26 May 2016 – El Economista
House prices accelerated their growth in Spain during the first quarter of 2016, increasing by 6.9% with respect to the same period last year, according to Spanish Real Estate Macroeconomic analysis performed by the independent financial advisory firm Arcano.
The study shows that the recovery is being seen in every autonomous region, regardless of the political colour; both in the new and second-hand housing segments; and in terms of both housing and land. Following a decrease in house prices of 38% in nominal terms and 50% in real terms, Arcano believes that the increase, which began in 2014 “should be maintained due to the positive underlying forecasts for demand, supply and accessibility”.
Specifically, the analysis highlights that the sale of homes in Spain continued to grow at double-digit rates during the first quarter of the year, increasing by 10% YoY, favoured by “significant” demand from foreigners, who now account for 13% of all house purchases in Spain.
Moreover, Arcano explained that another pillar of this data for the recovery of the residential sector is based on the “favourable” macroeconomic environment in Spain, especially the “historical” 12% decrease in unemployment and the subsequent 3.3% improvement in employment and 1.1% increase in wages, following several years of stagnation.
“The economic improvement is allowing pent-up demand for housing to flourish”, says the report, which adds that the recovery of the real estate sector in Spain “is continuing, led by strong fundamentals and a favourable macroeconomic environment in Spain”.
It also helps that house purchases are recovering not only due to necessity on the part of buyers, but also due to investment, given their “attractive” prices in comparison with other assets, explains Partner and Chief Economist at Arcano, Ignacio de la Torre.
In addition, mortgage loans have become cheaper, reaching average levels of 2.38% during Q1 2016, generated by the fall in Euribor. In turn, the number of new mortgages signed in February 2016 rose by 16% YoY, following their increase of 20% in 2015 and 2% in 2014.
In terms of the supply of housing, Arcano says that “it is still very limited”, above all the supply of new vacant homes, which is “practically” non-existent in many areas with high populations and GDP, such as Madrid, Barcelona, Sevilla and Valencia.
Specifically, 46,000 new homes were constructed in 2015, compared with 641,000 in 2007. And although it is true that new housing permits are recovering, they are still a “long way below their historical levels”.
Original story: El Economista
Translation: Carmel Drake