Spain’s house price falls decelerating, near bottom
- 48.6% on the Mediterranean coast
- 43.7% in the capitals and major cities
- 43.1% in the metropolitan areas
- 34.8% in the rest of the municipalities
- 32.8% in the Balearic and Canary Islands
Prices have continued to decline and properties have gotten cheaper since the bursting of the housing bubble, reversing some of the large increases of the real estate boom years, but not enough to revive the housing market. There is reason for optimism, however, as the Q4 2013 figures from Bank of Spain represent the smallest decline since end of 2010. The outlook for the Spanish property market is looking more positive for 2014 with house prices rising in three regions. Madrid, Balearic and Canary Islands report year-on-year property price rises in Q4 2013 of 1.82%, 3.23% and 0.23%, respectively, according to the Spanish Ministry of Development. However, house prices have declined overall with other regions exhibiting price declines y-o-y in Q4 2013:
- La Rioja recorded the steepest decline of 15.2%
- House prices in Cantabria, Castilla-La Mancha, and Aragonrecorded double-digit declines of 11.95%, 11.72% and 11.25%, respectively
- In Castille and Leon, Cataluña, and Asturias, house prices dropped by 9.54%, 7.73% and 7.58%, respectively
- Andalucia registered a decline of 6.31%, followed by Murcia with 4.73% decline and Extremadura with 4.05% decline
- The three lowest declines were recorded at the Valencian Community (1.73%), Navarra (1.43%) and Galicia (0.9%).
According to Kyero news, the ‘XVIII Housing Market Report’ prepared by Tecnocasa and the PompeuFabra University (UPF), found that the number of investor buyers is growing steadily. “In fact, in the second half of 2013, the number of buyers who did so as an investment increased by 7.94 percentage points compared with the first half of the year, accounting for 24.32% of all the purchases made, and reaching 32.04% in the city of Barcelona (9.9 points more than six months previously)”, said Alan of Kyero. In Q4 2013, the average house price stood at EUR 1,466.9 (USD 2,023.44) per square meter. Land prices are also falling. The average land price in Spain dropped 21.09% to EUR 147.9 (USD 204.1) per sq. m. year-on-year in Q4 2013. The highest land price was registered in Madrid at EUR 270.7 (USD 373.4) per sq. m., followed by the Balearics at EUR 268.3 (USD 370.09) per sq. m. The cheapest land was in Castille and Leon, at EUR 59.9 (USD 82.63) per sq. m. Latest government figures suggest that property demand from foreign buyers is helping to keep the Spanish property market afloat. Data from the Spanish Ministry of Development shows foreign demand to represent 1 in 6 property sales. The total number of properties sold dropped 17.4% to 300,349 units in 2013 from the previous year. Of which, about 81.2% were in the second-hand property market while 18.8% were new housing. The Spanish market is yet to hit bottom, agents and market experts said, but the rate of decline seems to be moderating. In 2011, the economy recorded a meager growth of 0.5%, after experiencing annual declines of 3.8% in 2009 and 0.2% in 2010. In 2012, the economy slid to recession again and contracted 1.6%, according to IMF. GDP shrank 1.2% in 2013 from a year earlier, but grew 0.3% q-o-q in Q4 2013. This is the second quarter of expansion after over two years of recession and the fastest growth seen in six years. The Spanish government expects the economy to grow by about 0.7 % in 2014.
From boom to gloom
SAREB, Spain’s ‘bad bank’
For several years prior to 2008, the Spanish authorities have failed to monitor uneconomic lending practices and failures associated with the savings banks in Spain. The ease of access and low borrowing costs fuelled the growth of the property and construction sectors of the economy, ultimately leading to a speculative bubble. The initial growth masked the scale of these problems. Soon after, the global credit crunch and the sovereign crisis of the Euro zone ensued, triggering a global recession and leaving creditors with bad debts. SAREB (Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria or Company for the Management of Assets proceeding from Restructuring of the Banking System) was founded in 31 August 2012 tasked to separate toxic or problematic assets from the balance sheets of credit institutions that require public support. SAREB is loosely called Spain’s “bad bank”. Apart from achieving restructuring of the Spanish financial system within a maximum period of 15 years, it also aims to obtain the maximum possible profit earning capacity from these problematic assets. About EUR 55,000 million (USD 75,839.50) have been transferred to SAREB from nationalized Spanish financial institutions: BFA-Bankia, Catalunya Banc, NGC Banco-Banco Gallego and Banco de Valencia; and banks that have required medium-term financial aid. Of this amount, two thirds correspond to loans and credits associated with the real-estate sector, and a third to real-estate assets. In 2013 SAREB has taken EUR 54 billion (USD 75 billion) of troubled property loans from the balance sheets of the country’s nationalized lenders, as reported by the Financial Times. SAREB has started placing these assets into portfolios to be sold to investors, which has helped generate confidence that a floor may have been set on prices.
Surge in foreign demand
- From 1990 to 1996, an average of 240,000 dwellings were started annually.
- Between 1999 and 2002, with house prices rising rapidly, dwelling starts exceeded 500,000 units annually. The number rose to more than 650,000 annually from 2003 – 2004
- In 2005, dwelling starts exceeded 700,000 and peaked at 760,179 in 2006, due to rising demand from EU nationals
- In 2007 commodity price rises brought rising costs – and starts slowed to 615,976.
- The global financial meltdown brought drastic decline. There were just 328,500 dwelling units started in 2008, dropping to 159,286 units in 2009. By the end of 2010, there were about 123,616 dwelling starts in Spain
- Dwelling starts declined further in 2011 to only 86,252. By year-end October 2012, only 41,008 housing starts were registered
In 2013, licenses to build new homes totaled 33,869, representing a decline of 23.3% compared to the same period in 2012 with 44,162 licenses granted, and the lowest figure registered since 2000, according to the Spanish Ministry of Development. A total of 58,319 licenses were granted for new constructions, renovations and extensions, representing a decline of 16.2% y-o-y. By property type, permits for the construction of family houses fell by 22% to a total of 11,315 licenses, while the number of permits issued for the construction of blocks of housing declined 23.8%, to 22,538. Dwelling completions followed a similar path. Despite the massive oversupply, dwelling completions exceeded 630,000 in 2008, most units having been started before the crisis. In 2009, dwelling completions dropped to 424,000. In 2010, completed dwellings stood at 276,883. A further decline in 2011 with only 179,351 dwellings completed. Only 133,415 dwellings were completed in 2012. By the end of third quarter in 2013, dwelling completions were down to 43,157. The average apartment size remained at 107 square meters, while the average size for a family home stood at 197 square meters. Tinsa believes the housing glut will be cleared by 2017 and new constructions will have to pick up by second half of 2015.
Economy expected to grow slightly by 2014
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