1 October 2015 – Expansión
The signs of recovery in the Spanish real estate sector are strengthening. The first sign was the arrival of international funds interested in investing in real estate assets in Spain; and now the residential market is also beginning to show the first signs of recovery.
House prices in Spain increased in 2014 after six years of decreases. According to a Europe-wide study prepared by Deloitte, average house prices in Spain’s two main cities, Madrid and Barcelona, increased by 9.5% and 15%, respectively, between 2014 and 2013. “Prices in Spain are increasing at an annual rate of 10%. The Spanish market was last in the line, in terms of the recovery in Europe, but now that trend has been reversed” explains Javier García-Mateo, Partner at Deloitte.
These signs of recovery are clearer if we analyse the results for new builds in isolation. The product has been particularly badly hit in recent years due to the over-construction that took place during the boom. “The gap between new builds and second-hand homes has increased with respect to last year and this is a sign of recovery” says García-Mateo. “New build prices are beginning to rise compared with previous years when the difference with respect to second-hand homes was less as vendors had to reduce prices to find buyers”.
Despite this growth, house prices are still below the levels seen before the crisis. In this way, house prices in Spain increased by 4% between 2002 and 2014, compared with 7% in Germany and the USA, 50% in France and 52% in the UK, according to Deloitte. “It is the start of a change in the trend, but we are not going to see a return to the boom figures. We are seeing a recovery because prices decreased so significantly (during the crisis)”.
Since 2007, a record year for the sector, house prices in Spain have decreased by 39%, compared with an increase of 18% in Germany. In Europe, the most similar market is Ireland, where house prices have fallen by 41% over the last seven years. “Ireland is one or two years ahead of Spain; as such, it is possible that over the next few years, we will see similar data to that being seen in Dublin this year, where the price per m2 has risen by 34%”, say the Partners at Deloitte. (…).
The increase in house prices will have an effect on the launch of new developments, which reached minimum levels of 35,000 units in recent years. “We think that the recovery in the construction of homes will take place in 2016, starting from very low levels. Between 2006 and 2007, 7,000,000 homes were constructed in Spain, the same figure as in Germany, which has 90 million inhabitants”, says García-Mateo.
The construction of new developments will be reactivated despite the fact that Spain still has a stock of around 535,000 unsold homes. According to Deloitte, the stock of homes decreased by 3.2% last year and has recorded a cumulative decrease of 18% since 2009, when there were 649,780 unsold homes. “There are still a lot of homes to be sold because the population is not growing”.
In this sense, Spain, together with Italy and Portugal, is the country with the highest volume of stock at the European level.
Most of Spain’s provinces are now showing signs of recovery
The Spanish real estate market is very heterogeneous and that is reflected in the location of the stock of more than 500,000 unsold homes in the country.
According to the study prepared by Deloitte, the recovery of the residential sector is happening at three speeds across the country. The recovery will be seen first in Madrid, the Catalan provinces, Valencia and the majority of Castilla y León; meanwhile Almería, Huelva, Teruel and Castellón will be the last regions to recover.
Only three provinces still have a stock that is more than 10% larger than in 2009: Guipúzcoa, Teruel and La Rioja, which the supply of unsold homes has increased by 38%, 26% and 10%, respectively; meanwhile ten provinces have reduced their stock by less than 10% in the last five years.
At the other end of the spectrum the provinces of Cantabria, Cáceres, Badajoz and Navarra have pretty much reduced their unsold stock levels by 100% over the last five years.
Original story: Expansión (by R. Ruiz)
Translation: Carmel Drake