Average mortgage in Spain

The average mortgage among house buyers in Spain reaches 144,216 euros

Mortgages keep rising in Spain much to the dismay of many Spanish households. The Euribor has been rising constantly over the last few months and house prices keep on going up. An average mortgage in Spain is now over 10% more than a year ago.

The average mortgage varies between different regions in Spain. The highest average is in Madrid at 222,000 euros and the Basque Country at 206,000 euros compared to the lowest average of just 113,000 euros in Extremadura.

The Comunidad Valenciana is the region with the most number of mortgage holders with 603 per 100,000 inhabitants and Galicia and the Basque Country are the regions with the lowest number of mortgage holders per 100,000 inhabitants.

Spanish savings banks (in Spanish Cajas de Ahorros) conceded the highest number of mortgages followed by normal Spanish banks. The average interest rates paid by mortgage holders with a building society was 4.12% and the average length of a mortgage was 26 years. These figures compare favourably with banks which on average charged 4.21% interest on their mortgages over a period of 26 years.

97,6% of mortgages conceded in November 2006 were taken out with variable interest rates and just 2.4% were given at fixed rates. The Euribor was used as the reference interest rate for over 80% of the mortgages conceded.

In Novembre, 21,663 mortgage holders renegotiated their conditions over 16,000 of these were mortgages for houses, 26.7% more than the previous year.

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Properties overvalued in Spain

Overvalued real estate prices could condition economic growth in Spain.

A half yearly report on Spain by the Organisation for Economic Development and Cooperation (the OCDE) has predicted a growth in GDP by 3.3% in 2007 and 3.1% in 2008, however it has detected some imbalances: low productivity and the overvaluation of properties in the housing market by as much as 30%. According to the report, if these two issues are not addressed then economic growth will drop to 2% over the following decade.

The report, which was published on Wednesday, has reinforced worries regarding the property market in Spain. The OCDE indicated that property prices in Spain have doubled since 1998. It also noted that while a large number of properties remain empty the possibilities for renting in Spain are limited, something which is bad both for the mobility of the labour force and the unemployment rate. The report said that careful analysis had shown property prices to be overvalued by around 30% something which could result in serious economic imbalances over the long term.

Furthermore, the level of debt that Spanish families are getting into, partly due to high mortgages and rising interest rates, is increasing at an exaggerated rate of 22% according to economists from the OCDE. The report highlights the need for stabilisation in the property market.

The report also stresses the need to properly address the current distortion in the housing market which on the one hand stimulates demand but at the same time makes it more difficult for young people and those on low incomes to get onto the property ladder. According to the report by the OCDE, the solution lies in gradually eliminating some of the measures helping property buyers and creating a balance between the incentives to buy and sell property.

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Property for sale in Spain

Possible new Property Tax in Spain

Basque proposal for new empty property tax

The Basque Government is considering making owners of empty flats pay a penalty of 9 euros a day. This would rise to 12 euros a day for the second year if the flat remained empty. According to Sr Madrazo, Housing Director of the Regional Government, "it is an unacceptable luxury for owners to have flats which are not lived in when there are so many people in need of a home".

The idea behind this law is to encourage property owners to let out unoccupied property. In order for the proposal to become law, the Government needs the support of EB, the PNV, EA and other smaller parties.

This proposal put forward by the Housing Director of the Regional Government would see the creation of an official register of empty properties in the Basque Region. The list would only include housing officially declared empty following legal proceedings. Legal proceedings would take place if no one is officially registered as a resident of the property or if there are other indicators such as very low consumption of water, gas or electricity which suggest lack of occupation. Property owners would be forced to pay a penalty by each district and the money gathered would be split equally between the Basque Government and those Town Halls affected. The money it costs to run such a project would be reimbursed before splitting the money. The extra funds created by this scheme would then be destined to be used on new housing projects.

In a press conference held in Gallarta (Vizcaya), Madrazo explained that these measures were being seriously considered before their incorporation into the Housing Bill which his department will be presenting within the next few weeks. In 2005, it was estimated that there were 54,425 empty flats in the Basque Country out of which 20,198 were thought to be second homes. Madrazo believes that if these measures were adopted then some 26,000 flats could be let out to young people unable to afford a new house.

Spokesmen from the PNV and Basque Socialist parties both called for a proper definition of "empty housing" and did not say whether or not their parties would support the motion. However, Madrazo said that ‘the definition of what constitutes an empty property is possible’. He said that in using the term empty he was referring to housing that has been unoccupied during 365 days of the year and not to holiday homes used in the summer months.

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Mortgages in Spain almost equal the country's GDP

Mortgages for homes, businesses and Public Administration were valued at around 900,000 million euros at the end of November 2006. This figure is almost the same as Spain’s total GDP which is estimated to be 950,000 million euros. According to the latest figures by the Spanish Mortgages Association (Asociación Hipotecaria Española AHE), the total figure borrowed for mortgages in November rose to 896,042 million euros - 23.8% more than November 2005.

The AHE is expecting to see a rise of between 14% - 18% mortgages this year – less than 2006 which saw a rise of 23.8%. However this still means that the total borrowing for mortgages will reach a billion euros for the first time. The slowdown in mortgage lending is only affecting home mortgages. According to the Banco de España these only rose by 20.8% last October a figure which is below lending for other mortgages.

It is believed that the constant rise in house prices together with the rise in interest rates are putting off families from taking out new mortgages, although this doesn’t appear to have affected businesses from continuing to increase their credit from banks due to their increasing profits.

According to the AHE building societies and credit cooperatives continues lending money for mortgages at a rate higher than the banks. Building Societies in the month of November alone conceded double the number of mortgages lending 9,217 million euros as oppose to 4,735 million euros lent by the banks.

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Bargain house sales in Spain

Property sector participates in January sales in Spain.

This years sales are to include special property deals too. According to a Cadena Ser article published today, if the price of other goods are reduced for the sales then why not flats – this must have been the thinking in Remax, a chain of estate agent’s which has reduced the price on some of its properties on sale.

The property sale will start next Monday 8th January and end on 31st January and will include 1060 properties with discounts of approximately 4% on the original price. This system was first put into practice last year in just one of Remax’s branches in Santa Pola, Alicante. Its success was such that the branch's sales of flats increased by 30% in January last year.

This year 68 branches of the same Spanish estate agent all over Spain will participate in the sales. Andalucia has the most offers while Valencia and the Canarias come next in terms of special deals available.

The reduced prices have been approved by the property owners who have agreed to participate in the sales. They have signed an exclusivity contract with the estate agent quoting the original price and the reduced price. In addition these contracts have been inspected by notaries in order to guarantee the reduced price for the buyer.

This campaign also includes garages whose discounts range from 500 to 1000 euros. For flats the discounts range from 1000 to 300,000 euros. The biggest discount is for an estate in Las Palmas, Gran Canaria valued at 1.3 million euros.

According to the president of Remax, this campaign is possible because the Spanish housing market is slowing down. Although prices aren’t falling there has been a slow downward trend in the sale of properties. And property owners who want a quick sale are having to lower their prices in order to achieve one.

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Houses for sale in Spain

Spanish housing market

Latest figures released by the Spanish Conveyence Association ST confirm the general trend of of a slower rise in the price of housing in Spain with respect to recent years when the Spanish property bubble was at its peak.

According to the figures published today, house prices rose by 9.8 percent during 2006. The growth in the second term of 2006 at 3.3 percent was markedly lower than the 6.3 percent growth in the first six months of the same year.

The average price of new housing in Spain now stands at 2,763 euros per square metre according to the ST.

House prices rose last year in all Spanish cities, but in some much more than in others. The regions in which consumers experienced the highest rise in house prices were Aragón (16.9 percent), Castilla La Mancha, Valencia and Catalonia. House prices rose the least in Asturias (3.9 percent), the Basque Country (5.8 percent) and, perhaps surpisingly, Madrid, where they rose by just 6.6 percent with respect to the previous year.

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