Housing Will Hit the Bottom in 2014

The Spanish real estate market has been observing some things changing since September. This is the favourite sentence that the professionals repeat on each occasion, not forgetting that “the market consists of many submarkets” which makes drawing general conclusions difficult.

To find them out, Expansion surveyed the main experts on the market now, at the end of the year. And the consensus points at the three headlines: in 2014 the houses sales will continue at the same level (or even rebound), the drop in prices will persist, however it will be smaller – in general terms; in the big cities and the prime zones or without stock the adjustment has almost been completed and the mortgage granting will stay at the same, very low level.

The three forecasts, althought not promising whatsoever, are better than the ones from the previous years´ends. One of them gets green light (more sales), one yellow (delicate depreciation) and one red (the deadlock on the credit flow). (…) If the experts´predictions fulfill, the 2014 won´t be a good year for housing but the prices could at least finally hit the bottom. The bottom is, however “very deep” as José García Montalvo from the Economy Department in the University of Pompeu Fabra appoints it. (…)

An independent consultant José Luis Ruiz Bartolomé clarifies, “The coastal provinces will experience an increase in the real estate transactions because the foreigners will continue raising the volume of purchases, but I don´t think there will be an upsurge at the national level. (…)”.

For sure the investment funds will maintain their leading role and will contribute to the better statistics on the Spanish market. (…)

The majority of the experts agrees with Julio Gil, the director of Horizone Consulting Inmobiliario, who denominates the forthcoming year as possibly “stable” and it can witness “a little improvement”, as  Raúl García, the director of Company Development of Tinsa, adds.

However, there are others, like Mikel Echavarren, the CEO of the IREA consulting company, who optimistically states: “the housing market in 2014 is going to surprise us positively”. (…)

Be that as it may, it seems that the sector has met the bottom reaching annual sales of 350.000, but not in case of the prices. The consensus mentions screech in the fall, but the fall to the bottom. (…) The research results make us predict that the average drop-off will stand between 7 and 8%. It is worth to mention that Standard & Poor’s foresees depreciation of 5% in 2014 and of 1% in 2015. According to INE, the prices currently fall by 7,9%, althought in the intertrimestrial terms they rise by 0,7%.

García Montalvo highlights that “the purchases of the foreign funds might make the sellers adjust less the prices and because of this the value will dip down as well. In turn, this will delay the transactions due to generating expectations. Following the domino effect this will delay the adjustments. (…) There is one more factor that might influence the prices: the role that the new owners of the real estate platforms of banks will play”.

Where is the bottom for the house prices? The experts agree: the key index to measure it is the number of times when the amount exceeds the annual gross income of the buyer. At present, the index shows 5.8 and it shall fall down to 4.5 to be sustainable, as Ángel Serrano, the general director of Business from Aguirre Newman, says.

The third conclusion drawn by the experts is negative: the credit granted for financing houses will remain halted. The news is really bad for the mortgage market as it has already fallen by 80% in regard to its golden age.

BBVA and Santander have announced that in 2014 they will revive the liquidity but 7 out of 12 experts don´t believe it. (…)

Finally, as it always happen in the sector, we must take all the predictions with a pinch of salt. However, for the first time in six years one may say that the upcoming year looks better than the passing one. Is it little? It is something.

Source: Expansión

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