BBVA Research: House Prices Will Rise By 3% In 2016

19 April 2016 – El Economista

BBVA’s Research Service forecasts that house prices will grow by around 3% this year across the country and that house sales will increase by 10% to amount to 440,000 homes, assuming that the economic and political uncertainties do not end up having a negative impact on demand.

In this sense, BBVA Research argues in its report, that the sector, just like the rest of the economy, is not without its risks.

The uncertainties that exist around global growth and relating to economic policy over the next few years may be conditioning the investment decisions of households and companies and so may end up affecting demand and supply in the sector.

In addition, the report forecasts that investment in housing will grow by 3.8%, taking its weight over GDP to 4.6%, and house prices will continue to be supported by increases in demand and the gradual reduction in supply, although this evolution will be relatively heterogeneous.

Large cities and the Mediterranean Coast

Whilst price rises will be more intense in the most active markets (i.e. in large cities and along the Mediterranean Coast); they have not started their recovery yet in the least active markets and will remain stable there in real terms.

The volume of new homes is also expected to grow in some markets in 2016…(…). As such, in terms of construction permits linked to the initiation of new homes, the report forecasts an annual growth rate of around 30%.

This, together with the greater dynamism seen in the market for land, will ensure the progress of construction activity. Moreover, the evolution of employment and household income will be positive and will continue to stimulate demand for housing.

Building work begins

The improvement observed in the real estate market has also moved to the construction segment, which will result in a significant increase in activity in the residential construction segment, which is set to be the big star of the sector in 2016.

Not only have residential prices have moved on from their minimum values, but also the trends indicate that more markets will have positive revaluations in 2016. Furthermore, mortgage financing is playing a significant role in the recovery and will be key for its development over the course of this year. The report adds that financing for property developments is expected to gradually consolidate this year.

Original story: El Economista

Translation: Carmel Drake