J.L.M. Campuzano (Spanish Banking Association) | The law on customer protection requires the banking sector to be responsible when it comes to credit granting: entities should analyze the capacity of borrowers to fulfil their obligations under contract. The current strong recovery of Spanish housing market has re-opened the debate about its sustainability. It is true that a significant part of property buyings have not needed mortgage financing, which can reflect that many buyers who could have made a purchase during the crisis, preferred to expect for a better macroeconomic situation to do it, or just that the Spanish households’ financial position have considerably improved. In spite of this, even though the mortgage credit balance continues falling by a yearly 4%, the new credits are growing at double-digit pace.
What can we find behind this solid increase of home sales operations? On the basis above mentioned that many people were expecting for better times to buy, there is no doubt that the economic recovery and its effect on job creation can underlie on that real state momentum.
According to last Bank of Spain’s data, the net wealth of the Spanish families is rising at 6.9% on a y-o-y basis. It currently exceeds 119.4 % of GDP. As regards to housing wealth, it now means 420% of GDP.
These are very significant figures showing a better financial position of families against numbers before the crisis. Spain households have made great efforts in last years to adjust their debt level, which stands at 63.4 % of GDP after a decrease of 30% and is very near to the European average. This appears to be opposed to the Spanish financial culture of house ownership. Furthermore, homes’ level of debt is under that of 2006.
Another way of looking at it is considering the strong adjustment of mortgage debt. In terms of GDP it drops to levels never seen before 2004.
It is not for us to assess the current and future evolution of property prices, but we can analyze the responsibility of banks on real state loans.
Therefore we can take into account again Bank of Spain’s figures. Firstly, the indicator on households income for payment of mortgages which means 33.8%, going downwards in last years, and very under the crisis. The other relevant indicator is the house price percentage that is financed by a mortgage loan which is now at 64,8 %. Hardly 14.2 % of mortgages loans finances properties over 80% of their price.
