Ministry Of Development: City Land Prices Soar By 38%

16 June 2015 – Expansión

The cost of land increased significantly in the year to March, especially in Castilla-La Mancha (381%), Asturias (176%) and Castilla y Leon (99.7%). The experts do not seen any signs of a new bubble…yet.

The price of urban land has increased significantly in Spain’s major cities. During the first quarter of 2015, land prices increased by no less than 37.8% YoY in municipalities with more than 50,000 inhabitants. The price per square metre rose from €220/m2 to €304.3/m2 in one year. And the number of plots of land sold in the major cities was 596, down by 1.3% from the first quarter last year, according to the Land Price Statistics published by the Ministry of Development, which are prepared using data from the College of Property and Commercial Registrars.

And land prices in large cities in certain regions have gone through the roof. That is the case of Castilla-La Mancha, where prices grew by 381% with respect to Q1 2014, Asturias (176%), Castilla y León (99.7%) and País Vasco (60.8%). The highest decreases in urban land prices were recorded in Galicia (-42.7%) and Murcia (-20.2%).

The average increase in Spain was 5.9%, a rate that is much less marked than that observed in the large cities. Not surprisingly, the average price across the country is €149.9/m2, less than half its value in the large cities.

The significant increase in the price of land in major cities raises fears of a small over-heating effect, due to the strong outlook for the sector, but the experts do not think that we are witnessing the birth of a new boom. We should remember that the Spanish real estate bubble had a clear spur in the price of land: between 1990 and 2007, house prices increased by 288% and land prices rose by 762%, according to a report from BBVA. (…).

The role of the banks

Julio Gil, Chairman of the Foundation for Real Estate Studies, offers an alternative view and points to the significant impact that the banks have on the market. “There were very few transactions and so the statistics are greatly affected by the intervention of financial institutions in the market for land. They are operations that relate more to the value of debt to property developers than the real price of land in the market”. In other words, the difference is because “before no one wanted to providing financing for land and now the financial institutions are funding it again. (…).

The highest prices in towns with more than 50,000 inhabitants were recorded in the provinces of Madrid (€546.2/m2), Barcelona (€448/m2) and the Balearic Islands (€353/m2). This explains why there is more interest in developing land, for both tertiary and residential use, above all in the central areas of large cities and on the outskirts, in high-class areas. (…).

Finally, the number of transactions completed during the first quarter of 2015 amounted to 3,465, i.e. a 4.4% YoY increase.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake