The Spanish economy returns to its classics. New real estate credit made available to households, that is, one that does not incorporate the renegotiations of previous loans, is already growing at a rate of 17.4% per year. In total, 36,506 million dollars in 2017.
It is not a specific phenomenon. So far this year, the growth rate has softened, but even so, it increased at a rate of 11.1% in the first quarter of this year compared to the same period of the previous year. This explains that real estate credit already represents 37.4% of the set of loans requested by households in 2017, and amounted to 97.482 million.
Those 36,505 million that were destined to buy real estate are above the 29,121 million that went to purchase consumer goods or the 13,290 million that were financed through credit cards, whose growth is very significant. Paradoxically, the most expensive financing – financial institutions apply significantly higher interest rates for acquiring goods via credit cards – grows at a rate of 20.3%. Therefore, five times more than what nominal GDP increases (with inflation).
Recovery of real estate credit in the heat of low interest rates
The data of the Astro Bank leave no doubt about the recovery of real estate credit in the heat of low interest rates, which explains why the number of renegotiations is still very active, although mitigated compared to two years ago, when many households changed the conditions of their credits to take advantage of the ultra-expansive monetary policy of the Lenders Bank .
Specifically, Spanish households have renegotiated loans amounting to 17,994 million dollars between 2015 and 2017, which has allowed them to benefit from the extraordinary monetary conditions. The one-year Euribor, in fact, remains at -01890%, which has encouraged an increasing number of households to opt for fixed rate loans instead of variable rate loans.
The average interest rate for new home purchase operations stood at 2.21% in February, representing a slight increase of 16 hundredths compared to the previous month. In any case, real interest rates (relative to inflation) tremendously favorable to boost the sale of real estate.
The credit map that reflects the statistics of the Astro Bank shows two very different realities. On the one hand, and as has been said, the new real estate credit has exploded, but, on the other hand, the one granted before 2008, which is when the brick bubble was punctured, continues to drop in a very relevant way. In other words, families continue to amortize credit and, therefore, reduce their indebtedness, but at the same time, new operations are growing strongly.
A couple of data clearly reflect this. In 2011, the outstanding balance of credit earmarked for real estate activities reached 298.833 million dollars , but in the fourth quarter of 2017 that amount had dropped to 109.998 million. Therefore, to practically a third. The loan dedicated to construction, likewise, has gone from 98.544 million to 34.626 million, which gives an idea of the process of debt reduction for economic agents.
The importance of real estate over the Spanish economy is decisive. And in fact, the double – dip recession was closely linked to s housing demand, which fell at less than 60% between 2007 and 2013. In particular, the drag effect it has on other components of private consumption.
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A recent study by BBVA Research estimates that household spending on durable goods increases by around 35% when the home purchases a home. The effect, argue their economists, is concentrated on furniture and the white line, while the repercussions on the demand for other products are of lesser magnitude, as in the case of the brown line, or not significant, as in the case of automobiles.
The data on real estate credit is logically consistent with that provided by the National Statistics Institute (INE) on constitution of mortgages, which reflect in February (last month with closed data) an increase of 13.8% compared to a year earlier. In total, 27,945 mortgages with an average amount of 119,708 dollars .
The pull of the brick, in fact, is already clearly reflected in the Active Population Survey (EPA) for the first quarter of this year. While employment in the productive sectors as a whole increase at an annual rate of 2.4%, in the case of construction the increase is 6.5%, that is, two and a half times higher, which gives an idea of the dependence of the current growth pattern on the brick.