The apartments offered by banks are not always cheaper

Although the initial price of housing may seem an opportunity to assume a low price, the final cost, including the necessary reforms, it can be high The apartments offered by banks are not always cheaper versus those offered by agencies and individuals. In addition, a lower price is a result of the state of housing and the need for a "profound reform". This is the conclusion drawn from a study by the Organization of Consumers and Users (OCU).

Despite popular belief, the bank is the owner of an apartment is no guarantee that it is a good opportunity. Thus, after an analysis of 54 real estate properties, the study shows that half of the banks visited flooring needed updating, which in some cases had to be completed.

Thus, although the initial price of housing may seem an opportunity to assume a low price, the final cost, including the necessary reforms can be high. Also, keep in mind that at that price must be added the cost of sales, according to the autonomous region, may amount to 14% of value.

In addition, funding is obtained not always an advantage, according to the organization. The usual spreads offered by banks are between 1.6% and 3%, depending on the degree of relationship with the company by recruiting other products. In this context, the study shows that the cheapest differential stood at 0.9% for a flat with a high price.

In this line, the analysis shows that most banks finance 80% of the value of the home, while in 3 cases 100% financing offered, albeit with a less favorable terms for the interest rate and the added expenses.

So, OCU recommends considering that, in comparing prices between agencies, banks and individuals, the latter do not charge commission to the buyer, while some agencies do. In addition the organization advised to invest in housing that exceed four times the net family income.

In this context, he said that the brick has risks, high acquisition costs, taxes and management, and low liquidity. Thus, it states that "there is a comparable investment with fixed term deposits." Thus, the organization indicates that for a housing investment is profitable, the profitability of this should exceed 5% to offset the costs of purchase, the rent, the risk of default and damage.

The household debt with banks fell by 4% and continues to minimum 9 years

The annual cut recorded by loans for the purchase of housing was the main reason for the fall in credit to households. Compared with the previous month, the household debt remained virtually unchanged, although slightly lower.

The debt of Spanish families with financial institutions fell 3.9% in May compared with the same month of 2014, which puts the figure at 736 080 million euros for the third consecutive month to its lowest level since August 2006. 

According to the updated data today by the Bank of Spain, the annual cut recorded by loans for the purchase of housing was the main reason for the fall in credit to households, since in May 2014 amounted to 600.439 million euros, 4 , 1% less than the 575.277 million euros in May this year. Compared with the previous month, the household debt remained virtually unchanged, although slightly lower, as it went from 737 983 000 (according to the final data) to 736 080 million. As for loans to companies, it has also been reduced in May from the previous year, by 5.1% to 941.345 million euros, while in April the decline has been only 0.68%. 

RBI interest rate cut positive for housing sector

For the first time in three years, Reserve Bank of India (RBI) has slashed interest rates by 50 basis points to 8%. This move will reduce the home, auto and corporate loan rates. A fall in interest rates of home loans spells relief for the common man who up till now had been postponing the decision to buy property due to increased prices and high inflation.

Anuj Goel, Executive Director of KDP Infrastructure believes that this is a good move from the RBI’s side as this will improve cash flow. “As the housing loan interest rate reduces, it facilitates home seekers to buy house and ultimately it will be beneficial for real estate industry. However, the move will only benefit new borrowers while the existing borrowers will have to grapple with the old rates,” he added.

Banks should allow existing home loan customers to reduce their interest burden by allowing them to re-price their existing loans at lower rates so that borrowers can switch to prevailing floating rates that are at a discount to the prime lending rate, Goel pointed out.

Navin Raheja, President, NAREDCO & CMD, Raheja Developers is happy with the move, saying that home loan EMIs will come down resulting in a boost to residential real estate. “But, the banker’s reaction to maintain the interest rates irrespective of cut in repo rates is a cause of concern because we feel that banks should pass the rate cut to the borrowers enabling them to invest in real estate,” he said.

Sailesh Kumar, Chief Operating Officer, Lotus Infra Projects Pvt. Ltd agreed with the view, saying that keeping in view the upside risk of inflation, the RBI could not afford to cut repo rate for the last couple of years.

“It seems that growth is likely to improve supported by pick up in consumption demand. The RBI has cut the repo rate which is a welcome step for real estate sector as high interest was impacting the demand on one hand and increasing the cost of construction on the other hand increasing the cost of construction,” Kumar added.

Gaurav Mittal, Managing Director, CHD Developers Ltd said that this step is slated to be beneficial for both the buyers as well as the developers who have been struggling with cash crunch in recent times. This significant move would reduce the cost of funds to home buyers as well as developers as it will allow the banks to lower down the interest rates. “This will ensure heightened property demand in the coming times. Removal of the pre-payment penalty clause will spread cheer amongst developers and would ensure fresh loans and hence boosting the market,” he added.

Now that rates are cut, consumer demand is expected to revive and overall sentiment will also improve. It is expected that banks will reduce the home loan interest by 50 basis points which will ultimately perk up the demand and will help developers to dispose off their unsold stock, Kumar added.

Rajesh Goyal, Managing Director (MD), RG Group said that the announcement in the new credit policy to cut interest rate by 50 basis points is a move towards the right direction. It will provide much-needed boost to the sector and a relief to home buyers.

However, Om Ahuja, CEO – Residential Services, JLL India does not consider this cut to be a positive move for the housing sector. It should be borne in mind that the RBI has hiked interest rates a total of 13 times between March 2010 and October 2011. “Given the ongoing concerns over inflation and excessive liquidity on the market, this spate of rate hikes as created a compounded problem for the residential real estate sector whose effects are not easily dispelled. The series of hikes in the past have also affected the price that builders put on their properties, since their own cost of borrowing has increased. It is unlikely that property prices will come down because of this rate cut, and it is the price of properties that is the decisive factor in residential real estate sales,” he said.

Housing Market Latest Reports

The year 2010 saw a real estate boom but the beginning of 2011 shows that the market again towards a downtrend. Update on the situation.

The balance of the year 2010 was marked by a strong rebound in property prices. A rebound confirmed by data from notaries in France. Thus on average, house prices have risen more than 8% in France.

These data continue to be analyzed and gives new information especially on the situation in the third quarter of 2010.

Location of apartment prices

For this period and year over year, home prices marked a rise of 8.5% yoy in the third quarter. But be careful, the situation is heterogeneous between a province sees increase its rates by 5.2% and peers more than 12.2%.

Location of house prices

As so often, the house price reacts differently collective dwellings. This is the case once more. Houses rose by 8.7% on average nationally, but with a nice 9.1% in the provinces against only 7.6% in Ile de France.

These data are interesting and clearly shows the interest of looking at the data in detail. In the case of a national average slightly lower parts of the country have been in sharp decline and others increasing.

The year 2011 marks the beginning of change

While statistically the price of housing in France is generally increasing (mainly due to the Paris region), some regions have already begun a process of decline. This is the case of Upper Normandy who comes in the last three months show a decline of more than 2%.

In addition, the real estate trend could change more broadly at the national level, leaving only the Paris region to rise. The first factors are expected to decline already at the rendezvous. For example, the return of higher mortgages. Loan brokers are finding that credit rates have already risen by more than 0.45% over the last two months. Some even predict an increase in appropriations of 0.5% in the next six months. The situation tends to the housing market nationally.

Factors of decline in the property market

Add to that a very unfavorable economic conditions with unemployment on the one hand that reaches just to stabilize at 9.7% in the third quarter of 2010. And above all, inflation is rising to iron some of which believes it will reach 1.5% in 2011. An optimistic forecast given the surge in raw materials such as grain or oil.

This inflation will also serve to strengthen the higher credit rates . Indeed, the governor of the European Central Bank (ECB), Jean-Claude Trichet, monitors inflation and could quickly increase the rate of the ECB to limit it. Must remember, this rate determines the cost of borrowing money from banks to the same central bank. The commercial banks will pass on the increase so future borrowers.

Finally, another negative factor is the reduction of the tax exemption Scellier which should slow down a bit more buyers.

Finally, 2011 should advertise the market hard and the balance of the year will be in the best conditions, probably a slight decline in prices and volumes. In a more pessimistic, some already announcing an upcoming real estate crash .