Peak to present property prices in Spain are 44% down on average, sending the number of all cash purchases higher than mortgaged sales for the first time.
Until the latest figures from the country’s National Statistical Institute (INS), the number of new mortgages exceeded the number of purchases each month. Now it’s the opposite, with increasing numbers of homes being paid for in cash. This happened first in the second quarter of 2013 when 23,642 houses were sold in April – but with 6,000 fewer mortgages granted.
According to figures released by the National Statistics Institute, the number of new mortgages on homes totalled 17,508 in April, a drop of 18.1% compared with the same month in 2012 and the 36th consecutive month of new mortgage decreases.
But, despite the drop, it was the first month on month mortgage growth in Spain for six years and there were 5,000 more mortgage cancellations than in the same month last year.
So are the cash buyers getting the best deals or is it the “mortgaged to the hilt” buy to let investors?
The latest Spanish mortgage report from international brokers Walker Property Spain, published this week, shows the main sources for cash bargains in Spain and terms for mortgages and provides topical advice on how to get the best property/mortgage deal from troubled Spanish banks.
The report shows more than half of the mortgages currently on offer are tied exclusively to the apartments and villas controlled by the banks themselves and LTVs range from 40% to 110%. These banks are lending only on properties they want off their balance sheets and buyers get nowhere if they approach them with a prospective purchase from a private vendor, developer or other source.
Terms are generous, with interest only for a few starter years and interest rates of around 2% to 4%, tied to all-time low Euribor. In some cases the property price is linked to the deposit/loan percentage, sometimes increasing to 30% over the all cash price, sometimes eliminating the original discount on offer.
Other mortgages are available for universal property purchase, but the interest rates can be three times higher than the best mortgage for bank-owned homes and in one case, an eye watering 6.2%.
Walker Property Spain sales manager, Ben Walker said: “Mortgages in Spain are very fluid at the moment. We offer distressed property and mortgages as international brokers for most of Spain’s leading banks, but cash only purchases have not yet overtaken those with mortgages.
“Sales are easiest where we offer a price discount of around 50%, average price of €120,000 and a loan to value of 80% with 4% interest rate.”
He detailed how all-cash purchase can produce extra savings: One recent international buyer for a townhouse repossession, rejected the controlling bank’s mortgage offer, having decided it was likely to eliminate the price discount. He now wants to pay €100,000 cash for his family holiday home to consolidate a bargain that has already saved him €95,000.
“Spanish Mortgage Update 09 – July 2013” is available from Walker Property Spain.
- Author: Kevin Barnett. Walker Property News