Fitch Sees ‘Clear Signs’ of Spain Property Bottom

The Fitch Ratings service has issued a new report on the Spain home market, which offers a rosier perspective than many of its peers.

Fitch concludes the home price declines are “coming to an end” and there are “clear signs” the market has hit the bottom. Fitch bases its findings on the increased activity from financial institutions.

“The house price and mortgage market stabilisation reflects Spain’s macroeconomic recovery and banks’ increasing willingness to lend,” Fitch said in a statement.

After analysing 8,000 foreclosed loans, Fitch concluded that declines in repossessed property valuations has peaked at 70 per cent below original levels and “the price range at which mortgage servicers are selling repossessed properties has also narrowed considerably.”

Fitch says prices may rise in “single digits” in the next quarters, which is much more optimistic view than recent reports, which suggest any real recovery may still be a year away.

Fitch acknowledges the overhang of supply and Spain’s continued struggles with a lagging economy and unemployment will continue to dampen any recovery.

But the analyst argues the market fundamentals have improved.

“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,” Fitch reports.

Stablisation at these levels reflects Fitch’s initial forecast of a 40 per cent peak-to-trough house price decline, “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.”