spanien / spain bubble world tour
Real Estate Slowdown in Spain May Cut Sales of `Covered' Bonds
Sept. 29 (Bloomberg) -- Sales of bonds backed by home mortgages in Spain may drop for the first time in five years as prices of apartments in Madrid and villas on the Costa del Sol rise at the slowest pace since 2001.
Banks in Europe's fifth-largest economy probably will reduce sales of bonds to finance mortgages by 23 percent next year to 50 billion euros ($63 billion
The banks raised 59 billion euros this year with so-called covered bonds, debt backed by mortgages and guaranteed by the seller, almost as much as in all of 2005 and the most in Europe
Mortgage lending fell for three of the past four months as borrowing costs for home buyers rose to the highest since 2003, the Spanish Mortgage Association said.
Investors demand 4 to 5 basis points in extra yield to purchase Spanish mortgage debt rather than similar securities in Germany, partly because of the higher amount being sold, said Ted Packmohr, a credit analyst at Dresdner Kleinwort in Frankfurt. The covered market in Spain, which started in 1998, now has 190 billion euros of bonds.
Holders of Madrid-based Banco Popular Espanol SA's 2.5 billion euros of 3 percent covered notes due in 2012 lost 0.5 percent so far this year, Citigroup Inc. prices show. That compares with a 0.1 percent loss on similar securities sold by Munich-based Muenchener Hypothekenbank AG. Moody's Investors Service rates both notes Aaa.
The premium on Spanish covered bonds compared with similar- maturity government debt rose 10 basis points to 29 basis points this year, according to the International Index Company's iBoxx indexes. In Germany, spreads widened by 2 basis points to 17 basis points.
Home prices will increase 4.5 percent next year, down from an annual 10.8 percent in the second quarter of this year, according to Madrid-based Banco Bilbao Vizcaya Argentaria SA, Spain's second-biggest bank.
The last time home values rose more slowly was in 2001, when they gained 8.8 percent.
``In Spain we've had bubble-like conditions for some time,'' said Vishal Pathak, an interest rate strategist at BNP Paribas SA in London. ``If you get reduced volumes of supply, that will help'' bond performance, he said.
Covered bonds typically get AAA ratings by requiring borrowers to set aside assets that can be sold to ensure repayment. (that is the main difference from an mbs and wm uses this structure for their european issuance, das ist der unterschied zu den mbs in den usa.)
Better Than U.S.
Spain's slowdown is nowhere near the slump in the U.S. housing market
The average lending rate for mortgage loans for periods of more than three years has risen to 4.23 percent, the highest since 4.25 percent in January 2003, according to Spanish Mortgage Association data. The rate has risen from 3.19 percent in August, 2005, the lowest in at least 15 years. (this is a consequence from the ecb that sets the rate for whole europe. a independent bank of spain would have raised the rate to at leat 5% or higher in the past years. same in ireland etc., folge der einheitlichen zinspolitik der ezb. ne unabhängige notenbank von spanien hätte die zinsen längst auf 5% plus x anheben müssen. gleiches gild für irland usw)
Declining purchases of second homes by U.K. and German citizens is causing the slowdown in Spain. Foreigners reduced their investments in Spain by 21 percent last year to about 400 million euros a month
Holiday homes account for about 30 percent of residential properties being built in Spain, according to DCM Securities, a London-based broker that finances property development. Half the holiday homes are for foreigners, with U.K. residents making up 52 percent of overseas sales, DCM's data show.
``The Spanish market definitely can't go at the speed we've seen in recent years,'' said Max Beinhofer, who helps manage the equivalent of $15 billion of covered bonds at Deutsche Asset Management in Frankfurt.