Experts Forecast Rise in Home Prices Within 2 Years

2/07/2014 – Cinco Dias

Seeing eye-to-eye with the optimistic data flowing in from all sectors, the Insitute of Economic Studies (or IEE by its acronym in Spanish) and the Association of Home Builders and Developers (or APCE) presented yesterday their collaborative analysis on the situation on the wrecked real estate market after six years of tough recession.

Both José Luis Feito from the IEE and head of developers José Manuel Galindo agree that if the general improvement persists, in 2015, but especially in 2016, housing prices will go up again and they may even do it “abruptly“, although neither of the organizations ventured to give more details on the adjustment.

However, both admitted that this year the real estate prices will fall by another 5%-10% in some areas and the future increase will not arrive equally all over the country. According to the analysts, housing values accumulate a slump of 35% since their 2008 peaks.

The most powerful factors that will fuel the sales growth are the employment and lending, but recently also the flourishing confidence of the foreign investors. Spain´s returning popularity will help draining the stock estimated at between 477.000 and 560.000 properties.

Another conclusion comprised in the report assures the sector will not come back to the boom times anymore. Thus, while the construction in 2008 represented 21% of the country´s GDP, last year it reached a little bit more than 12% due to building construction halt.

Likewise, the study demonstrates how the property sector is affecting the tax collection system. In fact, income from the real estate activity represented in 2012 2.4% of the GDP and 12.5% of the entire fiscal collection.

When it comes to demand, both organizations predict its prolonged weakness due to the ongoing price adjustment, restricted lending, high indebtness of the operators and ailing progress in job creation. However, Feito foresees gradual growth in demand for houses in spite of stagnant supply. Future interest rates will be very low, the same as the inflation, while workplace generation and foreign demand will climb up.


Original article: Cinco Días (by Raquel Díaz Guijarro)

Translation: AURA REE