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Servihabitat: House Prices Will Rise By 4.3% In 2017

7 December 2016 – Expansión

(…) According to Julián Cabanillas, CEO of Servihabitat, the findings from his company’s latest report show that “the trend  (in terms of house prices) will continue to rise in 2017, but at a more moderate rate”.

According to Servihabitat’s forecasts, house prices will rise by 4.6% this year and by 4.3% next year; moreover, all of the other indicators in the sector will continue to make significant improvements. For example, the stock of unsold new homes will decrease in 2017 to 315,000, the lowest figure since 2006, before the real estate bubble burst. In addition, the ratio of the number of years’ salary it takes to pay for a home will amount to six years – three years fewer than in 2007.

During 2016, the construction of new homes will soar by 20% and the gross rental yield (excluding capital gains) will rise to 5.4% (10% if we include capital gains over one year, which the Bank of Spain does in its calculations).

In 2016, property will register its highest price increases since the outbreak of the crisis. The rise of 4.6% predicted by Servihabitat is the highest annual figure since 2007. In 2017, the increase will slow down slightly (by three tenths of one per cent), but residential property prices will increase in every autonomous region. Extremadura will lead the price rises, with an increase of 7.3%. It will be followed by Aragón (+6.9%), Navarra (+6.7%), La Rioja (+6.2%), Murcia (+5.6%), Balearic Islands (+5.4%), Canary Islands (+5.4%), Community of Valencia (+5.4%), Castilla-La Mancha (+5.1%) and Asturias (+4.5%).

Thus, house prices will increase by more than average in ten autonomous regions next year, including Cataluña (+4.3%), and will increase by less than average in six regions, namely: Andalucía (+0.7%), Galicia (+1.2%), País Vasco (+1.5%), Cantabria (+3%), Madrid (+2.4%) and Castilla y León (+4.1%).

Three speeds

Cabanillas points out that the housing market is now operating at three speeds. “The first involves areas where demand is high and supply is at “technical levels””. That is the case in Madrid and Barcelona, where many more homes are being sold than in the rest of the country. (…).

The second speed is happening in “areas where demand is increasing and stock exists”, said the CEO of Servihabitat. In cities such as Málaga, Sevilla and Zaragoza, as well as in the vacation markets of the Balearic and Canary Islands and in the more traditional areas of the Mediterranean Coast. (…).

Nevertheless, residential prices are still recovering at a slower speed in many autonomous regions (the third segment), given that there, prices “are still decreasing (due to the crisis effect) or are stable, because the demand potential is much more contained and/or considerable volumes of stock are still available”.

To this end, it is worth nothing that 72% of the homes sold in Spain in 2016 had a price of less than €150,000. (…).

In this context, there are also considerable disparities in terms of the returns offered from leasing properties in the different regions. For example, buying a home and putting it up for rent would generate a return of 6.9% in Madrid, 5.8% in Cataluña, 4.1% in Galicia and 3.9% in País Vasco. (…).

Clearly, all of the regions offer more attractive average gross returns from rental than those generated by other investments, such as public debt and deposits. Not in vain, the average rental price will rise by more than 10% this year, according to Servihabitat, which highlights the seven most thriving markets in Spain at the moment, namely: Málaga, Balearic Islands, Barcelona, Girona, Alicante, Madrid and Murcia. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake