Rise in Spanish mortgages

The Euríbor closes at 5.38% and average mortgage goes up by nearly 60 euros a month
The Euríbor interest rate has gone up once again. For the month of September it is set to close at 5.38% which is six hundredths more than last month. The Euribor interest rate which is used for the majority of mortgages in Spain went down slightly in August, however this appears to be just a blip and it now looks set to continue rising. Those people who have to review their mortgages will see it rise by about 59 euros for every 150,000 euros of credit (the average mortgage in Spain is the Euríbor plus 0.5% over 25 years). This works out at around 709 euros more per year.

The Euríbor is now close to its historic high in July when it reached 5.393% and is far from the rate for September 2007 which was 4.72%. The Spanish government has asked the European Central Bank to review official interest rates which have been frozen at 4.25% (compared to 2% in the US) in order to try to put a brake on further rises in the Euríbor. Further interest rate rises are expected to affect the number of people unable to pay their monthly mortgages which has risen from 0.50% to 1.30% in a year according to the Spanish Mortgage Association.

Related: Mortgages in Spain

Price of land in Spain

Price of land goes down by 7.8% to 258.8 euros per square metre

The price of urban land which makes up between 40 to 60% of the final cost of a property has gone down for the fourth month in a row due to the crisis in the housing sector. In the current market sellers are finding it very difficult to sell which has led to prices dropping. Between April and June this year the price of urban land per square metre fell by 7.8% leaving it 258.8 euros according to information provided by the Ministry for Housing.

The price of land per square metre also fell by a similar amount (7.7%) during the first quarter of 2008. Therefore according to the government the price of land per square metre at the end of the second quarter of 2008 is almost the same as it was at the end of 2004 when it cost 247.3 euros.

The fall in the price of land is more pronounced in places where there are more than 50,000 inhabitants (8.8%) although land in these places is still the most expensive costing an average of 627.8 euros. The highest prices based on the cost of a squar metre are still in Barcelona (1,142.1 euros), Alava (1,045.4 euros) and Madrid (1,006.9 euros). On the other hand, the lowest prices are in Jaén (283.8 euros), Ourense (364.7 euros) and Toledo (400.4 euros).

In places where the population is between 10,000 and 50,000 inhabitants the price of land has only gone down by 3.3% to 314.8 euros while in areas with between 5,000 and 10,000 inhabitants the price of land per square metre costs 191.9 following a fall of 2.4%.

Region by region the biggest fall in the price of land per square metre was in Aragón (20.2%), the Comunidad de Madrid (19.2%), Ceuta y Melilla (11%), Cataluña (10.2%) and the Comunidad Valenciana (10.2%). In the Canary Islands the price of land per square metre went up by 11.8%, in Cantabria by 10.3% and in Navarra by 8.9%.
Another significant figure indicating the delicate situation of the Spanish housing market is the drop in the number of transactions registered during the second quarter of this year which stands at 7,956 operations, which is a drop of 38.1% compared to the same period last year and 10.5% less than during the first quarter of this year.
According to the Ministry for Housing property prices have risen by 2% over the last 12 months. In real terms this shows a drop of 3% when taking into account the level of inflation over the same period.

Related: Buying land in Spain

Spanish government offers rescue package to constructors

Zapatero promises 3000 million euros to help rescue Spain's building industry

The Spanish president has announced that the government is prepared to bolster the housing sector with long term loans totalling 3000 million euros. The announcement made in the Spanish parliament is aimed at boosting the economy and helping the housing sector and construction industry. In return for the loans which will help many companies stay afloat the government wants more houses to be destined for the rental market in order to help the housing sector readjust to difficult times.

By this method, the president hopes that these measures will help smaller investors gain access to properties, promote flexibility in investment in property and provide money for such investments. A new system of credit in ICO will have the objective of promoting the supply of rented accommodation and therefore helping the market to readjust.

More specifically, the government will facilitate the transformation of loans owed by construction companies for building projects to loans repayable over the long term. In return the government wants more properties to be offered for rent during a fixed period of time. The 3000 million euros destined to help construction companies could be increased depending on market conditions.

Zapatero also said that he believed that inflation would progressively decrease over the next few months and forecast that it would be below 4% by the end of the year.

Drop in number of foreigners buying property in Spain

In one year house sales to foreigners drops by 50%

According to figures provided by the Ministry of Housing in collaboration with the Association of Estate Agents and Promoters for the province of Alicante (Provia), house and flat sales have dropped by half since 2007. Between January and March there were 2,457 transactions involving foreigners already resident in Spain and another 119 transactions involving non resident foreigners. These figures are almost exactly 50% less than those registered for the same period in 2007 when 5,352 transactions were recorded.

The General Secretary of Provia, Jesualdo Ros, has explained that the uncertainty in the Spanish market is affecting prospective buyers from abroad. Furthermore other factors have influenced this figure such as the economic conditions in the foreign buyer’s country and the disappearance of property speculators. Other factors such as the drop in low cost flights to the potential buyer’s country can also have repercussions on the number of house sales to foreigners according to Ros.

Ros also claimed that foreign media coverage of legal problems faced by foreign property buyers in the Costa Blanca (in his view sensationalist and inaccurate) this year has also had an adverse effect on house sales.

Fall in Spanish Property prices

30% drop in house and flat prices in June

According to figures provided by the Spanish National Institute of Statistics (INE) the number of house and flat sales went down by 29.6% compared to the same month last year. Private property sales went down by 30% in June and the sale of state subsidised housing went down by 24.9%.

The biggest drop was in second hand properties whose sales dropped by 38.9% compared to a drop in the sale of new properties of 16.1%.

Today figures were also published on the average price of mortgages which now stands at 141,939 euros. Figures show that they have also fallen for the fifth consecutive month and by 4.6% compared to last month.

The amount of capital lent by financial institutions has also dropped by 40.57% compared to June 2007. Now an average mortgage for a property is 158,641 euros which is 8.22% less than last year. This is a clear indication that property prices have gone down since the end of 2007 when the property crash began.

Building societies conceded the highest number of mortgages (56%) followed by banks which lent 34.6% and other financial institutions which lent 9.4% of the total.
Meanwhile property prices in the UK have registered their highest fall in price in August compared to the same month last year since 1990. Now an average property in the UK is estimated to cost around 164,654 pounds (204,609 euros) which is 10.5% less than the same time last year.