No recovery in Spanish property market until banks relax mortgage lending
The headlines shout ‘foreign boom’, overseas buyers snatching up Spanish property at a rate of knots, but Murcia agent Mercers says if banks remain tight with their lending, full recovery of the property market is a long way off.
Chris Mercer, Director of 30-year established Mercers, says, “The maximum loan-to-value for non-residents in Spain today is around 60%. 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% 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,” continues Chris. “Whilst 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% 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% 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.”
Official figures out last week confirm that mortgage numbers in Spain have dropped for the 46th consecutive month up to February 2014. The country is in no danger of a full recovery, let alone a property boom, as average house prices have fallen by 30% since 2008 (closer to 50% in Murcia since 2007 highs) and mortgage lending dropped from a peak of 173 billion euros in 2007 to just 26 billion in 2013. With national unemployment not below 25% since 2012, it’s the foreigners that Spain is relying on to keep the property market alive.
Chris finishes, “Sales to foreigners are indeed on the up, they were at a nine-year high in 2013 when non-Spaniards bought 6.45 billion euros-worth of property. The Council of Notaries confirmed that 21.4% of all residential property bought in Spain in 2013 was by foreign buyers, some 55,187 homes, up 9.8% on 2012. But this could be much higher. Prices are still falling in some areas, and add in the strong pound versus euro and prices are even lower for foreign buyers. Relax lending and sales will soar, prices will inevitably stabilise and steadily increase. But there will be no general recovery in the Spanish housing market, for nationals and foreigners alike, until mortgage lending returns to normal.”
It’s not all bad news. Spain’s GDP rose at its fastest quarterly pace in six years in the first quarter of 2014. It is the latest sign that the economy is picking up steam after years of recession. Year-on-year Spain’s GDP expanded 0.6%, higher than expected.
On the market in Murcia:
Ref PW14 – Penthouse, Condado de Alhama, for less than 70,000 euros
A pristine penthouse with large roof terrace in the 900 hectare Jack Nicklaus-design golf resort of Condado de Alhama. Occupying a corner position, the home has two double bedrooms, a family bathroom, fitted kitchen and open-plan lounge/diner. Ready to move into, the penthouse is fully fitted and furnished to high standards, including hot and cold air-conditioning, and even has sunbeds, table, chairs, built-in barbecue and covered pergola all ready to go on the solarium. Communal facilities include a swimming pool, gardens, children’s play area and tennis courts – and the Jack Nicklaus signature 18-hole course at your feet. Education, health, shopping and dining services are all on site while the Blue Flag-designated coastal resorts of Bolnuevo, Puerto de Mazarron and La Azohia are a 25 minute drive. The planned Paramount Theme Park and soon-to-open Corvera International Airport are even closer at five and 20 minutes respectively.
Two bedrooms, One bathroom
Price 69,000 euros (approx 56,700 GBP)
Ref ROD153 – Rosa-style Villa, Camposol Golf, for less than 130,000 euros
Accessed via a full-length front terrace with pergola, the villa has separate dining and lounge areas, the latter with feature fireplace, a kitchen fitted with appliances, a shower room, twin bedroom and a large en-suite master. Set on a plot of 400m², the low-maintenance gravelled gardens benefit from mature planting, a sunbathing terrace and large 9m by 4m swimming pool. This property has plenty of scope for improvement, including a large tiled painted basement awaiting use as a games room, workshop, guest suite or ‘man cave’. Camposol Golf has an 18-hole course and plenty of shops, restaurants and bars on-site including an opticians, vets, medical centre, hairdressers and a weekly market. The Blue Flag beaches and marina of Mazarron are within a 15 minute drive.
Two bedrooms, Two bathrooms
Price – 128,000 euros (approx 105,000 GBP)
For more information, visit spanishproperty.co.uk.
