Unemployment, Stock Surplus & Population Decline to Hamper Increase in Housing Values

17/09/2014 – El Economista

Credit rating agency Moodys released a report that says that the improvement in Spanish economy cannot ensure sustainable growth of housing prices. High unemployment rates, stock surplus and decline in population are the main culprits for ailing demand which is predicted to stay weak for the next years.

Downward pricing tendency will continue until the following year at least, despite better performance of the sector, foresee the authors of the study, Luis Mozos and Antonio Tena.

The report stands in opposition to the latest official data releases which indicate the housing prices have actually rose. The optimistic figures made some experts believe in the upturn in the real estate market, noticed finally after six years of recession.

Even though many proclaim the end of the home prices slump, it is still too early to portend a general recovery, told Bloomberg the head of research at idealista.com, Fernando Encinar.

One of the hassles the Spanish Government must face is shrinking population. According to Spains Office of Statistics (or INE), population of 25 to 35-year old people – i.e. the group that usually buys their first home – is going to fall 35% in the upcoming decade.

Moodys remarks that in spite of a slight decline in unemployment rate, it remains extremely high and therefore will not manage to invoke sufficent demand due to worse quality of new jobs, especially among the young workers.

Finally, new housing stock. The backlog tripled from 2005 throughout 2009 and diminished by only 13% from 2009 to 2013, the agency informs. Moreover, new mortgage approvals are not climbing as in the first half of the year mere 15% of what it used to be in 2007 was signed.

Given all that, we expect to see better opportunities on the housing market but we also reckon that these movements will be temporal and they will differ in each region, we read in the reports conclusion note.


Original article: El Economista

Translation: AURA REE