9 February 2015 – Expansión
Forecasts / This year the construction sector will emerge from negative numbers in all of the major indicators.
If 2014 was the turning point for the housing market, then it looks like 2015 will be the year 1 a.c (after the crisis). After seven years of hell, the residential sector is seeing the light again with positive data across all of the key indicators. That is the main conclusion drawn from the 21st Edition of the Real Estate Heart Rate Monitor (la XXI edición del Pulsímetro Inmobiliario), which will be published by the Institute of Business Practice (el Instituto de Práctica Empresarial or IPE) in the next few days.
The report has been prepared by MAR Real Estate, the real estate arm of IPE, in collaboration with the Network of Qualified Property Consultants (la Red de Asesores Inmobiliarios Cualificados) (around 600 professionals from all over Spain have participated in the study). And their predictions indicate that a period of great prosperity is upon us: sales, prices, mortgage lending, construction, stock…everything will improve in 2015. From low levels, yes, and still with limited strength, but this can only be good news when we are talking about the impoverished residential market, where the metastasis has been more devastating than in any other sector.
There is a great atmosphere. To begin with, sales will increase by 7.5% this year, having closed 2014 with an increase of 2.6%, the first rise since 2010, the year in which the market was shaken by the removal of tax relief for buying a first home. According to MAR Real Estate’s forecasts, 344,000 residential properties will be bought and sold in 2015; 24,000 more than last year (320,063).
The second major indicator in the residential world is price, the eternal purchase thermometer. According to IPE’s report, house prices rose by 6.47% last year and are expected to increase by a further 2.5% in 2015. The average value of homes sold in 2014 was €141,718 and this year is expected to be €145,261, showing a return to 2012 levels.
“The trend is rising, something which is evidenced by the fact that the vulture funds have now left Spain”, says José Antonio Pérez, Director of Real Estate at IPE. “The properties being sold are those in good locations, in prime areas that are nicely finished and ready to live in. Speculative purchases have practically disappeared”, he adds.
Furthermore, a phenomenon not seen since the years before the Great Crisis is now happening: homes are being sold off plan and prices are rising during the purchase process.
There are two examples that illustrate this. Both are on the Costa del Sol, which analysts regard as the area where the trends in the rest of the housing market are first seen (that was the case in the 1980s and 1990s and it is starting to be the case again now). In Estepona, the British company Taylor Wimpey put a development containing 44 properties up for sale. Off plan. They now have only three loft apartments left to sell – the original asking price for these properties was around €400,000….and they are now being sold for €500,000. A 25% increase. The majority of its customers, are foreign (around 85%-90%).
The second example is that of Inmobiliaria Sur, which has a strong position in the domestic market, away from luxury properties. To the extent that it has been putting homes up for sale – also off plan – in its developments in Marbella and Mijas-Costa, the prices of the best properties that it has not yet sold have increased from between €200,000-€220,000 to reach close to €300,000.
“In prime areas, prices are rising. In mid-market areas, prices will be stable in 2015 and in the areas that still have a lot of surplus, there will be further price decreases”, says Pérez.
In other words: good properties have already been sold; but structural stock, born out of the excesses of the real estate bubble, has not. In the case of the former, bargaining power has decreased, although there are still bargains to be had; in the case of the latter, there is simply no demand, aside from investors looking to obtain yields from their properties, or to renovate them and wait for better times. “Buy-to-let homes will continue to generate good returns and so money will continue to move from the financial system into the real estate market in 2015”, predicts José Antonio Pérez.
There are potential buyers in the market, but they cannot obtain access to credit. Experts believe that natural demand in Spain would generate around 400,000 transactions (per year), but it will be a while before we see that figure again, especially given that the construction of new homes is clearly following a downwards curve. The return to sustainable figures will depend heavily on financial institutions opening the mortgage tap, which is currently shut off to ordinary mortals, i.e. to anyone that does not fall into the vague category of “solvent”.
According to Pérez, we are now seeing a rise in the number of loans being granted for property purchases, but lending is still scarce. In 2014, 299,064 mortgages were signed, which is 2.3% fewer than in 2013, but we expect to see the first increase in nine years in 2015, with 306,639 mortgages being signed for urban properties. In 2006, the last year in which an increase was recorded, that figure stood at 1,816,878, i.e. 592% higher.
“The mortgage market will continue to be very restricted in 2015, very focused on the products that are marketed by the banks themselves”, says Pérez. Moreover, “two thirds of sales will be paid for in cash”, he adds.
The average mortgage size grew by 15.8% in 2014 (from €113,972 to €131,984) and will increase by 3.4% in 2015 to reach €136,447. The volume of these loans will increase by 6% to take total mortgage borrowing to €41,840 million by the end of the year.
One question remains unanswered: if everything is going to start growing again, will the cranes return to Spain’s urban landscape? And the answer is yes. Very slowly at first, but yes. In 2015, 40,255 new homes will be constructed, i.e. 7.5% more than in 2014.
Original story: Expansión (by Juanma Lamet)
Translation: Carmel Drake