Spain's property recovery - all up to lenders?
Photo: Aitor Agirregabiria
Prices of Spanish property continue to fall in many areas, attracting overseas buyers looking for holiday home bargains or potential buy-to-let profits. Indeed, sales to foreigners soared last year, hitting a total of €6.45 billion, the highest total in nine years.
The Council of Notaries also confirmed that more than one in five residential property sales in 2013 (21.4 per cent) went to an overseas buyer, up 9.8 per cent on 2012.
But this could be much higher, argues Murcia-based agent Mercers. The market's complete recovery is "a long way off", if banks do not relax their lending for buyers.
It is no secret that unemployment in Spain remains a severe issue, with many domestic buyers simply unable to afford to get onto the housing ladder. Indeed, as has been the case for several years, the country is relying upon international buyers to bolster its property market - a fact accentuated by the recently introduced Golden Visa scheme, designed to woo high-earning non-EU buyers across the border.
While demand and sales are both increasing, though, official figures out last week confirm that mortgage numbers in Spain have dropped for the 46th consecutive month up to February 2014. In 2013, lending dropped from 173 billion in 2007 to just 26 billion.
Chris Mercer, Director of 30-year established Mercers, comments: “The maximum loan-to-value for non-residents in Spain today is around 60 per cent. However, the purchaser also needs to pay up 15% of the purchase price in taxes and fees so, unless you're buying a bank repossession where they may lend up to 100 per cent or more, you really need easy access to around half the money to buy a Spanish property. This debars a large number of people who require larger loans.”
“If the Spanish government really wants to give its economy a shot in the arm, the banks should relax their lending criteria,” he continues. “While we do not want another property bubble fuelled by 100% plus loan-to-value mortgages for unqualified borrowers, if well-qualified clients can raise finance there would be a large increase in foreign buyers entering the market.
"Our sales in Murcia were up 60 per cent in 2013 over 2012, and already for the first three months of 2014 we have jumped from an average of 7.6 sales per month to 12.6, another 60 per cent rise, but these figures could easily be higher. Most of our clients are cash buyers or those securing finance in their home country. With restrictive lending, Spain is shooting itself in the foot.”
Even with unemployment still high, the Spanish economy is showing some positive signs. The country's GDP rose at its fastest quarterly pace in six years in the first quarter of 2014.
That positive sentiment has spread abroad. 70 per cent of respondents to a recent CBRE report said that Western Europe was a preferred investment destination, with Spain rising 9 places from last year's rankings to become the second most attractive global region for investment - behind only the UK.
Mortgage broker Conti, meanwhile, has seen enquiries soar 90 per cent in the first quarter of 2014 compared to the same period in 2013. Spain is now making up 59 per cent of the country's enquiries, the first time one country has accounted for such as large percentage of activity.
For Mercers, though, those enquiries will only become sales if the banks take action.
"Relax lending and sales will soar, prices will inevitably stabilise and steadily increase," he adds. "But there will be no general recovery in the Spanish housing market, for nationals and foreigners alike, until mortgage lending returns to normal.”