Mortgage Rates Finally Going Down

Euribor - the rate normally used to calculate mortgage payments in Spain – has fallen rapidly to the lowest it’s ever been, but average mortgage interest rates used by banks and savings banks to calculate mortgage repayments were still rising as recently as January, new figures reveal.

The average mortgage interest rate in January was 5.64%, an increase in percentage terms of 10.2% compared to a year ago, and 1.1% higher than December 2008, according to data from the National Institute of Statistics (latest figures are for January).

In contrast, Euribor fell to 2.622% in January, a 24% fall from December, and 50% down from October. 12-month Euribor is expected to close March at around 1.9%, the lowest level in Euribor’s 10 year history.

The data shows that average mortgage interest rates charged by lenders have not fallen since October, despite Euribor falling more than 50% since then.

Savings banks are the worst culprits when it comes to hogging the benefits of a falling Euribor. Savings banks charged an average of 5.72% at 23 years, whilst ordinary banks charged 5.63% at 20 years.

Spreads between Euribor – the rate at which banks lend to each other - and mortgage interest rates are widening as banks try to rebuild their balance sheets after years of reckless lending on thin spreads.

These figures square with widespread complaints, especially amongst non-resident borrowers, that banks are not passing on any of the savings from a falling Euribor. The small print on many mortgage contracts is also starting to reveal nasty surprises for borrowers, such as interests rate ‘floors’ below which mortgage rates cannot fall.

Nevertheless, many borrowers on annually resetting mortgage should soon start to see some relief in their monthly payments. If the fall in interest rates is passed on payments on the average mortgage should fall by 25%.

Declining mortgage activity

The number of new mortgages approved fell 43.5% to 53,000 in January compared to a year before. The overall value of new loans fell 52% year on year, and the average mortgage value fell 14.5% to 122,000 Euros. New mortgage approvals have fallen for 19 consecutive months, and are now 20% lower than a year ago.

Sourge: http://www.spanishpropertyinsight.com/

Real Estate Agents Decimated by Spanish property Crash

Of the 80,000 real estate agents operating in Spain in the summer of 2006 just 25,000 are still in business, according to an article today in the Spanish daily La Vanguardia. That means that 70% of estate agents have closed in the property crash, destroying 180,000 jobs in the process.

The bloodletting is not over. Industry experts cited in the article forecast that another 5,000, or 20%, will close this year, leaving just 20,000 in business at the end of 2009.

Many of the estate agents that have closed were ‘chiringuitos’, or one-man bands with no qualifications working with nothing more than a car, a website and a mobile phone. “The great majority of Spain’s real estate association members (API) are still open,” claims Joan Ollé, president of Barcelona’s API association.

Estate agents in Catalonia are expected to have a rough year thanks to a new regional law obliging them to register with the government and take out professional indemnity insurance. Ollé expects the new regulations, which come into force after the summer, to drive half the agents in Catalonia out of business.

Estate agents are being hammered by an 80% fall in transactions since the peak of 2006, a fall in property prices, and the increasing number of developers going bust owing estate agents commissions.

The big chains of estate agents, where a franchise model is common, are suffering as much as any. Expofinques, MC, and Don Piso are all in administration, Fincas Corral was sold for just 1 Euro, and Coldwell Banker, the biggest real estate agency franchise in the world, has abandoned Spain after opening 60 shops. Tecnocasa, the biggest franchise real estate franchise operation in Spain, has gone from 1,400 offices in 2006 to 308 at the end of 2008.

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sourge:http://www.spanishpropertyinsight.com/

Second home sales to non-residents plunge 59% in 2008

The number of foreigners buying a second home in Spain collapsed in 2008, falling by 59% to a measly 3,691 sales, according to the latest statistics from the Ministry of Housing. Compared to 2006, when non-residents bought 17,212 second homes in Spain, sales were down by a whopping 79%, giving investors a chance to observe how risky the overseas property investment game really is.

Andalucia, home to the Costa del Sol, the Costa Tropical, and the Costa de Almeria, was still the most popular region for non-resident buyers, with 1,415 sales in 2008, down 52% (and 78% compared to 2006).


The Valencian Region was next, with a risible 778 sales in 2008, down 58% on 2007, and 83% on 2006. This latter figure shows how far Valencia’s holiday home industry has sunk in just 2 years. The Costa Blanca accounts for almost all holiday homes sales to foreigners: there were just 23 sales on the Costa Azahar in 2008.


The pain was spread fairly evenly around Spain’s popular southern coasts and islands, but Murcia was the hardest hit by the falling numbers of non-residents buying property in Spain. Sales in Murcia fell by 86% last year, to just 270 homes, whilst the supply of holiday properties built with foreigners in mind, typically on golf courses, continued to burgeon.


Sales fell in the Canaries by 39% to 475, in the Balearics by 51% to 221, and in Catalonia, home to the Costa Brava and Costa Dorada, by 49% to 193.


In Teruel province, once tipped on British TV as one of the top 10 overseas property investment destinations, sales exploded by 150%, rising to a mind-boggling 5 sales in 2008, up from 2 in 2007 (but down from 8 in 2006). Once again the lucky few who bet the house based on what they saw on the telly must have really hit the jackpot.

Sourge: Spanish Property News

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Prices Are falling

Prices for both new and resale properties have already fallen by 40% thanks to a collapse in sales, according to Santiago Baena, President of the Spanish Real Estate Agents’ industry body (API).

Speaking at the start of the annual API conference in Logroño, Baena also said that 50,000 estate agents have had to shut up shop as a consequence of Spain’s property market downturn.
“It’s now a time for buyers, not vendors,” said Baena, in reference to the fact that, in this market, buyers hold all the cards.

An official from the Ministry of Housing reminded participants that property transactions fell by 32% in 2008, whilst forecasting that “the numbers will start to recover in the coming months.”

Source: http://www.spanishpropertyinsight.com/