3/09/2014 – Expansion
Real estate recovery expands to more and more provinces. There are already 20 of them where the housing slump remitted and the property market started to head towards stability after seven years of a downward movement. To compare, the situation pictured itself much worse in 2013, when their number totaled at only 8. The latest report by Deloitte measures the speed at which the Spanish provinces brush off from the property depression.
Best perform: Madrid, Alava, Barcelona, Guipuzkoa, Biscay, Navarre, Cantabria, Zaragoza, Lerida, the Balearic Islands, Segovia, Valencia, Asturias, Huesca, Burgos, Valladolid, Palencia and Soria. This particularly means that in these areas we will see the cranes, more building permits and mortgage subrogations the soonest.
On the other end of the ranking, one may find Almeria, Ciudad Real, Toledo and Castellon, the provinces that are set to reach the recovery in long term, ‘both due to worse macroeconomic position and weak real estate foundations with a serious stock absorption problem‘. For the rest of the provinces (25) the forecasts say the recovery will arrive ‘in the following phase‘.
In general, the upturns will be felt in two stages: first wave will encompass the north and the next will arrive in the south. ‘The reason for the phenomena is that in the south there is an abundance of holiday product and the development control in there was much more strict than it was in the north‘, explains Deloitte Real Estate‘s head, Javier Garcia-Mateo.
In the report preparation process, Deloitte compared and took into account ‘all comparable variables among the provinces‘. On one hand, the real estate factors such as the volume of stock per inhabitant, the borrowing power (the two are the most relevant in the study), rental vs. sales rates and average home price, among others. On the other hand, it ponders the macroeconomical data which impacts the demand: GDP growth, population, birthrate, proportion of people in a home acquisition age, migration, unemployment rate, etc.
The report also points out that average affordability rate for the Spanish households (percentage of gross income of a family intended for payment of a mortgage) has declined over the past years until fixing at 33% which is ‘a reasonable level in terms of balance‘. The decrease is mostly due to the house value slump (around 40% since the dawn of the recession).
The average price of a dwelling in Spain currently equals to 4.4 times the gross personal income, compared to the average 6.1 rate of the European Union, with the United Kingdom and France posting 8.5 and 7.9 respectively.
‘The news is very important‘, remarks Garcia-Mateo, as it is the benchmark variable for many experts and in other circumstances it would indicate the end of the real estate recession. According to the director, ‘as soon as lending returns fully, the recovery‘s speed will increase‘.
Original article: Expansión (by J. M. Lamet & R. Ruiz)
Translation: AURA REE