More Buyers Paying Cash for Homes

March 26th, 2013

According to data emerging from the XVI Housing Market Report prepared by Tecnocasa, during the first quarter of 2013, 55% of those buying homes paid cash for the transaction – a period in which more than half of all properties sold were priced at less than 100,000 euros, with the exception of Barcelona and Madrid where the price rose to around 150,000 euros.

This study details the fact that these cash transactions are “significant” and responds to the difficulties in obtaining a home loan and also to the lowering of the price of housing. According to the study, “in many cases” this is resulting in purchases where the price of the property matches the amount available to the buyer. In fact, the firm notes that home prices have fallen 2.8% in the first quarter of 2013 compared to the fourth quarter of 2012.

In this regard, Professor of Economics at the University Pompeu Fabra of Barcelona, José García-Montalvo, explained at a press conference that “a few years ago, even with savings, it was better to ask for a mortgage because it was more cost effective than paying with cash, which is not the case now.”

Furthermore, according to El Mundo, the report reveals that the most common age for the acquisition of a property in the first quarter of this year was between 22 and 44 years (57%). The report also highlights the fact that one in five buyers, during the first three months of this year, were investors taking advantage of the drop in house prices to “acquire a property for rental purposes”.

According to Tecnocasa, the price of used homes fell 19.4% in the second half of 2012, year-on-year, bringing the cumulative decline since the maximum peak prices to over 54.2%. Meanwhile, the average mortgage in the second half of 2012 stood at 99,346 euros, a decrease of 14.6% compared to the second half of 2011, and a cumulative decline of 47% from the peak prices.

Finally, the report highlights that in the second half of 2012, the loan-to-value ratio was 69%, 80% of mortgages were granted to people with permanent employment contracts, and the number of loans granted with a maturity of 30 years grew, leaving behind the 40 year mortgages which were being granted a few years ago.

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