Thursday, April 15

Property in Spain: what low-cost home seekers need to know


What is the latest?

There were high expectations that 2021 would be the year that property prices in Spain would collapse.

This was predicted by different international credit agencies, including Standards and Poor’s, who said that the Iberian nation would go from being one of the countries where prices fall the most as a result of the coronavirus crisis in 2021, to then be among the markets where housing it will become more expensive in 2022.

Three months after the new year, there is little evidence so far of a sharp drop in prices.

In fact, according to the Gesvalt consultancy, in the first quarter of 2021 Spanish property prices rose slightly in seven Spanish regions and are stabilizing throughout the country.

If the Spanish tourism industry recovers some of its losses this summer and unemployment rates remain low, it could be that the expected drop in prices, especially for second-hand homes, is not as dramatic as expected.

Has the pandemic made it easier to obtain a mortgage in Spain?

It depends, to a large extent, on your employment and financial situation. The National Institute of Statistics of Spain recorded a 7.6 percent drop in the number of mortgages approved in 2020.

This could be related to a number of factors related to the pandemic, including Spain’s total two-month lockdown from March to May 2020 and rising unemployment, but there is another factor.

As a result of the current instability in the Spanish labor market, some banks are now stricter and more frugal when it comes to offering mortgages to their clients.

Officials and employees with an indefinite contract in companies that have not been affected by the Covid crisis are some of those most trusted by financial institutions to return their money. mortgages (mortgages in Spanish).

On the other hand, those who meet the bank’s criteria can take advantage of the fact that interest rates in Spain are now at an all-time low, which means more favorable mortgages for buyers.

“It’s a buyer’s market and a good time to buy a property right now,” says real estate agent Raf Jacobs of Inspire Property Experts in Barcelona, ​​who also runs a series of real estate webinars.

“Borrowing money has never been cheaper.”

READ MORE: Property in Spain: Why mortgages are now cheaper than ever

In January 2021, the mortgages signed saw a 32 percent drop compared to the statistics for the same month in 2020, so the attractive offer from banks does not seem to have paid off yet.

“The mortgage data for January shows the slowness with which the mortgage market has started this year, not so much because of the lack of interest from the banks, which continue with a wide supply and historically low rates, but because of the slowdown The momentum of demand , as a consequence of the lengthening of mobility restriction measures and their impact on the economic outlook in Spain, explained Juan Villén, director of the mortgage section of the Spanish real estate website Idealista.

“A recovery in the short term is not foreseeable, at least until we see a greater dynamism in the vaccination rate and the beginning of the relaxation of mobility restrictions.”

What if I have some money saved?

The rebound in layoffs and temporary layoffs (ERTE) has forced many families in Spain to tighten their belts or dip into their savings to make ends meet.

For others who have been lucky enough to continue working, the lack of mobility and generalized economic insecurity has meant that they have managed to save more than usual, and the latest data from the Bank of Spain shows that between January and September 2020, families in Spain it achieved “forced” savings of around 2.5 percent of the country’s GDP.

Are savings (savings in Spanish) are the other determining factor for budding homeowners.

So how much money do you need to put down as a deposit to get a mortgage on a house?

According to the Spanish money website iAhorro, Spanish banks will expect you to deposit at least 20 percent of the property’s price as a deposit. The price comparison site Rastreator estimates that the ideal initial savings needed before applying for a mortgage are more than about 30 percent of the value of the house, to cover transaction costs as well.

According to a recent study by iAhorro, it takes an average Spanish family seven years to pay a 20 percent share on a property.

This is based on the average Spanish salary of € 1,641 per month during the last quarter of 2020, and the average price per square meter in Spain as a reference, which stands at € 1,353, (according to Tinsa appraiser) and 50/20. / 30 rule, whereby 50 percent of monthly income is atlocated to basic expenses, 20 percent to savings and 30 percent to other personal expenses.

Photo: Nattanan Kanchanaprat / Pixabay

“More mortgage applications are rejected than before the pandemic, even from clients who, in principle, have a good profile,” says Miquel Riera, mortgage specialist at HelpMyCash.com.

The main requirements are to have a stable income, have a work contract and pay a considerable deposit of 20 percent plus 10 percent in taxes to guarantee the mortgage and the property.

Sometimes this can be € 40,000, for more expensive properties € 80,000.

Regional differences in wages and real estate prices play an important role, which means that in the Balearic Islands it takes around 14 years to pay a mortgage, while in Extremadura it takes five years.

How much can I expect my mortgage to cost me after that?

That depends on several factors, including how much you pay to insure the property.

Spanish families pay an average of € 599 per month for their mortgages. There are big differences between provinces: in Malaga and Mallorca, homeowners pay 27 percent of their salary for their mortgages, while in Lugo (Galicia), Castellón (Valencian Community), Murcia and Placencia the rate is less than 15 percent of the monthly salary.

It takes an average Spanish family 23 years and seven months to pay off their mortgage, so think carefully about whether you can take on that financial responsibility before signing on the dotted line.

Can I get a mortgage in Spain if I don’t have savings?

Some banks made mortgages of up to 90 percent or even 100 percent before the pandemic, but this trend appears to be slowly fading.

According to the Bank of Spain, the percentage of mortgages of more than 80 percent represented 9.4 percent of the total during the first quarter of 2020, while in the same period of 2019 it was 13.1 percent.

Ana Botín, president of Banco Santander, showed interest in marketing mortgages for young people without savings – a replica of the British model of help to purchase – which consists of granting young people 95% mortgages with a state guarantee. However, this has yet to materialize.

Meanwhile, rent-to-own schemes, which came to a halt when the real estate bubble burst in Spain in 2008, are making some profit as private sellers are starting to include this option in their listings to avoid having to go down. the price of their products. homes.

Buyer and tenant can deduct the monthly rents, totally or partially, in the final price and not pay interest, because there is no debt, during the validity of the purchase option.

Apartment blocks in Mallorca. Photo: Bartłomiej Koc / Pixabay

“You have to justify a stable monthly income of at least three times the monthly income, which you will have to pay during that period,” says José Antonio Montalbán, manager of AOC Consultora.

“More and more young people are asking us to find them a home with this option.

“They are creditworthy, but they have not saved 30 or 40 percent of the value of the property, including the expenses of deeds and taxes.”

Small developers struggling to sell their real estate stocks are also turning to this model.

Should I continue to rent in Spain?

If you do not have enough savings or do not fit the job profile that banks require to offer you a mortgage, the positive side is that rental prices will continue to fall in Spain in 2021.

According to Idealista figures for March 2021, the annual variation in rental prices was especially pronounced in Barcelona (where they have fallen by 14.3 percent in one year), followed by Madrid (-10.7 percent) , Palma (-8.7 percent), Valencia (-6.3 percent), Seville (-6.1 percent) and Malaga (-5.3 percent).

Property analyst and economics professor at the University of Barcelona Gonzalo Bernardos predicts that rents will drop an average of 6 percent in 2021.

This means that, in the meantime, budding homeowners who are not fully financially ready to own a property can save on their rents and save more money on their dream home.

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