Light at the end of the tunnel for the Spanish property market?

graph

This year could be the year where all indicators on the health of the property market emerge from the red.

If as claimed, 2014 was the turning point for the Spanish housing market, then 2015 may be know as 1 AD (After Depression), After 7 years in limbo, the residential sector may again be seeing positive data on all key indicators. This is the main conclusion drawn from ‘Pulsímetro Inmobiliario’ (XXI edition) of Instituto de Práctica Empresarial (IPE)

The report has drawn MAR Real Estate, the real estate co-operative of IPE, in collaboration with the Red de Asesores Inmobiliarios Cualificados (of which 600 professionals from all over Spain participated in the study). And their predictions are optimistic. All the indicators of the health of the Spanish property market, sales, prices, mortgage lending, construction, stock … should all show signs of improvement in 2015. Of course they point out; this is from the low current levels, but still a big improvement over the previous years.

To begin, it is expected that sales of Spanish residential homes will increase by 7.5% this year, after 2014 ended with an increase of 2.6%, the first increase since 2010 when the removal of tax relief for the purchase of a first homes altered the market. According to forecasts by MAR Real Estate, 2015 will see 344.000 residential property sales, 24,000 more than 2014 (320,063).
The second major indicator is property prices.According to the report by the IPE, last year prices rose by6.47%, and in 2015the increase will be 2.5%. The average value of homes sold in 2014was141,718eurosand this year will close with145,261euros, the same level as in2012.

Rising prices
“The trend is upward, which can be seen by the fact the vulture funds have already left Spain,” said Jose Antonio Perez, a director of the IPE. “What sells is what is in good location, in prime areas and well finished, ready to move. Speculative product has virtually disappeared,” he adds.

Furthermore, we are seeing a phenomenon not seen since the crisis, properties selling off-plan and the prices increasing prior to completion.

Both of these cases are found on the Costa del Sol which property analysts use to help forecast future national property trends (as was the case in the 80s and 90s). In Estepona, the British company Taylor Wimpey went on sale a promotion of 44 off-plan properties. They have only 3 penthouses left, and at the start of the promotion, similar units were selling for 400.000€, they are now selling for 500.000€. A 25% increase. With approximately 90% of the buyers being foreign.

The second example is Inmobiliaria del Sur, another promoter that has been able to increase prices in several projects along Mijas Costa and Marbella. With prices at 300.000€ when they were previously at 200.000 to 220.000€.

“In prime areas there is a trend of increasing prices while is areas of excessive unsold stock prices will further decline” says Perez.

That is to say, quality sells; the excesses of the housing bubble will not. In the first case, the bargaining power has fallen, although there are still drops, in the second, case there is simply little demand. Unless from investors looking at the very long term or those looking to buy to rent. “The homes bought to rent will continue giving good returns, which in 2015 will continue migrating money from the financial system to the real estate market” predicts José Antonio Pérez.

There are potential buyers, but cannot access credit. Experts believe that natural demand for Spain is around 400,000 property transactions; a figure that is believed is still a few years away. The return to sustainable numbers will be something that depends heavily on financial institutions to open the lending tap to the average person. For now mortgage loans for the purchase of property have shown increases, but still remain low, according to Perez. In 2014, 299.064 mortgages, 2.3% less than in 2014 were signed, but 2015 will show the first hike in nine years as 306,639 mortgages for urban properties will be signed. In 2006, the last year in which an increase was recorded, the figure was 1,816,878 mortgages nothing less than a 592% increase.

“The mortgage market in 2015 will remain restricted, with banks financing the sales of their own properties”, says Perez. Moreover, “two-thirds of sales will be cash deals” he adds.

The average mortgage grew by 15.8% in 2014 (from 113,972 to 131,984 euros) and will rise by 3.4% in 2015, to 136,447. The volume of these loans will rise by 6% to 41,840 million euros.

There remains one last question. What about the construction? Will we see cranes return to the urban landscape? The answer is a positive, albeit a cautious one, yes

In2015 40.225houseswill begin, 7.5% more than in2014.

Indicators

Sales of Spanish properties: + 7.5% The sale of homes has returned to positive path. After seven years 2014 showed an increase in the number of housing transactions (2.6%). 2015 will increase by 7.5% more than last year, according to the Pulsímetro Inmobiliario.

Prices of apartments: + 2.5%. The great indicator for buyers is the price, which, combined with the need, decides whether to purchase or not. According to the Pulsímetro Inmobiliario, last year the property prices rose by 6.47% and in 2015 the advance will be 2.5%. The average value of homes sold in 2014 was 141,718 euros and this year will close with 145,261 euros. That is, at 2012 levels.

Construction of Spanish properties: + 7.5% Slowly cranes will return to the skyline of major urban centers in Spain. 2014 saw an increase in projects. In particular, the start of 37,418 homes, 20% more than in 2013. In 2015 the upward trend will continue, albeit less pronounced. According to the IPE, becoming at least the first brick houses 40,225, 7.5% more than last year.

Mortgages granted: + 2.53% The number of urban buildings financed with mortgage will again start to pick up. This year 306,639 property loans will be signed, 2.53% more than the 299,064 recorded in 2014. The total volume mortgaged last year was 39.472 million euros, 13.8% more than in 2013. In 2015 will amount to 41,840 million, up 6%.

Average mortgage: + 3.4% The average amount granted by financial institutions on loans to cover the purchase of a residential property in 2014 was 131,984 euros, 15.8% higher than in 2013. This year the figure will continue to rise, particularly up to 136,447 euros, 3.38% more than last year. The average mortgage equal to 93% of the average amount of home sales (remember that all types of real estate mortgage).

Approved projects: +5% Approval for the construction of residential developments will grow again in 2015. This year 64,591 visas were granted. That is, 5% more than last year and 24,000 over the number of homes started.
All properties: + 1.8%

Property market: +1.8% The report from the Institute of Business Practice is mainly focus on the residential market, but real estate is much broader than that. Looking at the complete property market to include all transactions, we can expect sales around 717,451 in 2015, 1.8% more than in 2014.

Unsold stock: -29.1% For the fourth consecutive year, in 2014 the surplus of homes fell, from 777,000 in 2013 to 662,761. That is, no less than 115,000 dwellings, 14.7% of the total. This trend is expected to pick up pace in 2015. According to forecasts of IPE, this year the figure will dwindle to 469,708 properties, 29.1% less (193,000 homes).

Regards
Andrew Bellés

Original article seen in EXPANSION

Leave a Reply