Real News‎ > ‎2014‎ > ‎May 2014‎ > ‎

27th May 2014

Top Story

Review property cooling measures: Foo Mee Har

Source: Straits Times 

Some property market cooling measures should be reviewed to make it easier for more Singaporeans to upgrade their homes, Ms Foo Mee Har (West Coast GRC) said in Parliament yesterday. This would help give more Singaporeans "a chance to realise their aspirations and 'level up'", she said during a debate on the President's Address.

Singapore Economy

S'pore 'world's No. 3 city' by economic, social performance

Source: Straits Times

Singapore has emerged as the world's third top city, behind London and New York, in terms of social and economic performance. In the latest "Cities of Opportunity" study by PwC, the city state climbed four notches from last year's seventh spot, retaining its lead in transport and infrastructure and ease of doing business.

Singapore Real Estate

70-80% of Trilive to be dual-key units

Roxy-Pacific says launch date not fixed, but it should be within a month

Source: Business Times / Companies

LISTED developer and hotel operator Roxy-Pacific hopes to use dual-key units and the concept of three-generation (3G) living to unlock value at its new freehold project, Trilive.

Seventy to 80 per cent of the 222 units in the Tampines Road project will be dual-key units.

Roxy-Pacific chairman and chief executive Teo Hong Lim told The Business Times yesterday that the launch date has not been fixed, but that it should be within a month.

The pricing will take its reference from another freehold project in Kovan, The Tembusu by Wing Tai, which achieved a median price of $1,554 per square foot (psf), based on caveats lodged until last month. Leasehold properties in the area are going for $1,300 to $1,400 psf, he said.

-By Lynette Khoo

Demand up for private rental homes

Source: Straits Times

Demand for private rental homes rose in the first quarter and could grow further as the economy improves, but the glut of vacant properties means rents will likely weaken or stay flat. That was the state of play outlined in a report from consultancy Savills yesterday.

MapletreeLog acquiring logistics centre in Korea for 25.5b won

Daehwa to provide initial net property income yield of 8.3%

Source: Business Times / Companies

IN A bid to ramp up its scale in higher-growth markets, Mapletree Logistics Trust (MLT) has entered into a sale-and-purchase agreement with Daehwa Logistics Co to acquire Daehwa Logistics Centre in South Korea for 25.5 billion won (S$31.2 million).

With this purchase, the logistics Reit will grow its presence in South Korea to nine properties. Meanwhile, its total portfolio will clock 112 properties with a book value of $4.27 billion.

Situated within 50km of Seoul, the logistics centre is a three-storey Grade A dry warehouse with a gross floor area spanning about 25,600 square metres. The property, which was completed in December last year, is located in one of the key logistics clusters in the Gyeonggi province, where the majority of the country's warehouses and distribution centres are situated.

At the purchase price, the logistics centre will provide an initial net property income yield of 8.3 per cent and is expected to be DPU-accretive, MLT said.

-By Nisha Ramchandani

ONE° 15 inks deal to build Vietnam marina resort

Vung Ro Bay development will also have hotels, shops, apartments, beach

Source: Business Times / Singapore

SINGAPORE-based ONE°15 Marina Club will be developing an integrated marina resort in Vietnam to ride on the luxury boating and yachting wave in the region.

It yesterday signed a memorandum of understanding (MOU) with Vung Ro Petroleum to develop the property in Vung Ro Bay.

The development, to be named ONE15 Vung Ro Bay Marina Resort, will comprise hotels with over 760 rooms, 4,300 apartments, 100 luxury townhouses, retail shops and a 400 metre sandy beach, as well as marina berths.

The gross commercial area will total some 200,000 square metres, with space for schools, healthcare facilities, retail, leisure and entertainment complexes as well as the ONE15 Vung Ro Bay marina.

-By Malminderjit Singh

S'pore faces imminent hotel room shortage

Visitor arrivals seen rising with new attractions, big events coming up

Source: Business Times / Property

VISITOR arrivals in Singapore are expected to increase this year through 2018, underpinned by new attractions and major events the country is hosting, but the hotel room supply here is not rising quickly enough.

"Our projections revealed that hotel occupancies will remain extremely tight, rising from 80 per cent to 91 per cent from 2014 to 2018 respectively. We will expect hoteliers to raise room rates given the severity of the hotel room crunch situation developing here," Chesterton Singapore said in a report released yesterday.

"As such, we strongly suggest that the government review its policy and release more hotel sites for sale under the government land sales programme (GLS) sooner rather than later."

The hotel pipeline from 2014-2018 is expected to be just 11,147 rooms - about 20 per cent of the existing stock of 54,962 licensed hotel rooms in 2013. Most of the new hotel supply is expected to come onstream in 2014 and 2015.

-By Lee Meixian

HDB starts work on 40,000 new homes

Projects in Punggol Matilda, Tampines North, Bidadari areas

Source: Business Times / Singapore

THE Housing & Development Board (HDB) is set to launch more projects in Tampines North, Punggol Matilda, and Bidadari regions - the three new towns that were identified for further development under the Draft Master Plan 2013.

In the second half of this year, housing projects will be launched in Tampines North and Punggol Matilda, followed by Bidadari in the second half of 2015.

These follow two housing projects in Punggol Matilda - Matilda Edge and The Verandah@Matilda - which were launched in a build-to-order (BTO) exercise last September.

Work on the developments for the three housing areas has started on the ground. When fully developed, they are expected to provide about 40,000 new homes for Singaporeans, HDB said.

-By Lee Meixian

'Strong support' for Bidadari, Tampines North, Punggol Matilda developments: HDB

Housing agency say those surveyed are excited about the plans for the three areas and are looking forward to them being realised.

Source: Channel News Asia / Singapore

SINGAPORE: Plans for the upcoming Bidadari, Tampines North and Punggol Matilda housing areas have received "strong support" from the public, according to a survey conducted by the Housing and Development Board (HDB).

In a statement on Monday (May 26), the HDB said close to 4,000 visitors participated in a survey conducted last August during the launch of the three housing areas. Of these, more than 9 in 10 indicated that "they were excited about the plans and looked forward to them", it stated.

HDB said two housing projects in Punggol Matilda were launched during last September's Build-To-Order (BTO) exercise, and it will launch more projects in Tampines North and Punggol Matilda in the second half of this year. Bidadari projects will be introduced next year.

Commenting on the survey results, real estate firm ERA said Bidadari stands out due to its "excellent" location. There are two MRT stations there and nearby amenities include NEX mall in Serangoon and the upcoming commercial centre in Potong Pasir, it stated in a statement issued on Monday.

"The new proposals will exploit its greenery, rich heritage and convenient transport connections to provide a high quality environment," ERA said.

When fully developed, these three housing areas are expected to provide some 40,000 new homes for Singaporeans, HDB said.

- CNA/kk

Real Estate Companies' Brief

Global Logistic Properties

Source: Business Times / Singapore Markets

May 26 close: S$2.81

DBS Group Research, May 26

GLOBAL Logistic Properties (GLP) reported a 20 per cent growth in Q4 FY2014 revenue to US$150.4 million. However, lower fair-value gains from associates, including a revaluation loss from Brazil and forex losses, led to a 29 per cent drop in reported Patmi (profit after tax and minority interests) to US$160 million (US$152 million after perpetual securities distributions).

Global Economy & Global Real Estate

China property developers go down-market

Source: Business Times / Property

[HONG KONG] The Chinese developer behind an eight-storey clubhouse with a billion-dollar view over Shanghai's Huangpu River is turning to lower-end coffee shops and restaurants to fill the space, as a broad anti-graft campaign puts the brakes on conspicuous spending.

The state-of-the-art, steel and glass building was originally designed as a playground for China's elite, including space to mix and mingle with officials from state-owned enterprises based in offices nearby.

"Last year, we originally planned to open a clubhouse in the building, but it became too sensitive," said Vincent Zuo, a manager of research and development at Franshion Properties, 

which has a market value of US$2.7 billion. "We are now looking to open restaurants and coffee shops," said Mr Zuo, adding that an art museum was another option for the arch-shaped building which sits in the middle of the company's 30 billion yuan (S$6 billion) cruise terminal complex.

The decision to target middle-market consumers comes amid a crackdown on official corruption and extravagance in China that is forcing some high-end developers and hotel operators to change tactics to adapt to the new environment.

-From Hong Kong, China

Spanish property market shows signs of recovery

Increase in sales indicates that values may be starting to stabilise

Source: Business Times / Property

[MADRID] Within the ashes left by Spain's property crash, some embers are glowing.

As the recovery in the euro region's fourth-largest economy continues and record unemployment subsides, the property market whose slump had locked the country into a recession is showing signs of life. While home price data isn't yet signalling a turnaround, an increase in sales indicates that values may be starting to stabilise.

The market is now safe enough for Stanislas de Bellescize, a 44-year-old computer programmer who recently took the plunge and bought a house two subway stops from the affluent Salamanca district in downtown Madrid. More such decisions would offer Prime Minister Mariano Rajoy the prospect of a further pillar on which to build Spain's revamped economy after more than half a decade of misery.

"We thought this is the right moment," said Mr de Bellescize, who has found new work after losing his previous job last year. "There is still room to negotiate prices."

-From Madrid, Spain

Emaar Properties to list malls unit on bigger bourse

Source: Business Times / Property

[DUBAI] Dubai's Emaar Properties said yesterday it will list up to 25 per cent of its malls business on the Dubai Financial Market (DFM), a shift from earlier plans to list on the emirate's smaller Nasdaq Dubai exchange.

The builder of one of the world's largest malls - Dubai Mall - said it had received regulatory approval for the primary listing of up to a quarter of Emaar Malls Group.

Companies listing on DFM are normally required to float stakes of at least 55 per cent but exceptions to the rule have been made in the past.

Nasdaq Dubai has a much lower free float requirement of 25 per cent, but it attracts less trading activity than the DFM and has only 10 listed equities.

-From Dubai, UAE

Emaar to List Mall Unit on Main Dubai Market After Exemption

Source: Bloomberg / News

Emaar Properties PJSC (EMAAR)plans to list its retail division on the Dubai Financial Market as the operator of the world’s largest mall cashes in on a shopping surge that’s helping drive the emirate’s economic rebound.

The developer plans to list 25 percent of the unit after getting an exemption from rules requiring companies listing on Dubai’s main exchange to sell at least 55 percent, according to a statement today. Emaar scrapped earlier plans to sell shares in London and on the Nasdaq Dubai.

“This is the right decision and the likelihood of success has increased many times,” Mohammed Ali Yasin, managing director of NBAD Securities in Abu Dhabi, said by phone. NBAD has a buy rating on Emaar. “The strength of Emaar is close to its home base and that has improved through the crisis with people who know the value of the stock and are likely to stick with it.”

The developer, which generates more than half of its income from shopping malls and hotels, is benefiting from a recovering property market following a 2008 crash. In February Emaar said it planned to raise as much as $2.45 billion in a sale taking place in June and that funds raised would be primarily distributed as a dividend to Emaar Properties shareholders.

Existing Shareholders

The timing of the public offering and listing will be announced at a later date, Emaar said today. Existing shareholders will be given priority to buy the new stock, though some portions will be set aside for financial institutions and the general public, Emaar said.

“Following the listing, Emaar Malls Group will add significant value to the bourse, and is expected to drive more foreign direct investment,” the company said.

The developer has over 5.8 million square feet (539,000 square meters) of gross leasable area in Dubai, including the Dubai Mall, Dubai Marina Mall, Souk Al Bahar and Gold & Diamond Park, the company said. It’s extending its Dubai Mall, already the world’s biggest by area, by 1 million square feet, adding more than 150 shops, it said.

Emaar was up 3.7 percent at 10 dirhams at the close of trading in Dubai. The shares have surged 44 percent this year, giving the company a market value of 71.6 billion dirhams. Emaar is the biggest company on the DFM General Index, accounting for 22 percent of the total value, according to data compiled by Bloomberg.

-By Zainab Fattah

China State Construction Plans $4.8 Billion Preferred Stock Sale

Source: Bloomberg / News

China State Construction Engineering Corp. (601668), the nation’s biggest builder by market value, plans to raise as much as 30 billion yuan ($4.8 billion) in a sale of preferred stock to bolster working capital.

The company will sell as many as 300 million preferred shares in a private placement, according to a statement to the Shanghai Stock Exchange yesterday. The sale, which needs shareholder and regulatory approvals, would be the largest such offering in China by a non-bank company.

Regulators introduced sales of preferred stock on a trial basis in March to expand fund-raising options in a nation where the benchmark stock index has declined 26 percent since 2011. China State Construction needs to boost capital as its debt to asset ratio stood at 79 percent at the end of March, the Beijing-based company said in its statement.

“Share dilution is always a concern, but we are in an environment in which having access to that capital is much more important than anything else,” Gerry Alfonso, a trader at Shenyin & Wanguo Securities Co., said of the stock sale in a phone interview.

Shares of the company, which builds housing and infrastructure projects, fell 0.3 percent to 2.98 yuan as of 11:29 a.m. in Shanghai, compared with a 0.2 percent decline in the Shanghai Composite Index. The shares have fallen 5.1 percent this year after plunging 19 percent in 2013.

Tightening Credit

Tightening credit in China has raised concerns the company’s funding sources could be affected as Beijing seeks to rein in the effects of its stimulus in the aftermath of the 2008-09 financial crisis.

Key projects undertaken by China Construction Engineering Construction and its subsidiaries include the iconic National Aquatics Centre built for the Beijing Olympics and the Baha Mar Resort in the Bahamas.

Preferred shareholders have a higher claim on a company’s assets than common stockholders in the event of liquidation, though they are usually accorded fewer voting rights. Owners of preferred securities are typically entitled to a fixed dividend before funds are paid to common shareholders.

The company plans to sell at least 50 percent of the stock within six months of winning approval from the China Securities Regulatory Commission. The rest would be sold in 24 months of winning approval.

-By Bloomberg News

Risky Australian Lending Targeted as RBA Spurs Housing: Economy

Source: Bloomberg / News

Australia’s banking regulator urged mortgage lenders to maintain standards as higher-risk borrowing rises and home prices surge amid record-low interest rates.

The Australian Prudential Regulation Authority is “seeing increasing evidence of lending with higher risk characteristics and it does not want this trend to continue,” Chairman John Laker said in a statement. Draft mortgage guidelines released today reinforce “the importance of maintaining prudent lending standards when competitive pressures may tempt otherwise.”

The Reserve Bank of Australia, which has held its cash rate at 2.5 percent since August, has signaled the housing upswing was needed to spur residential construction. The RBA has eschewed measures to curb booming prices, in contrast with New Zealand, which has introduced limits on low-deposit mortgage lending, and Bank of England Governor Mark Carney’s warning this month that surging U.K. home prices are the No. 1 economic risk and policy responses may result.

“The RBA needs house prices to keep rising because of the lift they provide to other areas including consumption and construction,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “Cooling prices now risks derailing the still fragile recovery. Evidence that lending standards have eased will force APRA to have more closed-door discussions with banks.”

The RBA examined a range of macro-prudential tools and favors closer supervision of lending over “tick-a-box” regulations to help deal with a property boom, according to papers released March 10 under a Freedom of Information Act request. The central bank sees loan tests that include buffers for higher interest rates as preferable, the papers showed.

Draft Guidelines

APRA’s draft guidelines released today state that banks should apply a buffer over a loan’s interest rate and regularly conduct stress tests with a range of scenarios to ensure their mortgage portfolios can withstand adverse economic conditions and changes to home prices. When brokers or other third-parties are involved, lenders should take responsibility to ensure borrowers can repay loans, according to the guidelines.

Boards should also be vigilant if a bank increases home loan lending faster than competitors, or in particular segments or geographies, APRA said.

“This guideline doesn’t move APRA down the road of macro-prudential policies to address rising home prices,” John Buonaccorsi, Sydney-based banking analyst at CIMB Group Holdings Bhd., said by phone. “APRA is more concerned about underwriting standards and debt serviceability rather than just loan-to-value ratios and other limits.”

Stress Tests

Australia’s four biggest banks -- Australia & New Zealand Banking Group Ltd. (ANZ),Commonwealth Bank of Australia, National Australia Bank Ltd. (NAB) and Westpac Banking Corp. (WBC) -- had A$1.04 trillion ($960 billion) worth of mortgages as of March 31, according to APRA data.

Australian house and apartment prices climbed 11.5 percent in April from a year earlier with Sydney leading gains at 16.7 percent, according to the RP Data-Rismark home value index.

The RBA said March 26 an upswing in property prices has the potential to encourage speculation, it can’t go on forever, and lenders should avoid relaxing standards to boost profits.

The mean home price across Australia’s eight major cities rose to a record A$637,965 in April, according to RP Data. The average owner-occupied home loan size across Australia climbed 6 percent to A$319,300 in March from a year earlier, according to the nation’s statistics bureau.

Interest Only

Interest-only mortgages rose to 39 percent of total loans approved in the last three months of 2013 from 35 percent a year earlier, according to APRA data released on Feb. 25.

Banks should only approve such loans for owner-occupiers where there is a sound economic basis and not because the customer can’t qualify for a traditional loan where the principal is also repaid, APRA cautioned today.

Under the Reserve Bank of New Zealand’s lending limits introduced on Oct. 1, loans for more than 80 percent of a property’s value must account for no more than 10 percent of a bank’s new lending, down from about 30 percent.

The Bank of England said this month its options include imposing more checks on the affordability of mortgages, limiting types of loans or advising the government to rein in its stimulus program.

“We don’t see much value in carving out a particular aspect of the prudential framework under separate governance and manipulating it separately,” Luci Ellis, the head of financial stability at the RBA, said this month. “We’re talking about leaning on serviceability and making sure serviceability is being tightly controlled.”

-By Narayanan Somasundaram and Michael Heath

Berlin Voters Reject Plan to Build Homes on Cold War Airfield

Source: Bloomberg / News

Berlin voters rejected the government’s plan to build homes, schools and a library on Tempelhofer Feld, the former airfield where Allied bombers once delivered food to a city besieged by the Soviet Army.

The development on the edges of Tempelhof, now a recreational lawn almost the size of New York’s Central Park, was voted down by the majority of voters in the referendum and more than a quarter of all Berliners eligible to vote, Berlin’s Election Commission said on its website today. By 9:38 p.m. about 83 percent of the votes had been counted. A final result is expected by the end of the day.

The referendum was meant to settle a disagreement over a controversial project that pitted government officials trying to address a housing shortage against locals who worried they would lose access to Berlin’s biggest park. Polls putting roughly equal numbers of voters on either side of the ballot had made the outcome difficult to predict.

Tempelhof Airport was built in 1936 by Hermann Goering’s Reich Air Ministry. Used during the Cold War for an Allied Forces’ airlift to save Berlin from starvation, it was closed in 2008 after a referendum to keep it open failed because of a low turnout. Once it was shuttered, local residents staged demonstrations, demanding the airfield be opened to the public, which happened in 2010.

The vote blocks all development at the airfield. The government had planned to build 4,700 homes over several stages, with at least half of the 1,700 homes planned for the first phase subsidized to make them more affordable. All of the development would have been on the edges of the former airfield, leaving the rest of the site as a public space that would still be bigger than Berlin’s Tiergarten, a park on the west side of the Brandenburg Gate.

Hot Housing

Housing is a hot-button issue in a city where disposable income and employment lag behind the national average. Since 2005, the number of people living in Berlin has risen 3 percent to 3.4 million, according to data compiled by the city government, which expects 7 percent more residents by 2030.

Rents have increased by 23 percent in the past three years, according to Bulwiengesa, with some areas showing gains of more than 40 percent.

-By Dalia Fahmy

U.S. Home Sales Come Out of Deep Freeze

Source: Bloomberg / Luxury

Sales of new U.S. homes climbed in April for the first time in three months, allaying concerns of an extended setback in the residential real-estate market.

The 6.4 percent increase to a 433,000 annualized rate was the biggest in six months and followed a 6.9 percent March decline, Commerce Department data showed today in Washington. The advance was spurred by a surge in demand in the Midwest.

Last month’s gain brought the sales pace in line with the first-quarter average, indicating housing’s contribution to economic growth will be muted. An increase in the number of available homes, slower price gains and easier lending standards would help encourage prospective buyers to take advantage of falling mortgage rates.

“The deep freeze is over, and I think we can expect new home sales to continue to rise,” said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, who projected a 432,000 rate of April sales. “It’s better; it’s still not strong.”

Figures yesterday from the National Association of Realtors painted a similar picture of the housing market. Sales of previously owned homes climbed 1.3 percent, helped in part by an increase in the supply of properties.

New-home sales account for about 7 percent of the residential market and are tabulated when contracts are signed, making them a timelier barometer than transactions on existing homes, which are based on closings.

Lacking Momentum

“You’re not seeing renewed upward momentum yet,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, who projected an April sales rate of 435,000. Still, “I don’t think there’s a downtrend here of any consequence.”

Stocks rose after the report, with the Standard & Poor’s 500 Index closing above 1,900 for the first time. The S&P 500 increased 0.4 percent to 1,900.53 at the close in New York. The S&P Supercomposite Homebuilding Index advanced 2.7 percent.

Elsewhere, German business confidence declined more than economists forecast amid signs that growth in the euro area’s largest economy will slow this quarter.

The median forecast of economists surveyed by Bloomberg called for a 425,000 annual rate of U.S. home sales. Estimates ranged from 395,000 to 460,000. Sales in March ran at a 407,000 pace, stronger than the previously reported 384,000.

The increase in new-home sales last month was led by a 47.4 percent surge in the Midwest to an 84,000 annual rate, the fastest since November 2007. Purchases also climbed 3.1 percent in the South. They fell in the Northeast by the most since October 2012 and were unchanged in the West.

Home Prices

The regional data were reflected in the price figures. The median selling price in the U.S. fell 1.3 percent from a year earlier to $275,800. Homes are typically more expensive in the Northeast, where sales declined, and in the West.

There were 192,000 new houses on the market at the end of April, representing 5.3 months of supply at the current sales pace after 5.6 months in March.

Housing began to cool in the middle of 2013, with residential investment becoming a drag on the economy during the last two quarters, its worst six-month performance since the first half of 2009.

The slowdown hasn’t gone unnoticed at the Federal Reserve. Policy makers cited a potential “persistent slowdown” in housing as a downside risk for growth, according to minutes of the April 29-30 policy meeting.

“We’re still looking for a modest recovery in housing,” said Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. The April rebound helps reduce “fears that we have an overall stalled housing market.”

Builder Sentiment

Builder optimism has eased as well, reflecting still-tight credit conditions and limited availability of lots. Confidence dropped in May to the lowest level of the year, according to a gauge of builder sentiment from the National Association of Home Builders/Wells Fargo.

“I think that through the rest of the year, we’ll see an improvement, albeit maybe a little bit slow, but I do think that we’re on the right track,” Larry Nicholson, president and chief executive officer at Westlake Village, California-based Ryland Group Inc., said during a May 14 presentation.

Some relief may be in store for potential buyers as borrowing costs decline. The average rate on a 30-year, fixed mortgage dropped to 4.14 percent in the week ended yesterday, the lowest level since October, according to Freddie Mac in McLean, Virginia.

Builders are gradually adding to the supply of single-family homes. A report last week from the Commerce Department showed construction starts of one-family properties increased for a third straight month, to 649,000 at an annual rate in April.

Home appliance maker Whirlpool Corp. in Benton Harbor, Michigan, is upbeat about demand.

“We are, I would say, still in the early stages of a rebound in the housing market,” Chief Financial Officer Larry Venturelli said at a May 14 homebuilding conference. Underlying demand in the housing markets “continue to be very strong.”

-By Michelle Jamrisko

Spain Sees Embers Glow in Wreckage of Property Crash

Source: Bloomberg / Luxury

Within the ashes left by Spain’s real-estate crash, some embers are glowing.

As the recovery in euro-region’s fourth-largest economy extends and its record unemployment subsides, the property market whose slump locked the country into a recession is showing signs of life. While home-price data isn’t yet signaling a turnaround, an increase in sales indicates values may be starting to stabilize.

The market is now safe enough for Stanislas de Bellescize, a 44-year-old computer programmer who recently took the plunge and bought a house two subway stops from the affluent Salamanca district in downtown Madrid. More such decisions would offer Prime Minister Mariano Rajoy the prospect of a further pillar on which to build Spain’s revamped economy after more than half a decade of misery.

“We thought this is the right moment,” said de Bellescize, who has found new work after losing his previous job last year. “There is still room to negotiate prices.”

First-quarter house prices and mortgage approvals for March are due to be published on May 28. Economists surveyed by Bloomberg News forecast the data will show the smallest decline in values since 2010.

Pent-Up Demand

“A stabilization of prices is on the horizon for 2015,” Jesus Castillo, a Paris-based economist at Natixis, which forecasts declines will slow to an average 2 percent next year from 4 percent this year.

Evidence of green shoots in the market are emerging. Spain’s General Council of Notaries said earlier this month that home sales jumped more than 45 percent in the first quarter from a year earlier.

“Pent-up demand from buyers who’d been holding off is now coming to the market,” said Juan Villen, head of mortgage lending at, Spain’s largest property website. “They realize prices won’t fall much further and the economy won’t get any worse.”

Further releases this week, including April retail sales and first-quarter gross domestic product, may show stronger growth as households loosen spending slashed amid the toughest austerity measures in the nation’s democratic history. The GDP data will probably confirm economic expansion accelerated to 0.4 percent from 0.2 percent at the end of 2013.

Boom Legacy

Spanish bonds advanced today on speculation that the European Central Bank will increase economic stimulus next month. The yield on Spain’s 10-year benchmark bond fell 10 basis points to 2.89 percent in Madrid. That compares with a euro era record of 7.75 percent in July 2012, when the country was forced to seek aid from European Union peers.

As buyers re-emerge in certain parts of the country, prices, which have dropped an average of 47 percent since the peak in 2007, are starting to increase in cities such as Barcelona, the second-largest, according to Idealista.

In southern-eastern Valencia, the epicenter of the decade-long construction boom and subsequently among the regions worst hit by the crisis, the local association Fevec says builders are being asked to complete hundreds of unfinished homes which landed on the books of Spain’s bad bank, known as Sareb.

Valencia accounts for close to a fifth of Spain’s 1 million empty homes. Those vacant properties are a legacy of the unbridled building of almost 700,000 houses a year between 1997 and 2006, more than France, Germany and the U.K. combined. Last year, there were 43,600 homes completed in Spain.

Investors Gather

“It’s not only foreigners anymore, we’re actually getting calls from people in Madrid,” said Jesualdo Ros, general secretary of Provia, the builders association in Murcia, south of Valencia. “It’ll take time but residential tourism will eventually help to revive local real-estate demand as well.”

The improvement is already attracting investors such as Blackstone Group LP (BX), Goldman Sachs Group Inc (GS) and Azora Capital SL, which last year bought apartment blocks and social-housing developments from local authorities in Madrid.

Investment in Spain by funds, private-equity firms and other financial-services companies more than doubled to 13.9 billion euros ($19 billion) last year. About 37 percent of that went into real estate assets, according to debt-restructuring firm Irea, which expects the proportion to increase this year.

Economists including Souheir Asba at Societe Generale SA in London expect mortgage lending to start recovering toward the end of the year as banks -- which forced Spain to seek a 40 billion-euro bailout in 2012 -- finish cleaning up their books.

Pick Up

“It’s quite likely to pick up after the European Central Bank’s asset quality review,” said London-based Asba. “Demand is improving and not yet matched by offer.”

Real estate analyst Fernando Acuna says that lenders reluctant to offer credit remain obstacles to house sales.

“Banks are no longer offering 120 percent mortgages over 40 years,” he said. “Today you need at least 20 percent of the property’s value saved up before you can attempt to buy it.”

His Madrid-based firm, Acuna & Asociados, estimates that 40 percent of unsold housing units will never find buyers due to their undesirable location and because workers earning 1,000 euros a month -- known as “mil euristas” -- aren’t able to stump up deposits. About 30 percent of workers in Spain earn less than 1,216 euros a month, statistics office data show.

“Real estate is lagging but it’ll follow now that the economy has started to grow,” said Madrid-based Angel Laborda, chief economist at Funcas, Spain’s savings banks’ foundation. “It’s taking much longer, but Spain is going through the same process as the U.S. or Ireland, where construction is contributing to the economy again.”

-By Angeline Benoit and Sharon Smyth