LATEST NEWS RELEASED AND PROPERTY FIGURES WITHIN SPAIN AND THE EUROPEAN COMMUNITY
Property developers in Spain confirm drop in sale of homes
The president of the Association of Spanish Constructors and Promoters (APCE), Guillermo Chicote, yesterday confirmed that the sale of flats went down by up to 60% between September and April and that there is now a surplus of around 500,000 unsold properties. Gerardo Díaz Ferrán, from the CEOE also warned that if the government did not adopt ‘brave and aggressive’ measures to alleviate the economic slowdown in Spain there would be half a million more unemployed by the end of the year.
According to Chicote, the situation will get worse in 2009 and that instead of 300,000 unemployed workers in the construction sector this number would rise to 500,000.
The APCE announced that if more properties were not sold then the ‘Treasury would not have money coming in and that it would have to pay out more money in subsidies to the unemployed’. Chicote also suggested some ways of increasing the demand for housing by creating a new category that fell between subsidised state housing and private housing with a fixed price.
Promoters have also asked the government to take a number of financial steps within the space of 3 years one of which would be to update the tax rebate for buying a property set in 1998 at 9,015 euros.
With respect to prices, APCE predicts that prices will continue to increase slightly below the rate of inflation. According to the latest official figures published by the Housing Ministry the price of flats went up only by 4% in this last quarter compared to an inflation rate of 4.5%.
Labels: Spanish property prices, spanish real estate market
House prices fall in Spain for the first time in 10 years
The fall in property prices in Spain is now official. House prices have fallen for the first time in 10 years according to figures published today by the Housing Ministry which show that prices have risen by 4% since April 2007 which is 0.5% less than the rate of inflation for this period. During the last property crisis, which occurred in the 90’s, prices continued to drop for 7 years.
Figures for the last quarter show that property prices have only risen by 0.8% and although during some quarters in 2007 prices rose below the rate of inflation this is the first time in a decade that property prices have dropped in real terms over the last 12 months. Another record is that the average price of a square metre in Spain is now calculated to be 2,100 euros.
Beatriz Corredoris, Spain's new Minister for Housing, faces an immediate challenge in her post given that she has arrived just at the moment that house prices are rising less than the rate of inflation. Moreover, some analysts predict a sharp fall in the property sector.
However, property developers refuse to admit that the drop in prices affects new housing. However, statistics published today only talk about prices and sales. Neither of which show a positive panorama. It is estimated that the sale of used housing has dropped by 23% whereas sales of new housing have dropped by only 0.9%. Nevertheless, these statistics are a lot more positive than those of the Spanish National Institute for Statistics which estimates that the sale of used housing has dropped by 36% and new housing by 15% in 2007.
The last stronghold for the property market in Spain which now appears to be in free fall is subsidised housing. According to official figures this sector of the market has evolved well. Figures show that around 200 families buy a house or flat in this sector each day which totals 73,000 properties a year. This translates as a 20% rise compared to 2006. These figures are significant not only for construction companies that don’t know what to do with surplus stock but also the government which has made a commitment to increase the number of subsidised houses and flats to 150,000 a year.
The evolution of the property sector is one of the reasons why predictions for economic growth are gloomy. Funcas (the Foundation of Building Societies) has estimated economic growth in Spain at 2% for 2008 and the figure for 2009 is even worse at just 0.9%.
The IMF calculates that property is overvalued by 20 percent in Spain
The International Monetary Fund (IMF) warned yesterday that a drop in the price of properties and investment in the residential property sector in particular could lead to recession. Although this is not the case in Spain yet the IMF has indicated that it believes properties to be overvalued in Spain by around 20%, a situation which is unsustainable. It also warned that Spain’s economy is one of the most vulnerable if there is a further weakening in the property sector.
A chief economist for the IMF, Simon Johnson, believes that innovation in the financial sector that has helped many people to purchase their own home over the last two decades has also contributed to making advanced economies vulnerable to weaknesses in the property sector.
Ireland, the United Kingdom, Holland and France are also in a vulnerable position due to weaknesses in their property markets at present. Spain is also included in this group. Firstly residential investment is the second highest among advanced economies and constitutes 9% of GDP in Spain although at present this figure appears to be stable according to the IMF.
Ireland is the only other country with a higher figure than Spain’s with 12% of its GDP dependent on investment in the residential property sector. The second factor is the importance of the construction sector in the Spanish economy. Thirdly, the soaring price of properties in Spain over recent years is also another significant factor. According to Roberto Cardarelli, an economist for the IMF, prices in Spain are overvalued by between 15 to 20% which is twice as much as in the US. He also said that a weakening in this sector would have serious repercussions for the Spanish economy because it was much more vulnerable than any other advanced economy.
In the report due to be presented in Washington later this month the IMF also indicated that a weakening in the property sector would affect any economy that was experiencing a period of economic slowdown and that the effects would take anywhere between two to six months before they became apparent.
Monetary policy could help lessen the negative effects mentioned above which is why the IMF believes that central banks must pay more attention to developments in the property market and respond in an ‘energetic’ way to fluctuations in prices in this sector.
Next week the IMF will present its report on the risks to the financial sector and on Wednesday it will outline its forecast on economic growth. Yesterday Johnson spoke about ‘stagnantion in the US economy and ‘slow growth in Europe’. He also said that the price of property should be considered as one of the many key factors that influence economic prospects.
Spanish property market slide confirmed
25% drop in number of mortgages confirms problems in property market
Despite the government’s predictions of a smooth adjustment in the property market figures for property sales published today by the Spanish National Institute of Statistics (INE) tell a different story. These figures show that property sales have fallen by 27% compared to the same period last year.
Another indicator of the slow down in the Spanish property market is the 25% drop in the number of mortgages conceded. This drop of 25.71% was the biggest decrease since 2004. According to the INE not only fewer mortgages were conceded in January but also the total amount of capital lent by banks and building societies went down by 3.08%. The average amount lent was 142.793 euros.
Building societies conceded 58.5% of the total number of mortgages in January followed by banks at 31.4% and other financial entities at 10.1%. As far as the amount of capital lent by these building societies lent 54.5% of the total followed by banks at 35.1% while other financial entities lent 10.4%.
The average interest rate for mortgages conceded by building societies was 5.09% over 26 years compared to the average interest rate for mortgages conceded by banks at 5.06% over 26 years. 98.3% of the mortgages conceded in January were variable compared to 1.7% which were fixed rate mortgages. 87.6% of the total number of mortgages conceded in January used the Euribor as the reference interest rate.
The sale of used housing fell by 35.6% while the sale of new housing also dropped by 14.6%. However, despite a drop in figures compared to a year ago the sale of new housing rose by 41.08% compared to figures for the previous month of December.
91.8% of property sales were for private housing which constitutes a drop of 26.7% over a twelve month period while the sale of subsidised housing fell by 30.7% compared to figures for 2007.
The total number of rural and urban estates sold was 234.788 which is 15.3% less than a year ago. Although this figure was 37.8% more than for December 2007. However, despite this monthly increase figures show a fall in sales of 23.5% over the course of year.
The INE named Murcia as the community with the highest number of property sales per 100,000 inhabitants with 268 sales followed by the Rioja (258), Castilla-La Mancha (237), the Comunidad Valenciana (217), Cantabria (212) and Andalucia, with 200.
At the opposite end of the list was Galicia with the least sales per 100,000 inhabitants with 113 followed closely by Madrid (124), the Basque Country (129), Navarra (138), Catalonia (139), Asturias (150), Castilla y León (157), Extremadura (159) Aragón (167), Baleares (180) and the Canary Islands (190).
Number of mortgages in Spain fall by 8% in 2007
Despite the slowdown in the Spanish housing market the value of an average mortgage for a house or flat in Spain went up last year to 149,007 euros. This is 6.2% more than the average for 2006 in which mortgages increased by 12.6%. However, the total number of mortgages taken out for the purpose of buying a home went down by 7.97% to 1,235,212 following a sharp fall of 23.41% registered in December 2007.
A similar situation occurred with regards to the sale of property for commercial or rural use. The average capital needed to purchase land or property rose by 7% to 168,677. However, there were less mortgages of this type taken out with respect to the previous year with a drop of 5.1% compared to 2006 at 1,768,198 estates sold.
Looking at statistics for the last quarter of 2007 the drop in property sales becomes even more evident as well as a drop of 2.2% in the average price of a mortgage compared to November 2007 which shows an accumulated decrease of 5%.
However, the cost of mortgages kept going up with some monthly payments going up by as much as 118.05 euros according to figures from the Spanish National Institute for Statistics published yesterday.
Comparing the average number of years a mortgage is taken out, the type of interest paid and the average price of a mortgage it appears that monthly payments in 2007 were situated at 825.63 euros compared to 707.58 euros for 2006 which works out at 13.52% more.
Savings banks (cajas de ahorros) conceded the most number of mortgages in 2007 at 59.2% followed by banks which conceded up to 31.7% - other financial institutions were responsible for 9.1%.
As far as the amount conceded, savings banks conceded up to 57.2% of the total followed by banks which conceded up to 35.1%. The average interest charged on a mortgage was 4.71% and the average length was 26 years, one more than in 2006.
According to the latest information 98% of mortgages used variable rates compared to just 2% that used a fixed rate and the euribor was the most common rate used with 87%of mortgages using this interest rate as their reference.
The number of mortgages that changed their conditions rose by 26.2% in December last year while cancellations dropped by 10.1%.
Most applications for rent subsidies will be accepted
Housing Minister predicts 97% of applications for help towards renting will be accepted
Recently the Spanish government set up a scheme for those aged between 22 and 30 years old under which they can receive up to 210 euros per month Spanish subsidies towards the cost of renting (Renta Básica de Emancipación). Today the Spanish Housing Minister, Carme Chacón, said that she believes that up to 97% of applications for Renta Básica de Emancipación will be accepted.
Chacón, who is currently on a visit to Segovia where she will sign a plan to renovate the Cervantes theatre, explained that almost all of the applications received so far meet the necessary requirements needed to be eligible for government help.
Nevertheless, Chacón said that it was up to each individual region to manage and authorize proceedings which then needed to be submitted to the Housing Ministry for final approval.
Chacón said that 33,199 applications had been received so far - on average more than 1000 per day – a figure which is in line with her department’s forecasts. She stated that around 360,000 young people could benefit from the government subsidy during its first year.
Excess of new housing in Spain
The crisis in the property sector causes developers to find alternative use for the empty properties and they are trying to negotiate an agreement with the government renting agency set up by the Socialist government two years ago.
In little more than 2 months the Public Agency for Renting in Spain (SPA) created by the Ministry of Housing has received the offer of 6000 newly built flats from property developers interested in renting them out because they can’t find enough buyers.
According to figures released yesterday, over half of flats that are offered to the SPA for rent come from estate agents rather than from private owners. In general it is usually flats from small to medium sized property developers that are being offered.
The president of the Association of Spanish Constructors and Promoters (APCE), Guillermo Chicote, yesterday confirmed that the sale of flats went down by up to 60% between September and April and that there is now a surplus of around 500,000 unsold properties. Gerardo Díaz Ferrán, from the CEOE also warned that if the government did not adopt ‘brave and aggressive’ measures to alleviate the economic slowdown in Spain there would be half a million more unemployed by the end of the year.
According to Chicote, the situation will get worse in 2009 and that instead of 300,000 unemployed workers in the construction sector this number would rise to 500,000.
The APCE announced that if more properties were not sold then the ‘Treasury would not have money coming in and that it would have to pay out more money in subsidies to the unemployed’. Chicote also suggested some ways of increasing the demand for housing by creating a new category that fell between subsidised state housing and private housing with a fixed price.
Promoters have also asked the government to take a number of financial steps within the space of 3 years one of which would be to update the tax rebate for buying a property set in 1998 at 9,015 euros.
With respect to prices, APCE predicts that prices will continue to increase slightly below the rate of inflation. According to the latest official figures published by the Housing Ministry the price of flats went up only by 4% in this last quarter compared to an inflation rate of 4.5%.
Labels: Spanish property prices, spanish real estate market
House prices fall in Spain for the first time in 10 years
The fall in property prices in Spain is now official. House prices have fallen for the first time in 10 years according to figures published today by the Housing Ministry which show that prices have risen by 4% since April 2007 which is 0.5% less than the rate of inflation for this period. During the last property crisis, which occurred in the 90’s, prices continued to drop for 7 years.
Figures for the last quarter show that property prices have only risen by 0.8% and although during some quarters in 2007 prices rose below the rate of inflation this is the first time in a decade that property prices have dropped in real terms over the last 12 months. Another record is that the average price of a square metre in Spain is now calculated to be 2,100 euros.
Beatriz Corredoris, Spain's new Minister for Housing, faces an immediate challenge in her post given that she has arrived just at the moment that house prices are rising less than the rate of inflation. Moreover, some analysts predict a sharp fall in the property sector.
However, property developers refuse to admit that the drop in prices affects new housing. However, statistics published today only talk about prices and sales. Neither of which show a positive panorama. It is estimated that the sale of used housing has dropped by 23% whereas sales of new housing have dropped by only 0.9%. Nevertheless, these statistics are a lot more positive than those of the Spanish National Institute for Statistics which estimates that the sale of used housing has dropped by 36% and new housing by 15% in 2007.
The last stronghold for the property market in Spain which now appears to be in free fall is subsidised housing. According to official figures this sector of the market has evolved well. Figures show that around 200 families buy a house or flat in this sector each day which totals 73,000 properties a year. This translates as a 20% rise compared to 2006. These figures are significant not only for construction companies that don’t know what to do with surplus stock but also the government which has made a commitment to increase the number of subsidised houses and flats to 150,000 a year.
The evolution of the property sector is one of the reasons why predictions for economic growth are gloomy. Funcas (the Foundation of Building Societies) has estimated economic growth in Spain at 2% for 2008 and the figure for 2009 is even worse at just 0.9%.
The IMF calculates that property is overvalued by 20 percent in Spain
The International Monetary Fund (IMF) warned yesterday that a drop in the price of properties and investment in the residential property sector in particular could lead to recession. Although this is not the case in Spain yet the IMF has indicated that it believes properties to be overvalued in Spain by around 20%, a situation which is unsustainable. It also warned that Spain’s economy is one of the most vulnerable if there is a further weakening in the property sector.
A chief economist for the IMF, Simon Johnson, believes that innovation in the financial sector that has helped many people to purchase their own home over the last two decades has also contributed to making advanced economies vulnerable to weaknesses in the property sector.
Ireland, the United Kingdom, Holland and France are also in a vulnerable position due to weaknesses in their property markets at present. Spain is also included in this group. Firstly residential investment is the second highest among advanced economies and constitutes 9% of GDP in Spain although at present this figure appears to be stable according to the IMF.
Ireland is the only other country with a higher figure than Spain’s with 12% of its GDP dependent on investment in the residential property sector. The second factor is the importance of the construction sector in the Spanish economy. Thirdly, the soaring price of properties in Spain over recent years is also another significant factor. According to Roberto Cardarelli, an economist for the IMF, prices in Spain are overvalued by between 15 to 20% which is twice as much as in the US. He also said that a weakening in this sector would have serious repercussions for the Spanish economy because it was much more vulnerable than any other advanced economy.
In the report due to be presented in Washington later this month the IMF also indicated that a weakening in the property sector would affect any economy that was experiencing a period of economic slowdown and that the effects would take anywhere between two to six months before they became apparent.
Monetary policy could help lessen the negative effects mentioned above which is why the IMF believes that central banks must pay more attention to developments in the property market and respond in an ‘energetic’ way to fluctuations in prices in this sector.
Next week the IMF will present its report on the risks to the financial sector and on Wednesday it will outline its forecast on economic growth. Yesterday Johnson spoke about ‘stagnantion in the US economy and ‘slow growth in Europe’. He also said that the price of property should be considered as one of the many key factors that influence economic prospects.
Spanish property market slide confirmed
25% drop in number of mortgages confirms problems in property market
Despite the government’s predictions of a smooth adjustment in the property market figures for property sales published today by the Spanish National Institute of Statistics (INE) tell a different story. These figures show that property sales have fallen by 27% compared to the same period last year.
Another indicator of the slow down in the Spanish property market is the 25% drop in the number of mortgages conceded. This drop of 25.71% was the biggest decrease since 2004. According to the INE not only fewer mortgages were conceded in January but also the total amount of capital lent by banks and building societies went down by 3.08%. The average amount lent was 142.793 euros.
Building societies conceded 58.5% of the total number of mortgages in January followed by banks at 31.4% and other financial entities at 10.1%. As far as the amount of capital lent by these building societies lent 54.5% of the total followed by banks at 35.1% while other financial entities lent 10.4%.
The average interest rate for mortgages conceded by building societies was 5.09% over 26 years compared to the average interest rate for mortgages conceded by banks at 5.06% over 26 years. 98.3% of the mortgages conceded in January were variable compared to 1.7% which were fixed rate mortgages. 87.6% of the total number of mortgages conceded in January used the Euribor as the reference interest rate.
The sale of used housing fell by 35.6% while the sale of new housing also dropped by 14.6%. However, despite a drop in figures compared to a year ago the sale of new housing rose by 41.08% compared to figures for the previous month of December.
91.8% of property sales were for private housing which constitutes a drop of 26.7% over a twelve month period while the sale of subsidised housing fell by 30.7% compared to figures for 2007.
The total number of rural and urban estates sold was 234.788 which is 15.3% less than a year ago. Although this figure was 37.8% more than for December 2007. However, despite this monthly increase figures show a fall in sales of 23.5% over the course of year.
The INE named Murcia as the community with the highest number of property sales per 100,000 inhabitants with 268 sales followed by the Rioja (258), Castilla-La Mancha (237), the Comunidad Valenciana (217), Cantabria (212) and Andalucia, with 200.
At the opposite end of the list was Galicia with the least sales per 100,000 inhabitants with 113 followed closely by Madrid (124), the Basque Country (129), Navarra (138), Catalonia (139), Asturias (150), Castilla y León (157), Extremadura (159) Aragón (167), Baleares (180) and the Canary Islands (190).
Number of mortgages in Spain fall by 8% in 2007
Despite the slowdown in the Spanish housing market the value of an average mortgage for a house or flat in Spain went up last year to 149,007 euros. This is 6.2% more than the average for 2006 in which mortgages increased by 12.6%. However, the total number of mortgages taken out for the purpose of buying a home went down by 7.97% to 1,235,212 following a sharp fall of 23.41% registered in December 2007.
A similar situation occurred with regards to the sale of property for commercial or rural use. The average capital needed to purchase land or property rose by 7% to 168,677. However, there were less mortgages of this type taken out with respect to the previous year with a drop of 5.1% compared to 2006 at 1,768,198 estates sold.
Looking at statistics for the last quarter of 2007 the drop in property sales becomes even more evident as well as a drop of 2.2% in the average price of a mortgage compared to November 2007 which shows an accumulated decrease of 5%.
However, the cost of mortgages kept going up with some monthly payments going up by as much as 118.05 euros according to figures from the Spanish National Institute for Statistics published yesterday.
Comparing the average number of years a mortgage is taken out, the type of interest paid and the average price of a mortgage it appears that monthly payments in 2007 were situated at 825.63 euros compared to 707.58 euros for 2006 which works out at 13.52% more.
Savings banks (cajas de ahorros) conceded the most number of mortgages in 2007 at 59.2% followed by banks which conceded up to 31.7% - other financial institutions were responsible for 9.1%.
As far as the amount conceded, savings banks conceded up to 57.2% of the total followed by banks which conceded up to 35.1%. The average interest charged on a mortgage was 4.71% and the average length was 26 years, one more than in 2006.
According to the latest information 98% of mortgages used variable rates compared to just 2% that used a fixed rate and the euribor was the most common rate used with 87%of mortgages using this interest rate as their reference.
The number of mortgages that changed their conditions rose by 26.2% in December last year while cancellations dropped by 10.1%.
Most applications for rent subsidies will be accepted
Housing Minister predicts 97% of applications for help towards renting will be accepted
Recently the Spanish government set up a scheme for those aged between 22 and 30 years old under which they can receive up to 210 euros per month Spanish subsidies towards the cost of renting (Renta Básica de Emancipación). Today the Spanish Housing Minister, Carme Chacón, said that she believes that up to 97% of applications for Renta Básica de Emancipación will be accepted.
Chacón, who is currently on a visit to Segovia where she will sign a plan to renovate the Cervantes theatre, explained that almost all of the applications received so far meet the necessary requirements needed to be eligible for government help.
Nevertheless, Chacón said that it was up to each individual region to manage and authorize proceedings which then needed to be submitted to the Housing Ministry for final approval.
Chacón said that 33,199 applications had been received so far - on average more than 1000 per day – a figure which is in line with her department’s forecasts. She stated that around 360,000 young people could benefit from the government subsidy during its first year.
Excess of new housing in Spain
The crisis in the property sector causes developers to find alternative use for the empty properties and they are trying to negotiate an agreement with the government renting agency set up by the Socialist government two years ago.
In little more than 2 months the Public Agency for Renting in Spain (SPA) created by the Ministry of Housing has received the offer of 6000 newly built flats from property developers interested in renting them out because they can’t find enough buyers.
According to figures released yesterday, over half of flats that are offered to the SPA for rent come from estate agents rather than from private owners. In general it is usually flats from small to medium sized property developers that are being offered.