Mortgage lending continued to fall in Spain in August, and the rate of decline even accelerated, according to data out today from the National Statistics Office (INE). The average value of mortgages signed in August was down 10.6% year on year (falling to 152,672 euros). The number of mortgages that change their conditions was up 8.9%.
The total number of properties mortgaged was 88,161 - down 30.8% year on year, while the total value of the new mortgages was 13.459 billion euros - down 38.1% year on year. So, at the moment, this just continues and continues.
If we look at dwellings alone, they were down 36.8 percent year on year, (to 37,744 homes mortgaged in August) compared with a 26.3% fall in July. The drop in mortgage lending for housing also accelerated, falling 43.2 percent to 7.73 billion euros as compared with a 33.2% drop in July.
Building Permits Down and Housing Completions Up
The number of planning approvals in Spain fell by 59% to 199,146 in the first 8 months of the year, according to recent figures from the Spanish Ministry of Development. This means that housing starts this year will drop to a level not seen in Spain nearly a decade. Looking just at August, planning approvals were down by 67% compared to August 2007, and by a staggering 80% compared to August 2006.
The positive side of this is that the dramatic reduction in planning approvals will reduce the pipeline of new properties coming onto what is an already saturated market, though unfortunately it will take at least two years for any impact to even start to be felt. That said, housing starts in Spain are still very high compared to other European countries. In the UK, for example, there are around 120,000 housing starts per year.
The bad news is that falling planning approvals will drive up construction-sector unemployment even further, reducing demand for new homes.
And whilst planning approvals have collapsed, the number of new homes completed has continued to rise, even if this is now at a lower rate than before. According to the Ministry of Development there were 399,381 construction completions in the first seven months of the year, compared to 398,244 in the same period last year – a rise of 0.3%.
At present there are at least 650,000 unsold new homes on the market, and the figure is expected to reach 1 million by the end of the year, according to estimates from developers. Beatriz Corredor – Spain’s Housing Minister – estimates that it will take up to 2 years for the market to absorb the excess supply, but I think even this estimate is hopelessly optimistic.
Spain Real Time Data Charts
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Spain related comment. He also maintains a collection of constantly updated Spain charts with short updates on a Storify dedicated page Spain's Economic Recovery - Glass Half Full or Glass Half Empty?