FT: Spanish housing dips further

[jlmagic]

Spanish housing dips further

By Mark Mulligan and Richard Milne in Madrid

Published: May 28 2008 18:11 | Last updated: May 28 2008 18:11

The downturn in Spain’s residential housing market is gathering pace, as tightening credit conditions exacerbate already weakening demand among first-time buyers and holiday home investors.

Figures released on Wednesday by the National Statistic Institute show that the number of house sales completed in March dropped more than 38 per cent year-on-year, to 46,100 units. This compares with an annual decrease of 27 per cent in January and 24.5 per cent in February.

The number of home mortgages awarded in March also fell sharply, by almost 40 per cent to about 70,400. The average home loan size was €141,725, down nearly 4 per cent on the year-ago period.

However, the latest comparisons with 2007 are distorted by the Easter break, which this year fell in March instead of April.

Nonetheless, economists said Wednesday’s figures confirmed that Spain’s residential housing sector was in the middle of a hard landing.

“The situation is getting worse,” said Juan Carlos Martínez Lázaro, an economics professor at the Instituto de Empresa business school in Madrid.

“There is now a danger of paralysis that could spread to the general economy.”

The collapse of residential construction in Spain comes after a 10-year credit-fuelled boom, which peaked in 2006 with about 800,000 home building approvals.

Climbing interest rates, oversupply and tougher lending conditions miccionan new home starts this year are forecast at less than one-quarter of this.

The slowdown in activity has already been noted in rising joblessness figures, particularly among low-skilled immigrants, and has hit hard related businesses such as furniture and brick manufacturers.

Insolvency proceedings involving real estate or construction groups more than doubled year-on-year in the first quarter of 2008.

Consumer sentiment is also at a 14-year low, affecting spending across most sectors. The Banco de España, in its monthly economic bulletin, said that all signs pointed to “continuing weakness in activity in the second quarter”, amowing an 8 percentage-point drop in gross domestic product growth between the final quarter of 2007 and the first three months of 2008. Most economists agree this year’s GDP growth rate will be less than 2 per cent, compared with 4 per cent in 2006. The government, meanwhile, has promised to speed up planned public works programmes to help offset the housing collapse.

Although bad, the home sale figures – which track contract exchanges on new and used properties - tell only part of the story. According to a separate report by Morgan Stanley, off-plan sales, which are not included in official statistics, could have fallen by up to 75 per cent since the end of 2006.

The investment bank also noted a growing trend among would-be homebuyers to walk away from deposits after failing to secure mortgages. It said a survey of six listed real estate developers showed that between 5 and 10 per cent of off-plan buyers were losing their down payments after having their mortgage applications turned down.

Copyright The Financial Times Limited 2008

http://www.ft.com/cms/s/0/f92ea49a-2cce-11dd-88c6-000077b07658.html

 

[Deadzoner]

There is now a danger of paralysis that could spread to the general economy.There is now a danger of paralysis that could spread to the general economy.There is now a danger of paralysis that could spread to the general economy.There is now a danger of paralysis that could spread to the general economy.There is now a danger of paralysis that could spread to the general economy.There is now a danger of paralysis that could spread to the general economy.There is now a danger of paralysis that could spread to the general economy.

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[MNSV]

Los del FT con únicos viendo las pajillas en el ojo ajeno pero no ven el camello que se le está metiendo por el ojet*:

U.K. Home Values Drop Most on Record, Nationwide Says (Update1)

By Brian Swint and Jennifer Ryan

May 29 (Bloomberg) -- U.K. house prices fell in May by the most since at least 1991 as the shortage of credit starved the property market of buyers, Nationwide Building Society said.

The price of an average home dropped 2.5 percent from April to 173,583 pounds ($344,000), Britain's fourth-biggest mortgage lender said today in a statement. That's the biggest drop since the index started in January 1991. From a year earlier, prices declined 4.4 percent.

Bank of England Governor Mervyn King predicted this month that property values are ``likely to fall further'' and said there is a risk that the U.K. economy may contract. Mortgage approvals dropped in April by 39 percent from a year earlier, the British Bankers' Association said this week.

``Tighter credit conditions in the market at present are making it more difficult for borrowers to obtain loans,'' said Nationwide Chief Economist Fionnuala Earley. ``More weak economic news added to the gathering momentum of negative sentiment about the housing market.''

Property values have now declined for seven months, the longest streak of drops since 1992, Nationwide said today.

Homebuyers are paying more for mortgages after the global credit squeeze prompted financial institutions to curb lending. U.K. banks increased the cost of home loans with a 5 percent down payment to the highest in more than eight years in April, failing to pass on the Bank of England's three interest-rate cuts since December.

Worsening Outlook

While Earley cautioned against putting ``too much weight'' on one month's figures, recent reports point in the same direction. HBOS Plc, the biggest mortgage lender, said May 2 prices fell in April on an annual basis for the first time since 1996, slipping 0.9 percent. Research company Hometrack Ltd. said this week that values declined in May by the most since November 2005.

``The housing market seems likely to continue to deteriorate,'' said Nick Bate, an economist at Merrill Lynch & Co. who used to work at the U.K. Treasury. ``Though individual measures can be volatile from month to month, all the main house price indices have turned down more forcefully in recent months.''

Price declines in April were the most widespread since at least 1978, Royal Institution of Chartered Surveyors says. Apart from Scotland, where prices rose when unadjusted for seasonal swings, every region tracked by RICS showed declines.

Inflation Risk

The central bank kept the main rate at 5 percent on May 8 as record oil prices prompted the biggest jump in inflation since 2002 in April. Policy makers, who will take their next decision in a week, signaled they have little scope to lower rates further as inflation is set to accelerate, minutes of the meeting showed.

David Blanchflower, the only one of nine interest-rate setters to favor a reduction, said that the slowing economy will tame inflation in two years. The bank predicts that growth will slow to about a 1 percent annual pace by the first quarter, the least since 1992.

``Stronger than expected inflation data appears to have shattered hopes of an early cut in the bank rate in June,'' Earley said in the statement today. ``But more downbeat housing market data could lead more members to join David Blanchflower in voting for pre-emptive cuts.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=anDXqKzzW1KQ&refer=home