New Spanish mortgage approvals fall 37pc

New Spanish mortgage approvals in February fell by 37% year on year, to 51,827, according to new figures from Spain’s National Institute of Statistics (INE). Falling mortgage approvals are a clear feature of a shrinking property market.

New Spanish mortgage approvals have been declining for 20 months, and have decline by more than 20% almost every month since January 2008.

Looking on the bright side, February’s decline in new mortgage approvals was smaller than January’s, when the slumped by 43.5% year on year.

The average value of new mortgages also fell in February compared to the same month last year, by 17% to 123,643 Euros. But on a monthly basis, the average mortgage value rose a fraction, by 1.3%, for the first time in 12 months. That may be an indicator that the property market is starting to find a floor, or it may just be a blip.

Interest rates on new mortgages rose, however, despite an extraordinary drop in base rates. The average rate on new mortgages, at 5.4%, was 5.9% higher than a year ago, despite the base rate falling from 4.349% to 2.135%.

It was also reported today in the Spanish press that Spain’s biggest real estate companies have a combined debt of 300,000 billion Euros.

Spanish property market shrinks by 40pc in February

The Spanish property market shrank year-on-year by 40% in February, according to the latest figures from the National Institute of Statistics (INE). Excluding social housing, there were 30,822 property transactions in February, compared to 51,343 a year before.

The second lowest monthly sales results on record, this is a blow after sales figures in December gave optimists hope that the market might be starting to bottom out. The market fell by 41% in January, and February shows that the Spanish property market, measured by sales activity, is still contracting rapidly.

As the table above shows, property sales fell the most in The Balearics, by 54.6%, followed by Asturias (-53%), and Catalonia (-52.3%). None of Spain’s autonomous regions escaped negative figures.

Once again resale transactions were down the most, by 45%, compared to a fall of 29% for newly built properties, giving the impression that the new build market is faring comparatively well. That is misleading. In reality, new sales by developers have collapsed in the last 12 months, but thanks to long lead times in the construction industry, the full impact of this has yet to show up in the INE’s market figures. As the year proceeds, the monthly data for new build sales will fall off rapidly.

With the glut of newly built properties still growing to an estimated 1 million this will put further downward pressure on prices

Sourge: Spanish property

Spanish property still over-priced by some standards

The chart says highly overpriced

Despite a market crash and recent price falls, property in Spain is some of the most over-priced in the developed world, according to new figures published by The Economist magazine. Spanish house prices need to fall by around 50% to get back to the long-term average, if the figures are to be believed.

The Economist looks at property prices in the OECD (a club of developed countries) in relation to rents and incomes, comparing them to the long-term average for both measures.

By the standards of the price-to-rent ratio, Spanish property is the most over-priced in the OECD, around 80% above the long-term average. By the price-to-income ratio, Spain is the second least affordable country, 44% above the long-term average, behind only the Netherlands.

Property prices “will have to fall still more in most countries if affordability…is to return to its long-term average,” says The Economist.

Look where Japan is, almost 2 decades after its own property bubble burst. The lowest property prices in the OECD by both measures. Could that be what lies in wait for Spain?

Bear in mind that The Economist will be using official housing market data, which in Spain can be highly misleading. It is possible that real Spanish property prices are already considerably lower than The Economist believes, making Spanish property more affordable than the chart implies.

Source : Spanish property

Market could take 3 years or more to absorb property glut

The Spanish property market will take 3 years to absorb the glut of 1 million new homes, an official from Spain’s property register claimed recently. Even if no more new homes were built the glut would still take 2 years to liquidate. In reality, Spain is on course to start close to 200,000 new homes this year.

The same official also claimed that demographic changes are also partly to blame for the recent drop in Spanish property sales, whereas most of the sector like to blame the financial crisis. Spain’s falling birth rate in the 80s means that demand for housing is “drying up”, despite the massive immigration of recent years.

Sourge: Spanish property

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