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Spain’s real estate market recovery has experts divided

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Spain’s real estate market has finally recovered from the crisis this year and, while market experts agree on future growth estimates, the jury is still out on how this will shape the market in 2016.

Property prices in Spain could grow 6.0% and transactions on houses and flats could increase by 14.5% according to the October report “Residential Market in Spain” by Servihabitat, a Spanish real estate agency, in conjunction with the Institute of Business Practice (Instituto de Práctica Empresarial). Furthermore, their analysts forecast "a normalization process in the Spanish residential market" based on this year’s market indicators.

The Spanish market is really recovering: pre-crisis construction projects are unfreezing and older new builds that never found a buyer are now selling gradually. This is mainly down to the country’s affordable loans and improvements on the labour market.

Maria Kamysheva Maria Kamysheva Real Estate Sales Manager for Spain

Market recovery confirmed

The number of transactions is on the rise in Spain. With 26.6% more sales in 2015 than last year, the total number of transactions will amount to 403,000 according to Servihabitat. This increase is particularly associated with rising transactions on the secondary market as newly-built property sales only make up 12.9% of all transactions.

Nevertheless, even if pre-owned property sales appear to dominate market renewal, it is because Spain’s registration bodies haven chosen to consider property owned by investors (which were never inhabited) as part of the secondary market. In the meantime, the number of construction permits for developments are rising and off-plan property is making a comeback in Spain.

If anything, British buyers returning to Spain’s property market is a good indication that things are picking up. Sales to British citizens grew 33% in 2014 and they made 35% more purchases during the first quarter of 2015 than the same period in 2014.

Opinions divided

Real estate companies do not agree on 2016 estimates and their forecasts vary from moderate optimism and determined confidence in strong growth.

In terms of price growth, Standard & Poor’s (S&P), a financial group, and commercial bank Bankinter are advocating for moderate optimism, forecasting 2.5% and 2.0% price growth in 2015 respectively. Servihabitat, on the other hand, plans for a 6.3% rise year-on-year.

Growth forecasts 2015/16

Company Year-on-year price growth
forecasts, %
Number of transactions,
2015 2016 2017 2015 2016
Servihabitat 2.6 6,3 n/a 403 462
Bankinter 2.0 4.0 n/a 380 420
S&P 2.5 2.5 4.0 n/a n/a
Colegio de Registradores
de España
2.8 5.0 n/a n/a n/a

Sources: Servihabitat, S&P, Bankinter, Colegio de Registradores de España

As a result, while market players are unanimous regarding Spain’s recovery, there is no consensus on further developments, which are largely dependent on the country’s general economic health.

Less debt, more loans

The 2015 real estate market in Spain is characterised by higher demand, driven by healthier economic parameters. Unemployment, though still abnormally high, has fallen from 26.1% in 2013 to 22.2% in 2015. BNP Paribas, an international bank, forecasts that it will reach 19.3% by 2017.

Concurrently, lending volumes have substantially increased: 11.1% more mortgages were granted in Q2 2015 compared with the same period in 2014 according to Spain’s Colegio de Registradores, the national property registration body

Positive forecasts may come from an improvement in homeowner debt to GDP ratio. Mortgage debt has dropped to 68.6% of the country’s GDP in 2015 from 104.9% in 2010, meaning that citizens are finally catching up on credit accumulated before the crisis.

Finally, Spain’s GDP grew for the first time in 2014 since the 2008 crisis and is projected to reach 3.0% this year (although research by the Oxford Economics think tank says it will be readjusted to 2.6%).

What to expect

The real estate community is only partially unanimous: the consensus is on growth and recovery, supported by positive macroeconomic indicators, but expert opinions diverge on how strong and consistent this growth will be, making upcoming H2 2015 results all the more important in establishing accurate forecasts. In the meantime, expect the following trends on the Spanish real estate market in the near future:

Ivan Chepizhko, Tranio

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