The adjustment of the Spanish Real Estate Sector. January 2012

Transcription

1 The adjustment of the Spanish Real Estate Sector January 2012

2 The Spanish housing sector: facts and features

3 Price increase in Spain : fundamentals Favourable macroeconomic environment. GDP growth over EU average Substantial population increase and socioeconomic factors (immigration, household formation) Permanent real interest rate reduction effect, implying a permanent increase in asset valuations Macroeconomic permormance, housinge price and wages , Number of households and population in Spain (Annual growth rates) 4% 3% 2% 1% 0% Source: Bank of Spain Source: Statistics National Institute Household units Population

4 Housing sector in Spain: main features High proportion of ownership 81% vs. rent 17%. Market duality: main residence 67% vs. vacational housing 33% Homeownership rate (%) Population by tenure status 2009 (%) Secondary or vacational housing Empty or secondary housing (per (per hab) hab) Germany Denmark Netherlands France Sweden United Kingdom Ireland Portugal Belgium Italy Spain Source: Global Financial Stability Report IMF April 2011 Source: Eurostat Germany Denmark Source: Eurostat 2004 France Greece Holand Italy Portugal UK SPAIN EU Average

5 Housing sector in Spain: main features Preference for real estate assets: 80% of total assets. Social housing ratio below EU average : 11% vs 16% Fixed income securities 0,2% Investment funds 0,8% Private shares 0,9% Listed stocks 1,0% Pension plans 2,0% Bank accounts 5,3% Jewels, works of art, antiques 0,4% Value distribution of total household assets Other 0,7% Freelance bussinesses 9,2% Source: Bank of Spain, Familiy Finance Survey 2008 Main residence 54,7% Other real estate assets 24,8% Social housing 11% Proportion of social housing 2008 Source: Ministry of Public Works Free market housing 89%

6 35,0% House House price gaps (IMF (2008), 32,1% Price overvaluation Economic literature available estimates a range of overvaluation degree between 13% to 30% Following IMF World Economic Outlook (April 2008), the growth of house prices in Spain showed a lower overvaluation component than in other countries, and was largely based on fundamentals: Demographic and socioeconomic factors (immigration, household formation) Permanent real interest rate reduction effect, implying a permanent increase in asset valuations Studies estimating the price overvaluation in the Spanish housing market 29,2% 30,0% 28,0% 25,0% 21,8% 20,0% 17,0% 16,2% 15,0% 11,8% 10,0% 5,0% 1,7% 0,0% Ireland Netherlands UK France SPAIN Sweden Italy Germany Source: IMF Author and year Year of estimation Estimated overvaluation BBVA - Balmaseda et al. (2002) % Bank of Spain - Ayuso and Restoy (2003) % Bank of Spain - Martínez-Pagés and Maza (2003) % IMF (2004) % IMF (2005) % OECD (2005) % ECB (2006) % Ayuso and Restoy (2006) % IMF (2008) % FEDEA - Sosvilla (2008) % Source: OECD Economic Surveys: Spain 2010

7 The housing sector has experienced a strong adjustment

8 Construction activity shows a correction phase Construction activity is still in the process of downward adjustment. At the middle of 2011 residential investment reached a 54% cumulative decrease from its maximum. Relative size of the construction sector (Employment over total employment and residential investment over GDP) 14% 13,6% 12% 10% 9,5% 9,2% 8,7% 8% 8% 6% 4% 2% 4,7% 4,1% 4,3% 0% Source: Statistics National Institute INE Residential investment Employment

9 Price adjustment Housing prices have fallen over 19% from its maximum in the 1st Q 2008, and over 23% in real terms. Rent to housing prices ratio shows narrow margin for additional adjustment Housing price variation (Base 1995) Rent to housing prices ratio 2500 /m Housing / Rent Average Source: Ministry of Public Works Source: Ministry of Public Works and Ministry of Economy and Finance

10 International comparison: deeper adjustment in Spain House prices rose less in Spain than in other countries, but the difference in the decrease from the peaks reached is smaller. Thus, comparatively, the degree of the adjustment in Spain is being harder than in other countries New housing price variation (Base 1996) UK Ireland Spain Source:ESRI, Ministerio de Fomento and Department for Communities and Local Government.

11 Price adjustment: regional analysis The national average may not be noteworthy, as housing market requires regional analysis - 16% - 16% - 17% - 16% - 16% Housing price decrease per province over national average 1st Q nd Q % - 19% - 17% - 19% - 22% - 22% - 26% - 21% - 20% -18% - 16,7% - 17% -21% - 23% - 23% > -20% - 22% - 19% - 17% - 21% -16% - -20% Source: Ministry of Public Works

12 Municipalities over hab. with higher new housing price drop Average price drop in bigger towns: -25% 1st Q th Q2010 Price drop from the peak

13 Stock reduction Stock of unsold houses has started shrinking in 2010 Net stock and stock variation Stock reduction path Net stock %Y-o-y variation ,8% 51,3% 48,3% 40,1% 688, , ,512 12,1% 413, , ,184-0,08% 102, % Source: Ministry of Public Works Started housing construction Stock Finished housing construction

14 Housing Stock: regional distribution % stock / number of total houses % stock / total stock 2,5% 1,9% 2,5% 0,8% 1,2% 1,6% 4,7% 2,3% 2,6% 5,7% 1,7% 6,2% 0,4% 1,8% 0,7% 1,3% 0,77% 2,6% 15% 1,7% 7,4% 0,5% 4,2% 4,1% 2,8% 0,5% 7,8% 19,3% 2,4% 2,5% 3,7% 16,3% 4,3% > < 2 3,8% >10% 5-10% 0-5% 5,9% Source: Ministry of Public Works

15 Thank you for your attention Fernando da Cunha Serantes For more information please contact: