6 September 2017 – Expansión
The Spanish real estate recovery varies by neighbourhood. Whilst in smaller cities such as Zaragoza and Sevilla, second-hand house prices rose by 1.7% and 2.1% during the first half of the year, in Madrid and Barcelona, the value per square metre soared at a rate of 7.3% and 12.7%, respectively. On average, in Spain, second-hand house prices rose by 8.24% during H1, according to the latest report from the estate agent Tecnocasa and the Universidad Pompeu Fabra (UPF).
It is the largest increase registered in a single 6-month period since the price curve hit rock bottom at the end of 2013 and began its recovery with a slight increase of 1.12% at the end of 2014.
At that time, at the height of the real estate depression, the cumulative decrease in second-hand house prices peaked at 57% with respect to 2007. Nowadays, prices are 48.10% below the peaks recorded before the crash. The average value amounted to €3,500/m2 then, compared with €1,811/m2 now.
Despite the dizzying increase in prices currently being seen, there are no signs that a new bubble is being created. The CEO at Tecnocasa, Paolo Boarini, said yesterday that one of the most important factors to take into account is “the new attitude of the banks”. Whilst in 2007, mortgage loans represented 86% of the value of homes on average, that ratio has now decreased to 72%. (…). Moreover, mortgages that exceed the value of the home are no longer being granted, which was not the case during the years leading up to the burst of the bubble.
Tecnocasa’s report points to the ratio between the monthly mortgage instalment and a borrower’s monthly income, which is also one of the most significant risk indicators. To minimise the risk of non-payment, it is recommended that the aforementioned ratio not exceed 35%. At the end of H1 2017, the ratio between the mortgage instalment and the monthly income of mortgage applicants amounted to 25.5%. On average, mortgages in Spain cost around €375 per month (…).
In terms of the bargaining power in the market, according to data from Tecnocasa, the discount made by sellers with respect to the initial price was 2.7% in 2005, a figure that rose to 13.4% in 2012 and that currently stands at around 5.1% (…).
The study performed by Tecnocasa and the UPF is based on data from transactions brokered by the real estate agent itself involving loans advised by Kíron, the financial services company owned by the same group. José García-Montalvo, professor at the UPF and coordinator of the document, stressed that, unlike other reports, this document uses only real prices of actual sales and not the initial asking prices of homes for sale.
The most expensive square metre in Spain’s major cities was located in Barcelona for another half-year, at €2,754/m2, followed by Madrid, at €1,970/m2. The cheapest major cities include Córdoba (€1,009/m2) and Valencia (€893/m2).
Original story: Expansión (by Marisa Anglés)
Translation: Carmel Drake