

In 2011, the Spanish economy came out of the recession with a growth of 0.7%, a rate that the IMF believes cannot be maintained. The IMF also presented its global deficit forecasts in their Fiscal Report, which, while not quantifying the 65,000 million euros of adjustments announced by the Spanish Government on 11th July, lowered their previous forecasts.

For 2012, the IMF expects a reduction in the deficit from the 8.9% of 2011 to 7% (a drop of one point over the April forecast), while for 2013, they forecast it will fall to 5.9% of the GDP. These figures put the Spanish deficit this year above the 6.3% which Spain’s European partners had called for, while the figures for 2013 also exceeds the 4.5% deficit marked as a first step toward the 3% target for 2014, the extra year granted by the finance ministers of the euro.

The IMF noted that in the eurozone “tensions in the financial markets and over sovereign debt have increased, approaching levels close to those at the end of 2011.” “Clearly, the risks remain high and reflect the risks of delays or insufficient political action”, said the IMF, while nevertheless congratulating the EU leaders on taking “steps in the right direction,” as agreed at the summit in late June.

Diario Sur reported that the Fund stressed the importance of the European Union agreeing to capitalise the bank directly without going through the governments, because if the measures “are implemented in full, they will help break the adverse link between sovereign debt and the bank and create a banking union”. “The countries of the periphery (of the euro) need to maintain the pace of reforms and commitments, they need financial support and a growth environment to be provided by the ECB and other mechanisms of the eurozone,” the IMF indicated.

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House prices to continue falling over next three months

Prices still falling
Prices are still falling

According to the ‘Real Estate Confidence Index’ for the third quarter, drawn up by the Evaluation Society (Sociedad de Tasación), based on the opinions of up to 700 experts in the sector, housing prices in Spain are expected to fall further for at least the next three months due to the deteriorating economic situation and the drop in sales of apartments.

This latest report notes that this downward trend in prices will affect “virtually all the regions in Spain”. However, it points to a situation of “stability” in the ‘stock’ of homes, a trend which will “also be maintained over the next few months”.

This is the Society’s forecast for the next three months and explains the drop in the real estate confidence index from 31.8 points in April to 31.2 points from a possible 100 in the last estimate.

“This development is a clear reflection of the degree of distrust that exists right now in the market” said the Society, while pointing out that 50 points would be a situation of neutrality or stability in the market.

As far as second residences are concerned, the outlook is “the most negative of all those which have been analysed in the study,” although it improved almost two points over the first quarter of 2012.

Other results suggest that confidence in the development of promotions and building plots is again negative and even falls two points over the second quarter to 26.5 points. Moreover, with regards the sale of commercial premises, the third quarter of 2012 is likely to continue with a negative outlook.

The Evaluation Society noted that the real estate economic confidence index varied “slightly” in all areas of the country. The communities whose outlook most improved over the first quarter were Asturias, which advanced 6.7 points, followed by Cantabria (+2.4 points) and Murcia (+2.3 points).

By contrast, the Balearic Islands’ confidence index dropped 5.6 points, breaking with the rising forecasts for the previous quarter. The same was true for Castilla y León (-3.3 points) and Galicia (-3.2 points).

Looking at some of the variables, with regard to pricing, experts gave an assessment of 24.1 points to Catalonia, the lowest of all, while forecasting an upward swing in La Rioja, with 39.5 points.

Finally, El Mundo reported that normal home sales expectations are lowest in the Basque Country (27.5 points) and highest in Extremadura (41.7 points), a trend that worsens with second homes, with confidence being lowest in La Rioja (19.8 points) and highest in the Canary Islands (29.5 points).

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New Measures Needed to Tackle Mortgage Default Problems

Spaniards are struggling with their mortgages
100,000 families at risk of defaulting

Based on findings from a study on the impact of mortgage arrears, carried out by the Association of People Affected by Foreclosures and Auctions (AFES), the organisation has warned that 100,000 families are in danger of not paying their mortgage in the next two years due to rising unemployment.

The report reveals that 135,000 families are currently undergoing foreclosure proceedings, while 150,000 families have already lost their homes and a further 130,000 families are unable to pay their mortgage.

The AFES has warned that the “ever-widening gap” between banks and citizens “is strangling economic growth in Spain”. The organisation recognises that the banks are trying to adapt to the conditions of the debtor in order to avoid them getting into a default situation, “but the situation changes with families which are already in this process.”

According to El Economista, the president of the association, Carlos Baños, said that “undoubtedly the change of government will bring new measures in relation to mortgage arrears.” Baños went on to say that he hoped that the measures put in place to the fight against the struggling economy will open a debate over foreclosure proceedings, and that they will seek “alternative and negotiable” measures between the banks and their customers.

“We believe that the financial institutions are the ones who must take the lead in order to initiate a change of mindset, promoted by policy measures that build confidence in the system, and allowing them flexibility in mortgage default management”, stressed the AFES president.

The Association highlighted that the housing market recovery is one of the “major” challenges of the Government, “and will not be an easy task, because the outlook is complicated.”

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Spanish could buy 14,725 homes with unredeemed pesetas

Spanish pesetas
Spanish pesetas

According to latest data published from the Bank of Spain, Spanish citizens could buy 14,725 average-size households with peseta currency notes and coins which have not yet been exchanged for the single European currency, and the value of these unredeemed pesetas at the end of May totalled 1,700 million euros, a figure similar to that of a month earlier.

According to the Ministry of Development, between January and March the average price of a private home stood at 1,649.30 euros per square metre, putting the cost of an apartment of about 70 square metres at 115,451 euros.

In May, the number of unredeemed peseta notes held by members of the public and companies, both Spanish and foreign, amounted to the equivalent to 890 million euros, which was 13 million euros less than a year earlier, but money that would enable over 7,700 families to have access to housing.

Meanwhile, El Economista reported that the euro value of the peseta coins that have not been exchanged amounted to 810 million euros, compared with 812 million a year earlier – “small change” with which some 7,016 average-sized flats could be acquired.

The Bank of Spain reported that between January and May, 6 million euros worth of pesetas were exchanged, and at the end of 2011 the equivalent to 1,706 million euros worth of pesetas remained unredeemed.

According to the experts, although the exchanging of pesetas to euros is still going on, there will be a great number of pesetas which will never be redeemed, as they belong to coin collections, have left the country in the pockets of tourists, or have simply gone astray.

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