Spain House Prices Bottoming Out, Says Fitch
18th February 2015
The credit ratings agency, Fitch, estimates that prices of houses will stabilise around their current levels, which is around 40% below the peak prices recorded before the crisis, and pointed out that their data already indicates that a balance has been reached and that the price declines have ended.
El Mundo reported that, according to a report on the mortgage market in Spain, the theoretical benefits of greater accessibility to credit still far from compensate for the excess of housing stock and the lack of confidence caused by the high level of unemployment. Likewise, Fitch added that the increase in the price of housing will be “marked” by the greater availability of credit and the substantial improvement in the labour market.
In this regard, the agency stressed that interest rates are currently low and they expect that servicing debt will remain manageable in the medium term, although they warn that households, which are in the process of deleveraging, will remain sensitive to any rises in these rates.
However, Fitch indicated that the banks are now more willing to offer mortgage loans to solvent clients and that they are gradually reducing the margins, as a result of the lower cost of financing. However, the low forecasts for the Euribor for 2015 will limit any new reductions of these margins.
The agency pointed out that, according to the National Statistics Institute’s data, the price of housing in Spain increased by 0.2% in the third quarter of 2014, which is the first time that prices have risen in two consecutive months since the third quarter of 2007. Moreover, unemployment in Spain dropped by 2.3% year-on-year in the fourth quarter of 2014, to 24.2%, and Fitch believes that these slightly improved conditions in the labour market are reflected in the lower number of loans entering into arrears.