If you look at the Spanish property market as a giant puzzle, then there has been one piece missing – mortgage financing.
But that’s starting to change, according to a new report from Alfa Inmobiliaria. Mortgage lenders are once again approaching estate agents with mortgage offers, which hasn’t happened since the housing bubble burst, Alfa says.
Mortgage lending is “the missing piece” in the Spanish housing recovery, the firm suggests.
“In less than a year we can say that the housing market has turned the corner,” said Jesús Duque, VP of Alfa, in comments quoted by the Spanish press.
Now, it is worth noting that beyond the positive tone, the firm’s ultimate forecast is generally line with most of the recent predictions, which believe any signs of a real recovery won’t be noticeable until 2015, at the earliest. And while there have been reports of increased lending in recent months, the increases seem large only in the context of the almost non-existent activity a year ago.
But mortgage activity is increasing and that will help address “accumulated demand,” which can now tackle the large supply available “at a very good price,” the firm concludes. Banks are particularly interested in mortgages between 100,000 euros and 150,000 euros.
On a general level, banks have returned to using traditional criteria for evaluating loans. Banks will lend up to 80 per cent of valuations, as long as borrowers are creditworthy, with repayments not exceeding 40 per cent of income. That 40 per cent of income is still problematic for many Spaniards, with homes priced far above traditional affordable levels.
But the dynamics of the sales market are once again favorable, Alfa says.
“We can see many people who opted for renting over buying during the crisis coming back to the market with the intention of acquiring a home,” Duque said. “The return of credit, the opportunity to buy a home at the bottom of the price curve, and the current policy of low interest rates, are stimulating the sector.” At this rate “in less than a year we can say that the situation has turned around.”
