Spain Reducing ?Stock? of Unsold New Homes
According to a study by consultor Deloitte published last week, Barcelona, Castellón, Alicante and Madrid are the Spanish provinces which account for the most available ‘stock’ of unsold new homes.
Specifically, of the 50 provinces analysed, Barcelona (with 60,077 units), Castellón (54,274), Alicante (49,333) and Madrid (45,537) are the provinces that have most ‘stock’ available, while Badajoz (with 843 units), Caceres (1,317) and Soria (1,966) recorded the lowest levels of surplus ?stock?.
With respect to the relationship between the population and the level of the new housing surplus, for the third year, Castellón, Toledo and Almeria are the provinces with the highest levels per 1,000 inhabitants, while Badajoz, Cáceres and Vizcaya recorded the lowest ratios.
Despite the current economic climate, Deloitte points out that 35 provinces are reducing their ‘stock’ of unsold new homes – in particular, Badajoz, Navarra and Guadalajara, with adjustments of 58%, 42% and 23%, respectively, from the previous year.
Taking into account their economic situation and real estate indicators, the report indicates that Alava, Cantabria, Guipúzcoa, La Coruña, Madrid, Navarra, Valladolid and Vizcaya are the provinces better prepared to face a recovery in real estate activity, while 30 provinces, among which are Barcelona, Valencia, Seville and the Balearic Islands, would only be able to normalise their activity at a later time and at a slower pace. Finally, a group of 12 provinces need more time to absorb the ‘stock’ and energise their local real estate market.
Prices Slashed by 22% from Highs
With all this, and motivated by a cumulative drop of 22% in average house prices since the start of the crisis, the percentage of household income devoted to the payment of a home mortgage has reduced over recent years to stand at 34.3%, which is “very close to reasonable levels of balance,” said Deloitte.
El Mundo reported that the high price of housing in Barcelona and Guipuzcoa makes their respective rates of economic effort, for the third consecutive year, the highest in Spain. By contrast, buying a home in provinces such as Murcia, La Rioja, Pontevedra or Lleida is more accessible, with rates of economic effort registering below the 30% threshold.
Number of Newly Constructed Homes Falls Again
According to the Ministry of Development, during the first two months of 2013, construction was completed on 10,919 new homes in Spain, which represents a decrease of 44% compared to the same period in 2012 when 19,520 new homes were completed.
Thus, the figure for homes completed at the beginning of 2013 continues the negative trend of recent years. In the whole of 2012, with 120,206 homes completed, the drop was 28.4%, adding to five consecutive years of declines. From the peak recorded in 2007, when 641,419 homes were completed, the market has fallen by 81%.
Of the total homes finished in the first two months of 2013, El Mundo reported that 99.6% of them (10,872) corresponded to private developers, and the remaining 0.4% (47) to the Government.
Compared to 2012, private developers? home constructions fell by 43.3%, and those of the Government, by 86.5%. In the private sector, 6,376 were for corporations, with a decrease of 46.2%; 3,592 were for individuals and communities of owners (-31.8%), and 687 for cooperatives (-49.2%). Additionally, there were 217 completion certificates for other private developer projects.
House Prices Fell by 10.5% in April, Says Tinsa
According to the Spanish Real Estate Market Index (Imie), published by the real estate appraiser, Tinsa, housing prices fell 10.5% in April compared to the same month of 2012, and have accumulated a decline of 37.2% from the peaks reached in December 2007, before the property bubble burst.
By area, housing within the metropolitan areas were those which experienced the biggest price reduction, with a drop of 13.7%, followed by those on the Mediterranean coast, with a reduction of 12.8% over the same month last year.
Furthermore, properties in the provincial capitals and large cities fell in price by 11.3% in April, compared to the same month of 2012, while those located in other municipalities fell by 11.7%.
El Economista reported that property prices only rose in the Canary and Balearic Islands, by 3.3%, which Tinsa interpreted as being “cyclical stabilisation”.
Since prices reached their highest values, the cumulative decline on the Mediterranean coast is 45%, followed by the capitals and major cities, with 40.4%; metropolitan areas, with 40.2%; the rest of the municipalities, with 33.1%, and the Balearic and Canary Islands, with 24.5%.
According to the latest report from the National Statistics Institute published on Tuesday, the Consumer Price Index (CPI) rose by 0.4% in April compared to March, but dropped by one percentage point year-on-year, to 1.4%, thanks to cheaper fuel and electricity.
The annual rate of 1.4% reached in April is the lowest since March 2010, when inflation also stood at 1.4%. From the beginning of this year, the annual inflation rate has fallen 1.3 points, from 2.7% to 1.4%.
The National Statistics Institute explained that the groups most influencing the change in the annual rate were housing, which had dropped by nearly four points, to 0.5%, due to lower electricity prices, and transport, which showed a rate of -0.7%, more than one point lower than in March, as a result of the reduction in the prices of fuels and lubricants.
Meanwhile, the month-on-month increase in April, the third consecutive rise, was due mainly to the rising cost of clothing and footwear for the spring-summer season, and also to the rise in prices of food and non-alcoholic beverages.
Specifically, the clothing and footwear group registered an increase of 10.1% month-on-month, while food and non-alcoholic beverages rose by 0.3%.
In contrast, El Mundo reported that the declines experienced in April, month-on-month, were in housing prices (-1.5%), due to the lower price of electricity, transport (-0.8%) due to decreases in the prices of fuels and lubricants, and communications (-2.5%) as a result of the lower cost of telephone services.
The annual CPI rate decreased in all regions. Most notable among them are Castile and Leon (1.2%) and Catalonia (1.8%), both with a drop of 1.2 points. The smallest decreases occurred in the Balearic Islands, the Canary Islands, Extremadura, the Basque Country and La Rioja, whose rates are all nine-tenths lower than those recorded in March.
As for the Harmonised Consumer Price Index (HICP), it stood at 1.5% in April, more than one point lower than in March, while core inflation, which excludes prices of energy products or unprocessed food, dropped by four-tenths to 1.9%.
According to data published by the National Statistics Institute on Monday, home sales in Spain fell 12.6% in March compared with the same month of 2012, to a total of 22,086 transactions, the lowest figure since April last year, when these transactions reached just over 21,500.
The March decline comes after three consecutive months of year-on-year increases, and may be a consequence of the end of the tax benefits for home ownership which came into effect on 1st January.
In fact, looking at only the monthly data (March over February), housing sales fell by 37.8%, the worst figure for any month of March in the last five years.
Declines were registered in sales of both new and used homes in March, year-on-year, although the transactions on new homes declined somewhat less.
Specifically, sales of previously owned homes fell 13.2% in March year-on-year, to 11,535 operations, while new home sales fell 11.9%, with 10,551 transactions. In both cases the figures are the lowest since April 2012.
Most of the homes purchased during the third month of the year, namely 87.5%, were private housing. The sale of this type of housing fell 12% to 19,318 operations, while public housing operations totalled 2,768, a decrease of 16.3% compared to March 2012.
By region, El Mundo reported that the total number of property transfers recorded in the property records per 100,000 population in March was highest for La Rioja (756). The regions with the highest annual variations were La Rioja (18%) and Aragon (15.5%).
On the other side, the region that had the highest annual decline was Extremadura (-47.9%). With respect to the number of home sales registered, the region with the highest number of transfers per 100,000 inhabitants was La Rioja (199).
The region with the greatest annual change in the number of house sales in March was again La Rioja (158.1%), while the regions that registered the largest declines were Asturias (-48.9%), the Basque Country (-40.4%) and Navarra (-40.4%).
Government Approves Reform of Coastal Act
Following the debate on the reform of the Coastal Act, approved in Parliament last Thursday, the Minister for Agriculture, Food and Environmental Affairs, Miguel Arias Cañete, stressed that the new Coastal Act “does not change the boundaries of the maritime-terrestrial public domain nor the easement zone, yet prevents any new construction on the Spanish coast”. He also explained that the law “will not require the demolition of any constructions built prior to 1988, which fall under the protection of legislation that granted full ownership to the owners thereof”.
According to the explanation offered by the Minister, this is “a law that creates balanced compatibility between all environmental, economic and social uses”, and Cañete asked those who would criticise it, to read the text in its entirety given that coastal protection will be enhanced under this new legislation.
As reported on the Government website, La Moncloa, Cañete stressed that the new law “provides stronger instruments to prevent the development atrocities that took place under the 1988 law, with such clear examples as that of the Algarrobico hotel”, and highlighted that “the State will be given the means to suspend any actions that endanger our coast”.
Furthermore, the law will resolve “absolutely anomalous situations” such as those that exist on the island of Formentera, which required a different approach due to the existing geomorphological characteristics. It also tackles twelve population centres with particularly high levels of development and human activity.
Cañete stated that the fundamental goal of this law is to protect the coast, and its clear boundaries will appear on the website of the Ministry of Agriculture, Food and Environmental Affairs, and be incorporated into the property register in order to provide legal certainty to those wishing to invest in the Spanish coast and maintain the same protection distances throughout.
In this regard, and from a coastal protection point of view, the Minister emphasised that this law offers legal certainty and compatibility to certain uses, subject to restrictions, so that industries need not be demolished. He said that without this law being passed, more than 1,300 industries located on the Spanish coast prior to 1988 would have to disappear, as well as more than 12,000 homes.
Cañete also rejected accusations that the law aims to privatise the coast because the new text maintains the same maritime-terrestrial public domain boundaries and easement line, and explained that the easement zone is set at 20 metres in certain very specific urban centres that already existed prior to 1988 and that had practically all their services in place, but that no new construction is permitted.
Therefore, the Minister stressed that the new legislation enhances coastal protection while offering legal certainty to property owners who purchased property prior to 1988 in good faith and who, under the previous law, would have had to demolish them in 2018, and said “common sense required the establishment of a mechanism to guarantee an administrative concession to those property owners so they can keep their concessional ownership”.