The recovery in Spain’s property market is good news for the country’s banks as it will provide a boost for the economy as a whole, while helping reduce the “toxic” real estate assets on the lenders’ balance sheets, says Moody’s Investors Service.
The ratings agency highlighted the 4.2 percent rise in housing prices in Q2 2015, as reported by the National Statistics Institute.
The improvement in prices has also been accompanied by an increase in the number of mortgages granted and a rise in the amount of property transactions, Moody’s noted.
It said the uptick in the real estate sector will be particularly beneficial for the banks’ more problematical assets like residential mortgages, commercial properties and embargoed real estate assets “which in most cases are equivalent to over 10 percent of total lending.”
Despite the signs of a recovery, the agency warned that property prices will not continue to rise at such a high rate and will stabilise. While the favourable macroeconomic outlook and improving consumer confidence are fuelling property investment, “different factors are still weighing on the market.”
These include high unemployment and the decline in the younger bracket of the population, traditionally a source of first time buyers. The delay in Spain’s housing stock being absorbed is also dragging on the sector.