This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
The European Central Bank (ECB) has lowered the Eurozone base rate to a historic low of 0.25pc. What impact will this have on the Spanish property market?
There is nothing like cheap money to stoke up demand for housing in countries with a culture of owner-occupiers and investing in property like Spain. And it looks like money will soon get cheaper in Spain, after the ECB slashed its lending rate in half to 0.25pc on Friday, the lowest rate in the bank’s history.
Euribor (12 months), the rate most commonly used to calculate Spanish mortgage repayments duly followed suit, dropping from 0.534pc to 0.506pc, the biggest one-day fall in two years.
At 0.5pc, the Eurozone base rate was already dramatically low before the latest cut, but that didn’t stop new mortgage lending in Spain from plunging, and mortgage rates from rising as banks charged a higher spread. So what difference will this make?
In the very short-term, nothing will change, as Spanish lenders continue with their agenda of hoarding cash and reducing exposure to real estate. But after five years were are approaching the end of that story, and experts forecast that lenders will start to open up the credit taps a bit in 2014, albeit on a selective basis. Lower base rates will make it easier for the banks to lend.
Liquidity on parched earth
“The decision of the ECB will open the door for the arrival of liquidity in the real estate sector, which will have a better chance of borrowing and building homes,” says Gonzalo Bernardos, a professor at the University of Barcelona and leading authority on Spain’s property sector. “There will be more money more readily available, and the first to notice will be ordinary citizens, potential home-buyers.”
Bernardos expects cheaper money to stimulate sales, but does not forecast a sudden rebound in house prices. “No way,” he says. “Housing will not get more expensive.” All he expects is a “stabilisation” in sales and prices. “Even if there is more credit, the supply of homes for sale will continue to be bigger than demand,” he explains.
Nevertheless, easier money means buyers will put vendors under less pressure to lower prices, he argues. “The expectation that house prices have touched bottom will start to take hold,” he says. “People who can’t buy a house today because they can’t get credit, or it’s too expensive, will be able to do so in 2014.”
If he is right, then 2013 will have turned out to be the bottom of this cycle o the Spanish property market, in volume terms at least.
Bede says:
The Euribor, and the ECB’s base lending rate, have been falling for quite some time now. The effect on borrowing has been zero!! Mario Draghi should have reduced rates by a big amount all at once, several tears ago, instead f making gradual reductions that have had little or no effect.
In the meantime mortgages are simply not available, except at much higher rates than 5 years ago….and with a hefty deposit. The banks don’t lend because it’s less risky to lend to the government at 4.5% the money they borrow from the ECB at 0.5%…
Steve says:
They can lower interest rates all they like but when Spain does things like ripping off solar power owners as they intend to do this just sends signals around the world that Spain is a third world country with a dictatorship running the country. Good luck attracting decent people to the country with this attitude.