Lending and purchases
Data issued in December continues to show that the mortgage market in Spain is improving. Loans are on the increase both in terms of numbers of,capital lent and average loan size on a year on year basis.
House sales and house prices have stabilized and show some growth in certain areas but the improvements are not yet consistent enough to state a full recovery is underway.
House sales and prices.
The House Price Index published by the INE for the third quarter is now showing an annual rate of 4.5%. This is an increase of 4.5% over the base taken from prices in 2007. The house prices however when compared against the previous quarter only increased by 0.7% and where this related to new housing rather than resale’s the annual rate of increase stood at 4.3% and was six tenths lower than the previous quarter.
The purchase of homes in October, taken from those signed at Notary within the month, were up 2.7%. This was the 9th consecutive month of increases. The number of homes sold in October reached 35,088 which is still well below the pre crisis levels.
The sale of apartment’s stagnated dropping by 1.1% year on year, new build sales fell and resales were up 10.96%. Villas and Town houses are leading the recovery and sales rose 4.7%.
Regional house sales
Regionally the Balearics are performing best in terms of house sales increases and price hikes against the base of 2007. Madrid and Cataluña also performed above the national average and all three had an increase against the previous quarter.
Andalucía and the Canaries performed below the national average but both regions performed better than quarter two. A number of regions fell back against quarter two whilst still maintaining year on year slight growth.
The Coastal areas and major Cities as might be expected are ahead of the other regions in Spain.
Mortgages in Spain
Loans signed at Notary indicated a significant and sustained recovery during 2015 Last month’s reporting showed where for the first time in over 5 years new loans outstripped redemptions and cancellations. Despite however the good news of last month in relation to loans redeemed versus new loans registered, unfortunately September appears to have been a blip. Net outflows were the name of the game again in October with over 23,000 loans cancelled and only 19,000 new loans registered.
Loans for the purchase of homes were up 15% year on year with 15,163 new loans signed at Notary. The average loan amount was up 5.4%.
43.2% of all new house purchases were bought with some form of credit which is the highest percentage of homes financed by a loan since January 2012.
The INE figures for October which reflect loans registered at land registry, so a little behind the data from the Notaries, showed that the number of loans registered were 19,195 reflecting higher levels of signed loans in the previous two months. In comparison to October 2014 the increase was 7.1%.
Average loan size was up annually by 10.8% at € 111.711.
Number of new loans and capital lent
The number of properties mortgaged in October, when compared to September dropped by 19.4% and capital lent dropped by 18.1%. This is a normal trend with October completions falling below that of the September. Only once in last 5 years has October beaten September levels. Annually across both this being numbers of loans and capital lent,significant growth has been seen. Loan levels are up 20.1% inter-annual accumulated and level of money lent is up 24.7%.
53.1% of all credit flowing into the market during October was for the purchase of a home. Variable rates made up 90.3% of all new contracts. This levels still very high but lower than previous years as a trend toward taking fixed rates seems to be continuing. The average interest rate was 3.30% down slightly from September reflecting a continuing drop each month in the 12 month Euribor which stands for Decembers completions and reviews at an all time low of 0.079%.
Regional performance and types of mortgages
As with house sales the Balearics leads the way regionally in terms of yearly increases. The number of loans are up a staggering 61.8% on the year. The canaries, Cataluña and Murcia are all showing increases well above the average. Andalucía is up marginally but well below national averages and Madrid is one of the few regions down year on year although capital lent over the year remains up on an annual basis.
Construction lending covering residential homes is up 13.2% year on year but fell in October by 4.5% and this was the second consecutive month that construction lending shied a decrease. With new build house sales slowing down in comparison to resale’s this decrease may continue.
Governor of Bank of Spain yearly address to the banking system
The Governor of the Bank of Spain addressed the Spanish Banks this month and outlined the challenges facing the Banks in Spain through 2016.
Whilst most Banks are now on a sound footing, interest margins due to low interest rates remain under pressure and are expected to be so throughout 2016. NPLs, Non Performing Loans, continue to fall in terms of absolute numbers and as a ratio of the book. Bad loans this year are currently running at 4.9% of the balance sheets as an average in comparison to the 6% of last year.
The Bank of Spain Governor stated that whilst challenges laid ahead for the credit institutions that a number of opportunities should be grasped during the next 12 months.
Spanish Banks still have far more branches per customer than most other European countries leaving scope for further cost cutting to help improve profitability. There remains wide scope for further amalgamation of smaller Banks so 2016 will continue to see further consolidation of the Banking system. With fewer players and a number of branch closures competitiveness will improve and bring Spain in line with other major European countries.
Spanish Banks are also challenged by the governor to improve their scope of internet activity and significantly improve their access to product and services via the internet, again to bring them in line with other countries within Europe.