QF Focus Magazine
My predictions for the Spanish house market in 2016
The housing stock has been declining in many areas, although some are still struggling and will face challenges. Most importantly the housing crisis has seen a debugging in the industry, closing down the least professional firms and opening a window of opportunity for the surviving companies.
What is expected for 2016 in the housing market? I am glad you asked me that question. We have started the year recovering in many areas and stabilising in others. Economic expectations and housing prices have plateaued and in very specific areas it has begun to rebound. Moreover, according to recent data from the National Statistics Institute (INE), house prices rose 4.5% in the third quarter of 2015 compared to the same period of 2014. It is the largest increase since the last quarter of 2007 and means that we have had six consecutive quarters of prices going up.
Because of this many gurus in the property market are talking about “the time to buy”, which has become an attractive option again after the sharp adjustment of prices and interest rates at historic lows.
The revival of property development in Spain. Another important aspect is the revival of property development. You will probably have started to see cranes around our “Costa” and some small property developments have already sold from plan in a few months. In addition, new promoters with their own funds are offering higher value added products (more sustainable buildings, personalised and with extra services) although these developments are offered only in secure areas where there is high demand, and a lack of other products to compete with. Transactions are gathering momentum. In 2013 some 300,000 homes were sold in Spain, less than half that in 2007, and this year the figure has already come close to 400,000 units.
400,000 units sold in 2015.
Overall I think that price adjustment is over and done with. As regards stock there are areas below the equilibrium level, which may result in minor price increases in some localities around the Mediterranean area and in big cities like Madrid and Barcelona. Funding is positive with the recovery of credit availablity for businesses and some households. Some financial institutions are even publicising that they are ready to start to finance purchases. GDP growth in Spain is another important factor. Official figures show growth of around 3%. A very important fact because, according to experts of Studies at Caixa Bank, one point of GDP growth represents 170,000 more jobs.
The situation seems ripe for a boom in the housing market, although there are negative issues. Unemployment is still very high, about 22%, and the population at risk of poverty is also very large. These conditions need improving, because otherwise there will only be a demand based on foreign investment, which is not enough to lift the market up from where it stands at the moment.
All in all, 2015 has ended with the consolidation of a new cycle for the housing market, a fact that has been certified by many institutions. Finally the ending of a crisis that began with ferocity in the third quarter of 2007 and reached its peak in the year 2013.
Bankinter Bank in its semi-annual housing market review has had to revise their forecasts. “We believe the current recovery cycle will not generate a new boom in demand for housing, but will create the right conditions for purchases to increase in 2016 to 420.000 units. In our estimates published in February we estimated demand for 450,000 units in 2016”. Having said that most professionals in this industry will be extremely happy if 420.000 units are sold this year.
Article supplied by Pacheco & Asociados Architects. See their advert below for contact details.
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It is no secret that 2014 and 2015 were a turning point for the Spanish real estate market after a long period of crisis. In these two years the market began to get back on its feet after having bitten the dust in 2007 and 2008.
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