Bank of Spain removes the danger of an actual property disaster in Spain however advises “monitoring” its evolution | EUROtoday

Housing is likely one of the predominant considerations for Spanish society at this time, however not for the Bank of Spain, which doesn’t think about that the state of affairs of the nation's actual property market at this time is a worrying threat for the monetary stability of banking entities. However, this doesn’t stop the supervisor from sending a message of warning and advising to “monitor” the evolution of the market within the face of the impression of attainable sudden shocks or within the face of the contagion of tense conditions from Europe or the US.

“A significant adjustment in prices and investment in housing, in isolation from other shocks macrofinancials, would not generate critical impacts on the aggregate solvency of Spanish banking entities”, states the Financial Stability Report revealed this Monday by the Bank of Spainwherein it addresses the latest state of affairs of the financial and monetary system and the dangers it faces.

The speculation of a shock It just isn’t the principle state of affairs contemplated by the regulator, since each costs and the extent of brick exercise in Spain proceed to indicate indicators of resilience after the coronavirus increase, nevertheless, it is usually not proof against the tensions that industrial actual property is inflicting. in entities within the US and Europe, the warming of costs in some Spanish areas and cities and the impression that price will increase could have on the monetary capability of households and firms within the sector.

“We have a message of tranquility, but in which we must continue to monitor its evolution very closely,” he stated. ngel Estrada, basic director of Financial Stability, Regulation and Resolution of the Bank of Spain. The regulator additionally considers the prudence with which banks proceed to grant mortgages, the power of households to satisfy the fee of their mortgage funds, the resistance of the financial system and employment or the low publicity of Spanish banks to industrial actual property. “In Spain, the situation is much more reassuring because we are observing a small overvaluation of housing prices, but it is small and very limited. We had had a significant adjustment in activity in recent years that is reversing and in commercial residential We don't see any risks,” Estrada summarized.

Regarding the components that make them stay vigilant, the supervisor appreciates a sure disconnect between the manufacturing of exercise within the sector and the evolution of housing costs. “I wouldn't call it speculating, but it is worth continuing to analyze,” Estrada stated.

The low variety of requests to stick to the Code of Good Practices prolonged by the Government additionally offers them some peace of thoughts. “It has gone better than expected. The key is that the economic situation has gone better than expected,” stated Estrada. According to the info reported by the supervisor, the financial institution accepted 12% of requests to stick to the code in 2023, however rejected 43%, the bulk for not assembly the necessities to be beneficiaries of the aid measures for weak debtors. or vulnerable to vulnerability. The remaining nearly 50% are nonetheless pending evaluation within the entities.

Of these which might be rejected, 80% don’t meet the established necessities whereas within the remaining 20% ​​of circumstances, both all of the required documentation just isn’t offered or the applicant finally ends up withdrawing from the method.

According to the report, in 2023, the variety of accepted purposes reached 7,900 operations, which represents a quantity of excellent debt of 907 million euros (0.2% of the excellent stability of credit score to households for housing on the finish of 2022) . The earlier yr, the variety of accepted purposes was 1,350 with a quantity of 135 million euros. “The volume of new applications for compliance with measures of the Code of Good Practices last year reached 7.6 billion euros (1.5% of the outstanding balance of credit to households for housing at the end of 2022),” particulars the examine.

Geopolitical dangers

At a macroeconomic stage, the report ready by the Bank of Spain factors to geopolitical dangers as essentially the most related risk at the moment to international monetary stability, with Ukraine and the Middle East as sources of excessive geopolitical pressure. In the Spanish case, the public debt It continues to be the principle vulnerability of the nation's financial system.

“We have observed a significant reduction in the public deficit but the structural component remains high,” stated Ángel Estrada. “The main objective of the authorities should be to reduce this structural component,” and to take action, “it seems necessary draw up a fiscal consolidation plan that allows compliance with EU rules to reduce public debt” sooner or later, Estrada added. In the absence of this plan, the Bank of Spain estimates that public debt may attain excessive ranges sooner or later (120% in 2040). .