Spanish Property Market News

Half of all mortages are for more than 100% of the property price El Periodico de Catalunya reported that nearly half of all property buyers in Spain who request a loan, need to finance more than 100% of the value of the property, according to the fifth annual study of National Property Agents, undertaken in 2005.
In 2002, when the last study was undertaken, only 28% of all buyers needed to borrow more than 100% of the value of the property. On average, financing is calculated at about 92.9% of the property value, clearly higher than the figure cited in the last report, at 87.3%. The Bank of Spain recommends that lending institutions restrict their mortgages to only 80% of the property value, in order to avoid placing these families in a position of excessive debt if interest rates rise.
Spanish Housing Minister insists on Property Market regulation According to El Pais, Maria Antonia Trujillo stated 'In Spain it's more difficult to sell a lettuce than a home.' Hence her push to introduce stronger regulations for those buying and selling property, who currently are not subject to sufficient controls which would limit the abuse which takes place in the market (for example, charging excessive commission).
Despite there now being in existence some 8,000 registered and qualified professionals, in 2000 the PP in power in Government then decided to deregulate the market. Subsequently, there has been no need for a qualification or title to enable someone to deal in property. Amongst the measures announced by the Minister, agents will be required to obtain an official title in order to practise in the industry and there will also be a policing of fraudulent charges to clients. So far there is no date in place for these changes and Trujillo commented that they will probably be introduced in the long term.
The BCE delays interest rate increases until JuneExpansion.com reported that the Bank of Spain (BCE) has delayed the next interest rate hikes until June. Likely to be 2.75%, the intention is to correct the market, which awaited the tightening of lending during April. Jean Claude Trichet, President of the BCE, reassured that anticipated interest rate movements in May 'does not reflect the sentiment of the executive council of the BCE', a statement that just about eliminates the chance of changes next month.
Given the lack of haste that the BCE has expressed in changing the rate, it could mean that by the end of the year interest rates will stand at 3% instead of the 3.25% anticipated by the market. Nevertheless, Trichet insisted that interest rates will continue to rise now that there is a high risk of inflation and that for the first time in a number of years, economic growth here could be challenged.

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Interest Rate Hikes Fail to Cool Property Boom

Higher interest rates have failed to dampen Spaniards' desire to become property owners, new figures reveal.Mortgage loans rose 37.7 percent in the first month of the year, compared with January 2005.The European Central Bank raised its interest rate for the first time in December, with the second rate hike announced last month.The ECB current rate stands at 2.5 percent.
The Bank of Spain criticised the ECB policy calling it "expensive".But the Spanish government is worrying more about how much Spaniards are getting themselves into debt with mortgages. This concern comes as interest rates are going up and other inflationary concerns are increasing.The National Institute of Statistics said 98.3 percent of home loans are bought with a variable rate mortgage. But the government wants families to move to mixed mortgages to reduce the effects of a possible downturn in the property boom and a dip in the Spanish economy which would plunge many into negative equity.The average mortgage in January was EUR 145,000, up 16.8 percent from a year earlier.
Story from Expatica
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