Property and loan market in Spain

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April property sales

Data released within the month of June continued to show gradual but sustained recovery of the property and home loan market in Spain for the most part . New mortgage applications for mortgages in Spain, in total grew and house sales were up.

It is clear from some of the stats that the recovery remains fragile and the market remains a long way off its height.

House price index

Data issued by the INE in Spain for the first quarter shows that the house price index increase by more than two points and stands at 6.3%. The increase is mostly due to an increase in resale property with new builds continuing to hold back a higher level of recovery.

The increases are lower than increases experienced in 2015 within the same quarter indicating growth acceleration has slowed a little. Some of this may be a reflection of the political vacuum that was experienced in Spain during that quarter.

Areas performing above the national average included the Balearics, Madrid and Cataluna and only Castilla- La Mancha  and La Rioja saw a fall against the fourth quarter of 2015.

Numbers of homes sold

The number of houses sold within the month of April as signed at the offices of the Notaries increased by 16.2% on an inter-annual basis the price per meter squared being achieved as an average surprisingly fell back by 5.1% and remain 34.25 down on the peak year of 2007.

House prices have grown since June 2015 and grew between the months of June and November 2015 but the average price per meter squared achieved in April was in fact lower than November 2015. This statistic also appears to be linked to the election issues that Spain experienced with buyers and sellers less confident of a continuing financial recovery after no government could be formed.

Internal pressures

Whilst the new elections in June have by no means given a definitive and clear way forward for the Politicians the fact it is most likely a coalition government will now be formed and the fact the economy has continued to improve even in the absence of clear leadership may help the house price market get back on track.

Transfer of property rights actually registered at land registry show a similar picture with growth continuing but at a slower pace for the first quarter but a n acceleration again during April.

Transfers by way of all property sales grew 12.7% within the month of April in comparison to the month before and by 28.4% against the same month of the previous year. Overall for the year so far the increase in all property sales stands at 10.2%.

Where the data relates to the purchase of a house the month of April actually showed a significant difference to that of March and was up 10.3% this is the highest increase over these two months since 2013 and the normal trend is for Aprils completions to be lower than those of March.

Resales lead the way

Resale house sales outstripped new builds by quite some way with 28 thousand second hand homes sold and only 7,200 new builds registered with a new owner. Whilst Spanish Banks are now actively looking to start funding new developments again this relaxation of mortgage facilities in Spain does seem to helping demand.

The Balearics whilst smaller on numbers as per the rest of the year  is outperforming most other autonomo regions.

Mortgage lending keeps in step

Mortgage lending to support the housing market is also moving forward with mortgages in Spain now back to 2009 levels.

The number of newly signed mortgages in April for the purpose of buying a home reached 20,232. The average capital lent was € 120,125 actually falling slightly on April from the previous year. Loans for construction against the market trend of less sales grew by 45.3% however the numbers remain small at 539 new loans made by the Spanish Banks.

Interestingly the amount of credit granted for the purchase of a home as percentage of sales financed by way of a mortgage stood at 47.5% when compared to historic levels which exceeded 70%. This may be a blip but would be a concern if it turned into a trend for the already beleaguered Banks in Spain if those owning a home in Spain bought cash.

Home loans

Mortgages in Spain for the purchase of a home as reported by the INE in April reflecting previous months signings showed an increase of 24.6% over April of the previous year and number of new loans registered totaled 23.607. The average loan size for lending actually registered stood at € 108.354 lower than the level of new singings not as yet registered within the same month.

Increases over March were small with the number of new Spanish Mortgages increasing by 2.7%, the amount of capital increasing by 3.2% and the average loan size increasing by 0.5%.

Annually accumulated for the year so far the number of new loans constituted are up 16.2%, the level of capital lent is up 18.6% and the average loan size is up 2%.

Credit for the purpose of buying a main residence or holiday home made up 53..3% of all lending within the month.

Apart from 2013 when there was a sharp rise in lending April over March whilst small the increase of the preceding month is unusual.

Mortgage product types and rates

As part of ongoing trend, new mortgagees and the Banks in Spain continued to elect to contract and move forward the share of the market taken up by fixed rates. In March the level of mortgage product types granted on a full term fixed basis was 12.4% in April this rose to 14.8%.

The average interest rate dropped to 3.21% slightly down on March levels and 2.2% lower than the same month of the previous year.

Regionally only Andalucia , the Canaries and Madrid had a drop in numbers of new loans March over April. The drop in the Canary Islands was significant and partially reflects the house sale profile for the year in the Islands. However the Canaries remains the only region down for the year to date in terms of both number of new mortgages and capital lent.

Over all regions the number of loans is up 24.6% year on year and the capital lent has increased by 30.9% so far in 2016 over 2015.

Key challenge for the Spanish banks

The big fly in the ointment for the lenders in Spain aside form the margin pressures and high levels of defaults is that cancellations of loans in comparison to new mortgages in Spain  granted continue to be higher. In only one month in the last 5 years have new loans outstripped redemptions. The impact of  the shrinking Spanish mortgage books is felt both in terms of profit from interest earned and ancillary product.

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