Real Estate Slowdown in Spain May Cut Sales of `Covered' Bonds

Sept. 29 (Bloomberg) -- Sales of bonds backed by home mortgages in Spain may drop for the first time in five years as prices of apartments in Madrid and villas on the Costa del Sol rise at the slowest pace since 2001.

Banks in Europe's fifth-largest economy probably will reduce sales of bonds to finance mortgages by 23 percent next year to 50 billion euros ($63 billion

Mortgage lending fell for three of the past four months as borrowing costs for home buyers rose to the highest since 2003, the Spanish Mortgage Association said.

Home prices will increase 4.5 percent next year, down from an annual 10.8 percent in the second quarter of this year, according to Madrid-based Banco Bilbao Vizcaya Argentaria SA, Spain's second-biggest bank.

The last time home values rose more slowly was in 2001, when they gained 8.8 percent.

``In Spain we've had bubble-like conditions for some time,'' said Vishal Pathak, an interest rate strategist at BNP Paribas SA in London. `

The average lending rate for mortgage loans for periods of more than three years has risen to 4.23 percent, the highest since 4.25 percent in January 2003, according to Spanish Mortgage Association data. The rate has risen from 3.19 percent in August, 2005, the lowest in at least 15 years.

Declining purchases of second homes by U.K. and German citizens is causing the slowdown in Spain. Foreigners reduced their investments in Spain by 21 percent last year to about 400 million euros a month

Holiday homes account for about 30 percent of residential properties being built in Spain, according to DCM Securities, a London-based broker that finances property development. Half the holiday homes are for foreigners, with U.K. residents making up 52 percent of overseas sales, DCM's data show.

``The Spanish market definitely can't go at the speed we've seen in recent years,'' said Max Beinhofer.

Since when as growth of 4.9% constituted a crash?

Declining purchases caused by a slow UK property market in 2004/2005. What do you thinks going to happen over the next few months as people fall off the back of the UK property market revival in 2006.

My verdict

UK - Crash!!!! Spain - No Crash

The ECB will raise the interest rate again next month. And that will be the straw which will break the back of the camel.

If you read the article carefully you will see that British and Germans are abandoning the Spanish market which means there will much fewer fools to pay for the
overly-inflated prices.

My verdict:

UK - Stable prices but no crash, Spain - Big crash

ECB have said they may cut rates after a favourable inflation target was met so where did you get this info about rates going up, I am hearing the complete opposite. Also your choice of words are very OTT, Brits are not abandoning Spain and the numbers of Germans buying according to their own figures actually increased in 2005. I have no doubt that following on from the boom years of 2003/04 the amount of Brits buying in 2005 dropped 22% but if you look at the figures you will see that at 400million euros a month it is still the third best year ever.

Watch out for the Germans, numbers buying in Spain is actually increasing. Also a little tip off here for any investors......big trigger which will cause big increases in 2007....capital gains tax for non residents is being halved in fact more than halved from January 1st 2007. Although CGT still stands at 15% it WILL make a difference.

For me the biggest pointer lies in the German economy. Their house prices as DogBox points out in another thread are incredibly low. They are at the start of IMO a boom similar to that of the UK in 1999....and where do the Germans love to buy when they have the opportunity to MEW or retire....that's right they love Spain and contrary to popular belief actually quite like the Brits. They will create a demand similar to that of the Brits since 2001.

ECB will increase the rate because they are forced by the developments in Spain, Italy and Ireland. The interest rate in Spain should be about 8% but due to ECB politics, it has to be same as everywhere else, i.e. very low.

The house prices in Germany are incredibly low in regions which are deserted. All the young from East Germany go to the West as the salaries are much bigger. I just discussed to some geman friends and they told me that places like Leipzig, Jena, Dresden are deserted. The aging people in Germany need to prepare enough money to pay for their health after retirement and this will take money from investment. So no, there will no property boom in Germany except maybe Bavaria and regions around Stuttgart, Hamburg and Bonn.

So do not expect many german investors in Spain, they are enough already. The cost of living in Spain is already high enough so there is no attraction anymore from that point of view.

The same applies to British people who will have to sell their properties to pay for helth care.

Therefore my verdict: big crash in Spain in the next 4-5 years.

Everything you have said just doesnt make sense. German investors deserted Spain 10 years ago, everybody predicted huge price drops at this point but prices gently rose as the rest of Northern Europe continued to migrate there. Now the German economy is seeing some form of revival so there are more and more Germans able to afford luxuries such as second homes again. It may be that they fill the hole left as Brits desert Spain as things bite back home. Remember there are a lot more Germans than Brits.

Euribor is likely to head down as inflation goes below 2%. This will simply fuel the Spanish property boom of 2007. People are already starting to see it in certain areas. It is very similar to the American model though in the fact that there are very clear hot spots. Avoid Costa Blanca and Mar Menor.

You say what you want to happen not what is going to happen.

Anyway, I do not have time and patience to enter into more detail as it would take too much time to describe thoroughly the German market and their future. Just that the overall situation in Germany is quite bad and will not improve.

In what concerns Euribor, I hope to go down and not up. This way the Pound will become stronger and I shall proceed buying a property in Fuerteventura and tenerife for less Pounds and less interest.

Adibrown unfortunately cannot be listened to as he/she is hopelessly inconsistent in the use of logic; a while ago (on a house price trend site I might remind you) was fixated on discussing the price of pizza and annual temperatures

what a shrivelled scrotum I must say

Inveterate felcher

Well adibrown, any verbal diarrhoea you'd like to add? Any vacuous, irrelevent points about fast-food prices? Any other inane, asinine b*u*l*l*s*h*i*t??

Go on, give us a laugh!

sinful morphadite

The ECB interest rates really went today, didn't they?

Here on the ground in Madrid the change of psychology is changing rapidly. Family members no longer believe that "property only goes up". The main television and print media is reporting "the end of the bubble" as fact, not conjecture. Prices in some areas are beginning to drop. The only question is how far and how fast. Personally, my bet is "a lot" but gradually over the next few years.

Any hint of where the drop will be sharper?

Is there any housebubble blog in Spanish?

there's a forum.

Not sure if this is the one I read about before.

btp

Hey BTP

What's with the Onanist's Avatar anyway?

Or is your chosen picture representing some activity of the same-sex variety?

Or a general raised-middle-finger at the lunacy of all the speculation?

yours etc
heinous hermaprodite