24/05/2016 The Spanish real estate market is stirring in 2016
The latest statistics on the Spanish property market have just been released. Among them, and standing out for its rigour, was the data issued by the Association of Registrars of Spain presented in the report “Real Estate Registration Statistics for the 4th quarter of 2015”, according to which there appear to be a lot of positive developments in said market, albeit unevenly throughout Spain.
An increasing number of real estate transactions are being formalized, though prices still remain far from the highs reached before the bursting of the housing bubble in 2007.
The evolution of housing prices following an upward trend after bottoming out in the last quarter of 2012. This turnaround first surfaced in 2014, materialized in 2015, and continued its upward trajectory into the first quarter of 2016. However, it should be taken into account that current housing prices are at the levels seen in early 2003.
An important factor affecting these new boosts in sales is Spain’s economic situation, namely its economy, as well as international investment in the property market.
In 2015, such investments accounted for more than 13% of total transactions, with over 46,000 homes purchased.
Among the nationalities of the purchasers, the most numerous were the British, at 23.95%, followed by the French (8.17%) and Germans (7.79%). On the other hand, there has been an increase in acquisitions by Chinese buyers (3.88%) and a decrease of Russians, who continue to account for just 3%. The full breakdown is as follows:
Purchases and sales of used homes also hit a record high of 81.17%, though this is beginning to slow as there has been a certain degree of recovery in the initiation of new housing, which began in 2016.
Conversely, mortgage debt continues to maintain its upward trend due to the increase in the price of housing and the revival of the mortgage market.
Additionally, and also a contributing factor, interest rates have continued to drop, reaching 2.49% in the fourth quarter of 2015, thereby consolidating a very favourable development that strengthens the dynamism of the mortgage market and its conditions of accessibility.
All of this has led to the accumulation of about a year and a half of price increases since the appearance of the first positive figures in 2014. This period has seen a changing trend, leaving behind the double-digits drops seen in 2012 and 2013. With regard to the highs of 2007, the cumulative adjustment in the price of housing began in the 4th quarter of 2015, which is still at -28.42 % however.
As for the big cities like Madrid and Barcelona, the developments in 2015 have been very positive compared to 2014, though we must between the various neighbourhoods of the cities.
As such, and according to the report prepared by “El Idealista“, the prices in the City of Barcelona have increased by 6.58% from the 1st quarter 2015 to 1st quarter of 2016.
Yet even so we see that prices are still down more than 26% compared to real estate prices in 2007.
As for Madrid, these developments have been more moderate, although this is understandable because the city has plenty of land available given its size.
With regard to the country’s third capital, Valencia, we see that the trend in prices has been mild, though there are significant differences between the various neighbourhoods, dominated by certain areas such as Eixample over the rest, where the effect of the crisis has been more severe.
As for the rental market in Spain, it should be noted that as a result of the economic crisis there is a significant segment of the Spanish population unable to access mortgage credit for the purchase of a home, even though prices are nearly 30% less than they were in 2007. All these people have been redirected to the rental market in the larger cities, which in turn has generated a high level of demand so the obtainable returns from rental housing is now between 3 and 6% in some cases, making this area very attractive not only to domestic investors, but at the international level in particular.
The confluence of certain elements, such as the low or lack of profitability of bank deposits, Euribor at negative rates, the instability of the stock market, liquidity in the system, and improvement in the economic conditions of the country, has led many investors to turn their attention to the Spanish market, with opportunities for big business, not only through acquiring assets with daily price developments, but also through leases which can generate returns which are unbeatable in terms of financial products, in turn becoming a refuge for certain profiles of investors fleeing higher risks.
In conclusion, it is likely that housing prices, both in major cities as well as certain tourist locations – will continue along this upward trend, which together with the demand for housing from a growing sector of the population makes this an attractive investment product that deserves to be taken into account.