Re­cov­er­ies on re­pos­sessed Span­ish homes will rise fur­ther, since hit­ting bot­tom in 2013, says Moody’s

Financial Mirror (Cyprus) - - FRONT PAGE -

As the stock of out­stand­ing re­pos­sessed prop­er­ties de­clines, re­cov­er­ies will con­tinue to im­prove, since bot­tom­ing out in 2013, Moody’s In­vestors Ser­vice said in a new re­port. Re­cov­ery rates on re­pos­sessed prop­er­ties have risen in par­al­lel with an im­prov­ing econ­omy and a 5.8% in­crease in Span­ish house prices since 2013. Mort­gage loan orig­i­na­tion shot up by 13% in Spain dur­ing 2015-14.

“Given the favourable eco­nomic back­drop, we con­sider that Span­ish se­cu­ri­ti­sa­tion ve­hi­cles will be able to sell their re­pos­sessed prop­er­ties more eas­ily,” said Ca­role Bernard, a Se­nior An­a­lyst at Moody’s.

“Span­ish

mort­gage

loan

de­faults in­creased fol­low­ing the fi­nan­cial cri­sis, driv­ing a high vol­ume of property re­pos­ses­sions since 2009. When those prop­er­ties failed to sell at auc­tion, it forced Span­ish res­i­den­tial mort­gage-backed se­cu­ri­ties (RMBS) trans­ac­tions to hold them. So far, losses on re­pos­sessed houses re­main within our as­sump­tions for de­faulted mort­gage loans, we will con­tinue to mon­i­tor the re­cov­er­ies on re­pos­sessed prop­er­ties,” noted Bernard.

The rat­ing agency stud­ied more than 14,000 re­pos­sessed and de­faulted loans and an­a­lysed the sale prices of 5,008 re­pos­sessed prop­er­ties in rated Span­ish RMBS. Moody’s es­ti­mates that 43% of all re­pos­sessed prop­er­ties in the Span­ish RMBS in­cluded in the study have been sold so far, com­pared with just 30% as of its pre­vi­ous study in 2013. The sales of re­pos­sessed prop­er­ties av­er­aged 34% of their orig­i­nal val­u­a­tion.The cor­re­spond­ing de­cline in property value (66%) is greater than the peak-to-trough na­tional house price in­dex.

Moody’s re­search shows that re­pos­sessed prop­er­ties sold in Catalunya, where re­pos­ses­sion vol­umes are large, de­pre­ci­ated the most. Re­pos­sessed prop­er­ties sold in Mur­cia, Va­len­cia and Castilla-La-Man­cha, where un­em­ploy­ment re­mains high, de­pre­ci­ated by more than 67% of their ini­tial val­u­a­tion. The vol­ume of re­pos­sessed prop­er­ties con­tin­ues to be sig­nif­i­cantly lower than the cor­re­spond­ing de­cline in the re­gional house price in­dex of the Span­ish Sta­tis­ti­cal In­sti­tute (INE).

The Mediter­ranean Coast, An­dalu­cia and Castilla-La-Man­cha have the largest dif­fer­en­tial be­tween the re­pos­sessed property sale price and the cor­re­spond­ing in­dex val­u­a­tion, at more than 50% be­low the property in­dexed val­u­a­tion for those re­gions.

North­ern Spain had the low­est de­vi­a­tion be­tween re­cov­ery on re­pos­sessed as­sets and re­gional in­dex­a­tion. Coin­ci­dently, re­gions in north­ern Spain had the low­est vol­ume of cu­mu­la­tive re­pos­ses­sions brought to court.

Re­cov­ery rates on re­pos­sessed prop­er­ties im­proved the most in the Ca­nary Is­lands, the Balearics, Castilla-La Man­cha and Cataluna since 2013.

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