June 6, 2017

The price of residential properties in Spain will go up

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The international agency Moody's has pointed out in its report that the recovery of the Spanish economy favors notably the improvement of the housing market in the country, and this, in turn, positively affects the quality of residential objects that own the banking institutions, as well as the situation with the issuance of mortgage loans in Spain. Therefore, this prestigious rating agency believes that real estate prices in Spain will grow by 4.7% per year until 2019.

At the same time, the agency Moody's excludes the overload of the Spanish mortgage market in the short term for several reasons. First, the number of mortgage loans is still at a low level, that is, 25% below the previous of economic crisis years. Therefore, Spanish banks continue to face a situation of low demand for mortgage loans, so they are more focused on those segments where the yields are higher, such as, for example, issue of personal loans.

Another reason, according to this rating agency, is the lack of a direct relationship between the increase in home sales in Spain and the increase in new mortgages issued, since in many parts of the country, flats and houses in Spain are bought without the need to get a mortgage in the bank.

The current fact is that the criteria for granting mortgages are more rigid and controlled than those before the crisis in order to reduce the risks of defaults, and therefore a smaller number of people who wish to obtain a mortgage comply with these requirements, would be another reason.

"For residential real estate in Spain the increase in prices has a positive effect on the level of mortgage payments on real estate that is found in the portfolios of Spanish banks. The reduction of the difference between the amount of the mortgage and the market value of the property shorten the risk of the debt," said Greg Davis, assistant of vice president of analytical department at the rating agency Moody's.

In addition, the increase in the number of sales of residential properties in Spain, particularly of the second-hand homes, was another key factor in this recovery. The highest rates of sales growth were recorded in the coastal tourist areas of Spain, as well as in the urban centers of Madrid and Barcelona.

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