Euribor 12M, the benchmark index used in mortgage loans, has exceeded 4%, said Maria Suárez, director of Banca País d’Andbank

Having a proper residence brings an element of well-being and stability into people’s lives, and it is very important, according to sociologists, that housing appears as early as possible and not after ten years of waiting.

One of the main advantages of a mortgage is legal security because the bank will check the purchased property so that it is “clean.” Thanks to this, the buyer has no risk of challenging the deal. Like any other loan, the main disadvantage of a mortgage is the so-called overpayment, i.e., the money that must be returned to the bank as interest on the loan.

At the same time, the relevance of mortgage lending is the ability to solve social problems once and for all. And if you already have a residence, a mortgage can be a good opportunity to invest in real estate with the possibility of subsequent rent or sale.

Maria Suárez, director of Banca País d’Andbank, told us about the conditions of mortgage lending in Andorra and the prospects of the real estate market in the Principality.

Andbank, the international group specializing in private banking, closed 2022 with a profit of 30 million euros, 11% up on the previous year. In 2022, Andbank added 3.257 billion euros of new customer positions, a record figure for net organic acquisitions. Assets under management rose to 31.241 billion euros, and credit investment stood at 3.092 billion. The Liquidity Coverage Ratio (LCR) held at 234%, and the Loan to Deposit Ratio (LTD) was 60%. The bank also has a consolidated TIER1 solvency ratio of 15.7% and a non-performing loan ratio that fell to 1.6%, one of the lowest in the sector.

“Depending on the profile of the client, the conditions may vary as each client must be studied according to their age, standard of living, and appropriate to what exactly he is asking from us. Mortgages can be requested for a first residence or the purchase of an investment property. In this latter case, the customer would be a non-resident, as we understand that he will be buying the property as an investment object.

In terms of documentation, the bank must document the ability to repay the loan and have a guarantee provided by this banking transaction. CASS (Caixa Andorrana de Seguretat Social, Andorran Social Security Fund) points, IRPF (Impost sobre la renda de les persones físiques, Personal income tax) declaration, and bank extracts are usually requested. Furthermore, an updated appraisal of the property and a purchase and sale guarantee will be required.

Not too long ago, when interest rates were 0%, the most common interest rate was a variable one. Nowadays, and after the rate hike, we have several requests for both fixed and variable rates. It all depends on the client’s needs and what they think is best for their economy.

We can’t say that this year is better than the previous one or that the previous year is worse than this one. It all depends on people’s needs at some point in their lives, whether they are buying a property for personal use or because they want to make an investment.

An office or office space will be considered as a way of investment, so the % of financing will be lower than for the purchase of a first residence. The truth is that any property can be bought with a mortgage loan, but in each case, it must be adapted to one or another depending on the purpose expressed by this purchase.

Is it profitable to buy a property with a mortgage loan in terms of its subsequent renting out?

For this loan model, the profitability that will be obtained from the rent that will be received and the payment of commission must be calculated on a case-by-case basis. We could advise a customer who wants to request a loan for this purpose to calculate his financial possibilities and how much money he has on the table, and thus, he could evaluate his choice.

Our forecast shows that sales prices are likely to remain stable for the foreseeable future. One of the main reasons for this stability is the constant influx of new residents arriving in the country each year. The combination of a safe environment, an attractive tax system, and an exceptional quality of life attract investors and individuals looking to change their place of residence.

The influx of foreign investors is putting some pressure on sales prices, thus contributing to their stability in general. Domestic demand in the Andorran real estate market is experiencing some difficulties due to high prices and current economic conditions. House prices have reached higher levels, making it difficult for locals to access property. In addition, Euribor 12M, the benchmark index used in mortgage loans, has exceeded 4%, which has also affected the ability of local buyers to purchase homes.

We cannot say that there is a certain type of person who most often applies for a mortgage loan, a certain level of purchasing power, or a certain social status, just as we cannot say that more houses are sold than villas, or vice versa. Everything always revolves around the needs of each individual”.

Interview: Irina Rybalchenko for El Periòdic News

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