The End Of Spanish Property Crisis But When Will Prices Rise

21 Sep 2014

property market in SpainThe Spanish property market is bottoming out, but prices are unlikely to rebound quickly, says the Fitch ratings agency.

Price declines in the Spanish residential property market are coming to an end after nearly seven years, according to Fitch Ratings, which has produced an analysis of property repossessions.

Forced sale discounts are higher in coastal regions and on repossessed properties linked to mortgages originated before the credit crisis, the research has found.

“The return of mortgage credit is driving the stabilisation, but high unemployment and a large property overhang will prevent a rapid rebound in prices,” Fitch Ratings says.

“Property value depreciation on repossessed and sold houses has peaked at 70% relative to their initial valuations, and that the price range at which mortgage servicers are selling repossessed properties has also narrowed considerably.

“These findings are reflective of a new market consensus helped by improved price transparency and drastic economic adjustments that have affected both supply and demand.”

The Spanish Statistical Office (INE) reports that 768,000 houses built between 2002 and 2011 remain empty.

Fitch carried out a regression analysis to understand what controls property sale discount on repossessions and found that forced sale discounts are higher in coastal regions such as Andalucia and Catalunya.

The analysis, based on more than 8,000 foreclosed loans from more than 20 banks across Spain, suggests repossessed properties linked to mortgages originated before the credit crisis require greater discounts to find a buyer.

The stabilisation of Spain’s house price and mortgage market reflects its economic recovery and increasing willingness by the banks to lend to solvent borrowers at gradually reducing loan margins.

Yesterday’s  (Thursday 18 September) launch of the European Central Bank’s Targeted Long-Term Refinancing Operations is set to add to the cheap money available to Spanish banks, but Fitch does not expect it to lead to a rapid increase in mortgage lending.

Evidence of the bottoming-out of the broader property market comes from INE data suggesting prices rose 0.8% from April-June 2014, the first quarter-on-quarter rise since July-September 2007.

Market stabilisation at current prices reflects Fitch’s forecast of a nominal peak-to-trough house price decline of 40%, and a ratio of the average house price to the annual net household income of approximately five times, which is close to the historic mean.

According to Spanish Hot Properties Managing Director this data doesn’t take into consideration prime location areas such as Marbella and Mallorca where prices have already started to rise. Also only taking data from repossessed property doesn’t give you a true indication of the market. Saying that even a company as negative as Ffitch agrees the Spanish property recession is actually over said Nick.

If you would like any help or advice on how to take advantage of the Spanish property market before prices start to rise contact Spanish Hot Properties by phone or email. 
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