Spain’s Birth Rate Continues to Fall

The number of births in Spain continues the fall it began in 2009, and dropped by 6.2% in the first half of this year, with 38,664 less babies being born than in the period from January to June 2012, while at the same time, the number of deaths has fallen by 6.1% to 204,394 people.

However, according to the National Institute of Statistics’ Natural Population Movement study, the decline in the death rate is due to there being a short-term increase in deaths in February and March of 2012, resulting in the number of deaths increasing to 217,634 for the first six months of 2012, which is 9.5% more than the same period in 2011.

The decline in births has accumulated a fall of 18.3% since 2008, mainly due to lower fertility, a decrease in the number of children per woman, and the progressive reduction in the number of women of childbearing age.

By region, births declined in all, and only increased in the autonomous cities of Ceuta and Melilla. The regions where they fell most between January and June were the Canary Islands, with a decrease of 15.8%, and Navarra (-11%), while the smallest declines were registered in Aragon (-1.9%) and Murcia (-2.1%).

Spanish births dropped by 6.2% in the first half of this year

Similarly, the number of deaths also reduced in all regions and increased only in Ceuta. Murcia and Castilla-La Mancha were the regions where the number of deaths fell the most (-8.8%), while the more moderate declines were registered in Galicia (-3%) and Navarra (-3.6%).

The statistical data published includes marriages, and those registered in Spain between January and June this year fell by 3.9% compared with the same period a year earlier, reaching 70,996 unions, of which 2.4% (1,690) were same-sex couples. The number of marriages also recorded declines in all regions except the Balearic and Canary Islands.

El Mundo reported that the National Institute of Statistics also released the definitive data for 2012, according to which last year 454,648 children were born in Spain and 402,950 people died, resulting in a positive natural balance of 51,698 people, in a year where 168,556 people married.

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Depreciation on Spanish Foreclosed Homes Reached 63%

Moody’s credit rating agency indicated recently that the accumulated depreciation on foreclosed homes in Spain since the beginning of the crisis has reached an average of 63%. This percentage is well above the 41% average decline registered, according to the National Statistics Institute, in housing prices between the first quarter of 2007 and the second quarter of 2013.

The rating agency stated that the largest price declines registered, related to sales of foreclosed homes in the regions of Murcia (-78%), Valencia (-71%), Catalonia and Andalusia (both -69%) as well as the Canary Islands (-67%).

Depreciation on foreclosed homes in Spain since the beginning of the crisis has reached an average of 63%

In these regions, the average decrease in housing prices, between the first quarter of 2007 and the second quarter of 2013, was 32% in Murcia, the Canary Islands and Andalucía, 37% in Valencia and 48% in Catalonia.

El Mundo reported that, in the whole of Spain, the greatest decreases in the price of housing since the beginning of the crisis correspond to Catalonia and Aragon (48%), Madrid (46%), and the Basque Country (43%). In Castilla y León, the price of housing has accumulated an average decrease of 39%, while in Castilla-La Mancha and Valencia the average decline is 37%.

When analysing only foreclosed homes, the prices fell by an average of 64% in Aragon and 62% in Madrid, while they dropped by 61% in Castilla-La Mancha and by 60% in Castilla y León. The decline in prices registered in the Basque Country reached 56%.

Moody’s warned: “The largest losses are concentrated in the foreclosed properties on the Mediterranean coast, Andalusia and the Canaries ( … ) although it will not lead to a lowering in the rating, taking heavy losses on foreclosed mortgaged homes is detrimental for the credit”.


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Spanish property price data shows a more moderate decline in November

Property prices in November fell 7.2 % from the same month last year, according to the index imie tinsa appraiser. This data records a more moderate decline compared to the previous month, the maximum drop accumulated since December 2007 is 38.5%.

Regarding behaviour by areas,  capitals and big cities suffered cuts highlight with a fall of 7.9% , followed by metropolitan areas and other municipalities both with a descent of 7.8%, very close to the towns of the Mediterranean Coast stood with a fall of 7.5%.

Graph supplied by Idealista

A  smaller decline compared to November last year, experienced by the Balearic and Canary Islands with 0.9% drop and has maintained a stable trend since mid-2012.

In terms of the accumulated areas since they reached their highest value cuts, the Mediterranean Coast adjustment in November stood at 45.4 %, was followed by the capitals and big cities with 42.2%, Metropolitan areas with 41.9 %, the other municipalities with 33% and closing the series the Balearic and Canary Islands with 27.3%.


Is a Spanish mortgage a better option?

Having made a decision where you want to call home and also which property to purchase, the following step of purchasing a home is usually how to find the funds to pay for it. For everybody apart from the wealthy, this will likely entail obtaining a mortgage.

It may be worth arranging the mortgage before deciding on a property

Qualification requirements in Spain depend on your own personal capacity to pay back the money you borrow, and could well be stricter compared to your own country. Typically, your overall regular monthly expenses such as repayments must not surpass 35% of the net income. Loan providers may take into account some types of earnings outside your income, for example that from rentals and other investments, however usually in Spain they don’t always take these in to account.

Should you obtain a mortgage from a Spanish loan provider, or perhaps from back home? Benefits of obtaining a mortgage in Spain consist of reasonably low interest payments, much less management complexity and, if you want to rent your home, maintaining all funds in Euros. Nevertheless, looking at Spain’s present financial situation, it might be hard to get a good option.

In addition, mortgage loan products like buy to let and well-known features like reduced fees and penalties with regard to earlier repayment might not be offered. Several non-resident mortgage loans are inelastic and out-of-date and don’t provide the overall flexibility a lot of consumers would like. Additionally, the standard mañana culture may result in lengthy administration times so its worth lookihng in to arranging the mortgage before the search for the property.

This example is slowly improving. Several lending institutions now have awakened to the fact that there are rewards available from the large numbers of non-residents purchasing holiday homes, and now have set up non-resident divisions that will look on foreign loan provider expectations far more sympathetically.

It could take quite a while to get the mortgage you would like – more time if you are not fluent in the local language. Spanish loan companies tend to opt for your main income source to be a regular salary, and could overlook less regular income sources like dividends and also self-employment. Acquiring a mortgage broker could help to ameliorate these kinds of issues.

Mortgage types:-

The repayment mortgage is considered the most typical type in Spain. It’s conditions depend upon whether or not you qualify as a Spanish resident or not. Should you have held a Spanish residence card or perhaps a certificate, and have been paying taxes in Spain for two years or maybe more, you could be entitled to a Spanish Resident mortgage. It has the best loan-to-value ratio (LTV), and also the most favourable rate of interest, which in Spain is linked to the European standard borrowing rate, known as the Euribor.

Click link here to calculate your mortgage  – Mortgage calculator

House prices continue fall in Q2

The price fall continues unabated
The price fall continues unabated

House prices in Spain fell during the second quarter by 11.5% compared to the same period in the previous year, up from 9.2% in the previous quarter.

The report, from Tinsa, shows that the majority of the autonomous regions followed the downward trend with La Rioja recording the greatest fall of 22.6%, bringing the prices back to 2003 levels. Catalonia followed with an 18% decline, followed by Aragon (-16.3%), Valencia (-14%), Castilla-La Mancha (-13.8%) and Madrid (-13.8%).

Staying within a few points of the national average were Castilla y León (-11.8%), Andalusia (-11.6%), Navarra (-11.5%), Murcia (-10.8%), the Canary Islands (-10.6%) and the Balearic Islands (-10.5%). The areas least affected by the decline in prices include Extremadura (-10.1%), Galicia (-6.2%), Asturias (-5.2%), Ceuta (-4%), Cantabria (-3.6%) and Melilla (-3.3%).

On a provincial level a more pronounced decline was recorded with above average falls in Tarragona (19%), Toledo (-18.7%), Zaragoza (-18.6%), Almeria (18.1%) and Segovia (18%).

At the other end of the scale a few regions registered smaller declines, or none at all, including Basin (-0.1%) and Orense (0%). Lugo is the only province that, provisionally, shows a slight rise of 2.1%.

Looking at the cumulative decline in prices since the crisis first hit in 2007 the north-east corner of the country stands out with the largest falls recorded (in addition to La Rioja) in Catalonia (-39.3%), Aragon (-37.8%) and Valencia (-36.2%).

Included in this group, although located in the central zone, and with prices influenced by Madrid, is Castilla-La Mancha where the cumulative decline from 2007 now stands at 38.9%.

The cumulative decline now stands at over 40% in a number of provinces including Toledo (-43.1%), Guadalajara (-41.1%), Zaragoza (-40.4%), Tarragona (-40.2%) and Barcelona (-40%). Also on the verge of joining the over-40% group are Almeria (-39.2%), Malaga (-39.1%), Girona (-37.2%) and Valencia (-37.2%).

Conversely, the provinces that showed lower cumulative declines were those with lower population density and a slow second-home market, mainly in the north-west quadrant. Those provinces include Soria (-13.8%), Zamora (-10.2%), Orense (-6.5%) and Lugo (-5.7%).

You can download Tinsa’s complete report here (ES): Tinsa Market Report Q2 2012

Spanish unemployment approaches 5 million

Spanish unemployment
The queues keep growing

The number of registered unemployed is creeping closer to 5 million following an extra 38,769 job losses during March, slightly higher than the increase of 34,406 in the same month in 2011.

The total figure for people registered at the offices of public employment stands at 4.75 million at the end of March, an increase of 0.82% compared to the previous month, according to figures announced on Monday by the Ministry of Employment and Social Security. The official number of people registered unemployed is 4,750,867.

Compared to the same time last year unemployment is up by 9.6%, an increase of 417,198, and is the highest single increase since records began in 1996. The previous highest figure for March was in 2009 when 123,543 people registered as unemployed.

March is the eighth straight month in which unemployment figures have risen and also the represents the largest monthly increase of those eight months.

Secretary of State for Employment, Engracia Hidalgo, used the figures to justify the recent labour reforms stressing that the current situation was “unsatisfactory” and that the reforms introduced a framework of “trust and flexibility” for businesses. I’m not sure what it introduced for workers though! Not much, in my opinion.

The new figures suggest women are finding it harder to find or retain employment with an increase of 20,251, compared to the increase for men of 18,518. The same is true overall with the total number of unemployed women at 2,379,085 compared to the total for men which is 2,371,782

It’s not bad news for everybody though. In March 1,026,858 people found a new job and of those, 98,485 were permanent contracts, although the figure is 11.4% lower than the same time last year.


Spanish banks ‘encouraged’ to sell assets

Mariano Rajoy
Rajoy will "encourage" banks to sell assets

In an address to the Spanish parliament last week newly elected Mariano Rajoy says Spain’s banks will be encouraged to sell off their real estate portfolios in 2012.

Mr Rajoy said the true value of the aptly named “toxic assets” held by many of the country’s financial institutions needed to be clarified.

The Guardian quoted Mr Rajoy as saying: “We must clear up doubts about the value of certain assets, especially in real estate, which make access to the markets for the financial sector more difficult and also damage the credibility of our public debt.”

Antonio Barroso, analyst with Eurasia Group, told the Associated Press that there is still a division between the Popular Party, who have the majority in Parliament, and the Bank of Spain regarding the option of establishing a central bank to deal with all the toxic assets.

The value of property in Spain has taken a large hit over recent years with the latest Tinsa report showing a national fall of 8% between November 2010 and November 2011.

Spanish mortgage market update

Since September 2011 a number of Spanish Banks have implemented new scoring systems which assess client profiles and then produce client specific terms based on the overall risk profile of the client. The scoring systems are developed based on the performance of their back book and often penalise good applications because the client falls into a risk profile of non performers.

This is a change to the way Banks assess and reverts back to the pre boom days where Spanish Banks were renowned for lack of transparency and certainty.

Many Banks now work on this basis and also assess rate linked to products taken. With many life cover is compulsory to gaining an approval and for others life cover is compulsory to gain best rates.

Margins above Euribor have risen over the last two months, in some cases by as much as 50%. This is due to cost of funds and lack of liquidity.

The practice of placing floor rates on a mortgage deed has raised its ugly head again and is rarely explained properly to direct clients when they apply at branch level. Where possible these should be avoided as the rate will never drop below floor rate even if Euribors fall.

Debt to income ratios based on net incomes as shown on tax returns and debt payments as shown on credit files have tightened as 2011 has progressed, and in some cases Banks will only take into account 80% of net income but 100% of debt payments.

A great credit rating in the UK is meaningless to the Spanish Banks – they look at credit files merely to ascertain monthly outgoings and to check whether there any missed or late payments.

Financial assessment is made based on what shows on personal tax returns after deductions, nothing else is taken into account no matter how wealthy or asset rich you may be.

Clients  with buy-to-lets will find Banks assess the full debt payments but not all the rental income if rental income is not declared on tax return or after costs is nil many will not assess the rent coming in at all.. Those with more than a couple of buy to lets in home country will almost certainly find themselves unable to meet any Banks criteria.

Minimum income levels are another area of change for many Banks as is minimum loan sizes and minimum valuation levels they will accept.

Clients in non-taxpaying jurisdictions or living in countries where credit files are not available may find it difficult to achieve above 50% loan to value.

Self build loans, equity release and re-mortgages are scarce on the ground with few lenders even offering any solutions. Those that do have very strict criteria on what is possible and buying a share of a property for those getting divorced or one owner needing to get out has become near on impossible if you need to borrow money above the Banks maximum percentage of the cost of the share being bought.

Document evidence requirements are very high with anything up to 12 months bank statements and three years tax returns required. Failure to ensure clear and concise packaging of an application and full documentation will result in the application sitting on a Banks table going no-where. What has not improved is the Banks ability to be forthright and honest with a client preferring to ignore an applicant than actually deal with what is required.

An experienced mortgage packager will at least ensure that any application is dealt with swiftly even if the answer is not what was hoped for. Direct branch applications often go into no man’s land for weeks.

Poor explanations by branch staff explaining exactly what terms the client will be signing for and also ensuring clients understand these are embedded in a deed and cannot be changed at a later date without extensive costs incurred have made the market dangerous for the uninitiated. Behaviors have reverted to type with the onus put on the client to ask the right questions rather than information being freely and transparently given.

There is now a two tier mortgage system in Spain. Buy Bank stock and  pay more than you should for property but get high loan to values and rates from 0.25% above Euribor or find a good deal independently and expect to put in more cash with rates over 4%.

Either way use a good broker who takes fees on results so you can be sure you know exactly what you are taking on and what the alternatives are. Expect the process to be different to the UK as it is not the same. Do not pass over non refundable monies until you have an approval and for the safest way forward, and to give yourself maximum negotiating power on price of purchase, get an approval in place before you start looking at property.

This should cost nothing, except a bit of your time, never pay up front as there is no requirement for this, but be willing to pay on results. In this market an experienced and good broker will earn every penny of their fees.

International Mortgage Solutions

Domestic buyers returning

SpainWith the Spanish property market traditionally aimed at foreign buyers it seems the Spanish are now returning to the market too.

According to research from Savills, domestic buyers now make up two-thirds of Spanish property buyers with 66.2% of purchases made in the first nine months of 2011, a significant increase from the same period last year.

Danny Kinnoch, International Investment Director at Savills, said “Domestic investors continue to dominate the core market, but international players remain on the lookout for opportune deals.” He also added that he predicts an increase in investment in Spanish real-estate in 2012.

Meanwhile, recent research from the Royal Institution of Chartered Surveyors noted that expectations of capital and rental growth have dropped due to the increasing crisis in the eurozone.

Valuation gap in Spanish property

Spanish property valuations are causing friction between banks and investors.

The Financial Times revealed financial institutions have, on occasion, refused to sell real estate assets because the price offered by the buyer has been considered too low.

Wences Bunge, head of Credit Suisse’s European real estate group, said “Sellers have not adjusted expectations to the new reality. But I believe we are starting to see that reality.”.

Wences also pointed out that experienced investors are staying away from Spain’s property market and he does not expect this to change in the next 12 months.

According to Jones Day in Madrid economic uncertainty is the main reason why buyers may be postponing their purchase.

Meanwhile, delegates at Reuters Global Wealth Management summit were told that property prices in Spain’s coastal regions had reached rock-bottom and that the number or transactions was starting to show signs of recovery.