Moody’s, a credit rating agency, expects property prices in Spain to rise by 4.7% per year up to 2019.
However, the agency point out that the number of units sold is equally as important to the recovery of the housing sector.
They point out that it is necessary to “decouple” the sale price from the number of operations, since although the volume is slightly lower, new property “now represents only 10% of sales, far from the pre-crisis levels”, when new property sales accounted for 50% of the total.
There is, says Moody’s, no risk of “overheating” of the mortgage market, nor any likely mortgage bubble, as for every four euros that were loaned in 2007, only one euro is loaned today.
This is despite a warning from the president of the European Central Bank (ECB), Mario Draghi, that there is a danger in the euro area of a new housing or credit bubble.
Spanish banks are now much more restrictive when it comes to mortgage lending, says Moody’s analyst Antonio Tena, adding that a distinction needs to be made between the number of mortgages and the number of sales. In 2007, banks gave more mortgages than the number of homes sold, while in 2016 the reverse was true.
Housing have grown steadily at around 14% per year, more than the increase in property prices, but still represent half of what was sold in 2007; The data that Moody’s assessed shows that in no city of more than 200,000 inhabitants did the number of sales decline, and that Madrid and Barcelona – and the bordering towns – as well as the Mediterranean coast see the majority of sales.
Another positive indicator, Tena points out, is that the average age of a mortgage applicant, which in 2007 was 34 years old, has risen to 38, a profile with greater capacity for savings and personal financing of a home purchase.
Repayment periods have also been reduced which will have a positive impact on the banks’ balance sheets and their credit risk, as well as their default rate.
As for the proliferation of fixed rate mortgages, a “rarity” in Spain, Moody’s analyst José de León says it is “not clear” whether or not it is better, and for whom, that the banks are not keen to offer such conditions.