The activity of the real estate sector in 2019 will undoubtedly be marked by the mortgage drift that is beginning to be seen at the moment. As per the surcharges in capitals and the control of rental housing. They will be very relevant factors to know if it is also a good time to invest in securities of the traditional brick sector in Spanish equities. In an exercise that will be developed with many doubts due to other conditions in the general economy.
On the other hand, it cannot be forgotten due to its special importance that the slowdown in the Spanish economy, which is certified by the European Central Bank (ECB), somewhat removes the ghost about a new bubble, in this case the real estate. This is a scenario that raises serious doubts among small and medium investors. Beyond other technical considerations in the stock values that represent this important sector of the Spanish economy.
In any case, we must also influence other aspects that will give us the odd signal about how the movement of the Real estate transactions. Carried out through various strategies, ranging from buying and selling shares in this important sector of Spanish equities to simply investing in brick. That is, buying flats with the intention of making them profitable in a rather short space of time, in the short term. Without giving up other alternative ways of investing in this financial asset that is so popular among small and medium investors.
Real estate sector: mortgages
The number of mortgages constituted on homes is 30.356, 20,4% more than in October 2017, according to the latest provided by the National Institute of Statistics (INE). In which it is shown that the average amount is 126.926 euros, with a 4,6% increase. The average amount of mortgages registered in the property registers in October (from previously public deeds) is 138.171 euros, 5,8% lower than the same month in 2017.
While on the other hand, another of the relevant data from the INE is that the value of mortgages constituted on urban properties reaches 5.594,4 million euros, 13,5% more than in October 2017. In housing, the borrowed capital it stands at 3.853,0 million, with an annual increase of 25,9%. On the other hand, there is also an impact on the fact that in this analyzed period, for the mortgages constituted on the total of properties in October, the average interest rate at the beginning is 2,57% (4,3% lower than that of October 2017) and the average term of 23 years.
Changes in mortgage loans
62,4% of the mortgages are at a variable interest rate and 37,6% at a fixed rate. The average interest rate at the beginning is 2,35% for variable rate mortgages (3,5% lower than in October 2017) and 3,06% for the fixed rate (9,1% lower). To finally reach the conclusion that the 5.355 mortgages with changes in their conditions, 46,3% are due to changes in interest rates. After the change in conditions, the percentage of fixed rate mortgages increased from 10,0% to 15,1%, while that of variable rate mortgages decreased from 88,7% to 83,4%.
The Euribor is the rate to which the highest percentage of variable rate mortgages refers, both before the change (76,4%) and after (77,5%). Behind the modification of conditions, the average interest on loans on fixed-rate mortgages decreases 1,0 points. Variable rate mortgages also fell 1,0 points. All these data show that there is a great demand for this important financial product, still with a fairly competitive interest rate for the interests of the users. Although there are already the first signs of rising prices in the European benchmark, the Euribor, which has been on the rise for several months after trading at historic lows.
Rent through the roof
Another of the investment systems is materialized through the rental of housing, with very good results for their owners. Not surprisingly, it cannot be forgotten that this real estate occupation regime is very profitable and above other financial assets. In this sense, there is a data as relevant as that the rental price grew slightly more than 15% in the third quarter of 2018. This data in practice represents the highest price reached in the last 10 years, which includes the period in which the economic crisis developed.
As a consequence of this upward trend in rent, the owners at this time would have a profitability close to 15%. A percentage that in any case does not generate any kind of financial products, neither in fixed income nor in variable income. It is enough to remember that the main banking products (fixed-term deposits, bonds or high-income accounts) barely exceed levels of around 0,5%. As a result of the cheaper price of money and that has led to its profitability being at historical lows for several years now.
Is there a risk of a real estate bubble?
One of the most relevant fears that financial and economic agents harbor is the fact that in the coming months or years the much-talked about real estate bubble may burst. In this sense, the opinion of experts in the sector indicates that the conditions are not yet in place for it to emerge from now on. At least in the short term, which is the one that investors are most interested in. What on the contrary, if it is appearing in the brick market is that the price of housing is over warming up, especially in large Spanish cities.
From this general scenario, it cannot be ruled out but opinions go the other way and only warn of the risk that the price of housing will go growing month after month. Not surprisingly, there will be a time when this trend will have no choice but to moderate. This is a very specific problem that is present in Spain and not in other countries in our immediate environment. It is an aspect that undoubtedly may end up affecting the values of the construction sector in national equities
Purchase and sale of apartments
These operations have grown 13% in the past year, although there may be slight variations from now on. In this sense, different studies and reports from the sector suggest that in 2019 housing prices will rise, going from 1.650 euros per square meter that is currently being traded to about 1.800 euros per square meter. In any case, it seems a less intense deviation than that generated in previous years. Now what will have to be checked is whether this year will produce a turning point in the purchase and sale of homes.
On the other hand, there is also the desire of a good part of the small and medium investors to invest their savings in the securities of the sector of the national equities. It may be a good idea, but it carries great risks and is the evolution of these financial markets in the current year. You cannot forget that the Ibex 35 dropped just over 15% in the past trading year. The risks, therefore, are rather latent to the point that you can leave yourself many euros along the way.
Dividend distribution
On the other hand, some of these listed companies distribute a hefty dividend among shareholders, with interest ranging between 3% and 6%. Like a fixed income and guaranteed every year, whatever happens in the equity markets. As a very original strategy to create a fixed income within the variable and avoid the weak intermediation margins offered at the moment by the different savings and investment products. With a strategy set in the medium and long term and that is aimed at a very well-defined profile of investors: a defensive user who wants to preserve their savings over other considerations.
At least in the short term, which is the one that investors are most interested in. What on the contrary, if it is appearing in the brick market is that the price of housing is overheating, especially in large Spanish cities. Beyond other technical considerations and also from the point of view of its fundamentals. In what is the X-ray of this important sector of the Spanish economy and one of the favorites by a good part of the users of our country at this precise moment.
These operations have grown 13% in the past year, although there may be slight variations from now on. In this sense, different studies and reports from the sector suggest that in 2019 housing prices will rise, going from 1.650 euros per square meter that is currently being traded to about 1.800 euros per square meter.