4 September 2017 – Expansión
More than 1,000 second-hand homes were sold per day in Q2. During the second quarter of 2017, 99,343 second-hand house sales were recorded, the highest quarterly figure since 2007. That statistic confirms the consolidation of the residential market.
Over the last 12 months, 429,624 properties were sold, and so the experts consider that the sector is reaching its cruising speed. Moreover, they forecast that prices will rise by around 5%, which is the “healthiest” rate to avoid a bubble (…).
Each day, 1,090 second-hand homes are sold in Spain, according to data from the College of Registrars. It is true that not all of those homes are strictly “second-hand”, given that although they have all been sold in the past, some of them have never been lived in (those sold to the banks). However, new build sales are also recovering and overall, demand is booming. Over the last twelve months, 429,624 homes were sold, which is very close to the psychological threshold of 450,000, which real estate analysts consider would represent a return to normality in the housing sector.
“In most markets, the recovery is starting to take hold or has already been established”, said Julio Gil, President of the Real Estate Research Foundation. In his opinion, there are three speeds of recovery: “The first, in large capital cities, islands and the most established areas along the coast. The second, in the most heavily populated capital cities. The third, in small capital cities and areas without much activity”.
“The forecasts indicate that 2017 will close with between 450,000 and 500,000 residential property sales. I think that we are going to reach cruising speed”, says Manuel Gandarias, Founding Partner and Director General at Civislend PFP (…).
New build sales are taking off
“New builds are starting to gain ground. All of the off-plan sales made in 2014, 2015 and 2016 are starting to be recorded in the statistics now. The numbers are going to start to grow”, says Gandarias. According to Julio Gil, this recovery depends “on demand from the youngest generation, i.e. from first-time buyers, being able to access the market”. In reality, new families have been displaced to the rental market, which is experiencing a boom: rental prices are rising significantly and returns on homes are much higher than those being offered on deposits and public debt.
Gandarias explains the effect of this displacement on the buy-to-let market as follows: “There is still a lot of upwards potential for new builds. We are always talking about pent-up demand, and that demand exists, but it still doesn’t fulfil the solvency criteria demanded by the financial institutions”. Gil adds that “ It is absolutely necessary (for society) to redouble efforts in terms of access to housing for young people, with help to make purchases that can be reversed. That is one of the major challenges facing the housing market.
In other words, the market could still grow more. That will happen if employment continues to grow. However, there is a significant threat to mortgage financing and therefore home buying: that of a possible increase in interest rates.
The inevitable rise in interest rates
“A large part of the current recovery is due to the extraordinarily low interest rates” says Gil. “A rise in rates, which will happen sooner or later, will have a significant impact on the real estate market”. The other factor that will determine the behaviour of the future growth of the sector will be the behaviour of demand from first-time buyers.
Meanwhile, house prices are continuing to rise, but not by too much, dispelling fears of a new bubble. In comparison with the same period last year, second-hand house prices have risen by 1.7%, according to Idealista, up from €1,529/m2 in August 2016 to €1,554/m2 now. The highest rises were seen in the Balearic Islands (+1.7%), followed by the Canary Islands (+0.8%), Cataluña and Castilla-La Mancha (+0.7% in both cases). They were followed by prices in Comunidad Valenciana (+0.6%) and Andalucía (+0.5%) (…).
Original story: Expansión (by Juanma Lamet)
Translation: Carmel Drake