Spanish Housing Crawls Out From the Red

26/05/2014 – El Mundo

The housing market pulled over in 2014 marking a turning point after six years of slump. One of the recent reports confirming the improvement was published by the General Council of Notaries. They claim the upsurge in number of purchases and new mortgage granting both in March and in the first quarter of 2014 is more than strikingly visible.

After the doomsday year 2013, reaching drastic historic minimum levels (meagre 306.039 transactions and 96.328 new mortgage contracts signed), the recovery traces are seen in the streets (with new real estate branches openings) as well as in statistics.

According to the data made public by the Notaries, the number of property purchases rose by 45.4% between January and March, reaching the total of 81.042 transactions. The year-on-year increase was significant: +62.7% in January (23.882 operations), +41,1% in February (26.860) and +37.6% in March (30.300).

It is worth to mention that the shoot-ups in January and February are due to the end of tax incentives for the purchase of the house taking place at the end of 2012 and in the following months the number of transactions practically halted. The March data is more reliable.

However, Miguel Cordoba, professor of the Financial Economics at the CEU- San Pablo University, calls for caution. “We shall not celebrate yet as the data is being compared with a year that was exceptionally difficult and negative in all aspects”, he warns and adds that “at least five quarters should pass before we collect reliable information which is certainly not a logical adjustment after hitting the bottom. The challenge is to get the market stable and stop its dip down.” According to him, the perfect balance is 100.000 transactions sealed quarterly.

Another factor that cheers the sector up are the prices. The notary data shows reflection of the end of discounts and even starts to post slight rebounds. In the first quarter of 2014, an average price per square meter rose by 1.6% to €1.248. The percentage represents a 9.8% climb in January and a 2.9% in February, while March saw a 4.8% decline. “The price development will head toward stagnation”, Cordoba proclaims.

The third important factor deciding about revival of the market is defined by new mortgage signing. Following the rise in transaction number, lending shot up by nearly 50%. Precisely, in January 7.927 new mortgages were granted (by 61.3% more), in February 9.391 (by 41.1% more), while in March 11.265 new contracts were signed (by 46.3% more).

The strong rebound in lending confirms entities´disposal of granting loans again, although in March their number fell by 0.6%. And although the payment in cash still represents 62.8% of all housing purchases, they begin to go down.

As per Cordoba, “the worst time for the housing sector has already gone down to history and even if the prices keep falling 5%, the decline is nothing to worry about. Further development will depend upon purchasing ans selling decisions. Right now, I recommend to be calm.”


Original article: El Mundo (by Jorge Salido Cobo)

Translation: AURA REE