The European Central Bank (ECB) has announced its own version of quantitative easing (QE) that will support Spain’s property market with easier credit conditions, argues Gonzalo Bernardos, a real estate expert and professor at Barcelona University, in an article for the Spanish daily El Mundo.
In late January the ECB announced it would be embarking on a programme of QE lasting until at least September 2016, injecting €1.14 billion into the Eurozone financial system by purchasing public debt.
This move is expected to lead to lower interest rates for bonds in most Eurozone countries, and to a considerable increase in their banks’ liquidity and lending potential, argues Bernardos. “The top product will once again be mortgages lent to private individuals to buy homes,” he writes, whilst forecasting that outstanding mortgage lending will increase 8 per cent this year, having fallen 4.2 per cent in 2013, and 3.5 per cent last year.
Expect to see mortgage lenders battling it out for market share this year for the first time since the bubble burst, just like they did in the boom. This time around banks are expected to be more sensible. It won’t be a case of getting any old client, just the good ones,” explains Bernardos. “For most banks, these will be families whose monthly income exceeds €3,000 with some banks reducing this to €2,500. This means that those families who don’t reach this figure will have serious difficulties getting a mortgage.”
Targeting the best borrowers, he says banks will start to reduce their spread (the difference between base rates and the lender’s rate) to 0.75 per cent, and extend terms to 35 years. We can also expect to see more bridging loans, 100% LTVs, and lending that takes repayments above a third of disposable income, which experts do not advise.
“The greater access to credit, together with the shortage of supply in upper/middle-class areas in large towns and cities, will mean that in 2015 transactions will increase by approximately 20 per cent, and that property prices go up by around 5 per cent,” predicts Bernardos. “A rise that will mean an end to the most significant property crisis in Spain’s modern history, and the start of the recovery period.”