Bloomberg News

Spanish Mortgage Drop as Sharp as After End of Housing Boom

June 22, 2011

(Updates with comment from economist in fourth paragraph.)

June 22 (Bloomberg) -- The number of mortgages issued for Spanish homes in April registered a drop unseen since the end of the housing boom, confirming the weakness of a real-estate market that is penalizing the country’s banks and growth.

The number of new mortgages declined 38.2 percent from a year earlier, the National Statistics Institute said in an e- mailed statement today. That’s the most since April 2009, when buyers pulled out of the real-estate market after the end of the housing boom in 2008. The value of mortgage lending slumped 45.1 percent from a year earlier, the most in more than two years, the institute said.

The decline reflects the impact of a 21 percent jobless rate on consumers’ borrowing capacity. The number of foreclosed properties in Spain has climbed tenfold since 2008, according to Idealista.com, the country’s largest property website. The extent of the drop is also due to the end of a tax incentive in January, announced by the government last year to encourage buyers to bring forward purchases and work through a backlog of 1 million unsold homes.

“This addition to a long series of negative data confirms Spanish growth is weak, but it is still too early to tell whether the real-estate sector is actually worsening,” said Javier Diaz-Gimenez, an economics professor at Madrid’s IESE Business School.

Bankia IPO

The data come as Spain’s central bank shepherds lenders formed from mergers of savings banks toward market listings as it tries to contain the cost of recapitalizing them from public coffers. One of them is Bankia, which will register its initial public offering prospectus with regulators next week instead of today as planned, a person familiar with the transaction said.

“The mortgage situation isn’t good news for the banks because they have Spain’s stock of unsold homes and credit is becoming rarer and more expensive,” Diaz-Gimenez said.

A possible default by Greece and mounting bad loans tied to domestic property have driven up Spanish banks’ borrowing costs.

Transaction volumes on Spain’s real-estate market won’t pick up until prices fall more, Diaz-Gimenez said.

Home prices fell for the 12th straight quarter in the three months through March, making for a 15 percent drop from the peak three years earlier, the statistics institute said on June 15.

--With assistance from Charles Penty and Emma Ross-Thomas in Madrid. Editors: Jennifer M. Freedman, Andrew Atkinson

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net


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