A Tough Journey to the Housing Market Recovery

THE REAL ESTATE SECTOR OUTLOOK/  Six out of ten main residential market indicators keep dipping down and four already soar up , according to the last report released by the Institute of Business Practice (IPE, Instituto de Práctica Empresarial). The prices and funding remain low but there is a chance. The houses construction has already reached the bottom and the stock began to dwindle.

The real estate market (…) analysts have got contrary predictions for the future. Some of them foresee upcoming recovery (in 2014, like Deutsche Bank) while others talk about the ´Lost Decade´(2008-2018, like RR de Acuña).

(…) In general, we cannot speak about the recovery. Nor the moment is good to buy, but in many separate cases (every time more, however still too few) or places, surpluses have already drained out. (…).

Visas, completed projects, mortgage funding, rehabilitation operations and sales are falling sharply. Also, drop-off of the prices carries on, which is happening less abruptly, thought (…)

On the positive side, the rental burden versus property rises (while its monthly price shrinks), the annual effort needed to buy a house begins to decrease and the new houses´ stock started the dreinage process. Out of the 924.266 properties in surplus in 2011, they became 777.022 at the end of 2013. Namely 147.244 housing units less within two years. (…) In fact, the report publicizes the slump of stock in all communities except for La Rioja, caused by the collapse in houses´ completion and a slight growth in sales.

“The liquidation of stock is the key strategy for recovery, as well as in construction, as in the economy, due to their direct domino effect on the employment” assures José Antonio Pérez, the director of the Chair of Real Estate at IPE. 

Moreover, there is an improvement of 11.1% in the fiscal area, precisely in the collection associated with the real estate sector. It should almost entirely be enhancing the collection of sales, something that IPE commented on as “a significant upturn” since summer, (…).

What is more, the mortgages continue their dramatic drop, “expecting to sign less than one third of what they achieved in 2006, and complete around 500.000 transactions in 2013”, according to IPE.

As a consequence, “there are more and more purchases in cash, pushing out the cash from banking market – before its uncertainty – and from saving towards more real estate opportunities, slowly reducing the acumulated stock” says Pérez. In fact, according to the data from the General College of Notaries, 70% of the houses is transacted without mortgage.

The upper is linked with selling to non-residents, who prefer to pay in cash. Such transactions constitute about 20% of the sales each year. (…)

The little boom in the foreign investment shall be consolidated by encouraging the legal certainty. “We need to drive the trust, transparency and security up on the following markets: English, German, Scandinavian, Russian and the Middle Eastern. This is the key to raise absorbtion of the stock, especially on the coast, where concentration is the greatest” adds Pérez.

There are small turns in the tide, however the movement in construction keeps being wane. At the moment, the residential construction represents 15% of the level reached in 2007. (…)

The report ends with a statement: “Without construction, the recovery will be achieved through an ardous effort”.


Source: Expansión