The RE Recovery Intensifies As House Prices & Permits Rise

27 November 2015 – Expansión

According to official data from the Ministry of Development, the average value of private homes amounted to €1,476/m2 at the end of Q3. This represents a YoY increase of 1.4%, or 1.8% in real terms, after accounting for inflation. This represents the fourth consecutive increase, which means that house prices have now been rising for a whole year.

Two other statistics published yesterday supported the intensification of the start of the real estate recovery. Firstly, the number of mortgages granted to buy homes increased by 20.2% in September, according to Spain’s National Institute of Statistics (INE). Secondly, the number of permits granted for the construction of new homes soared by 30.5% during the first nine months of the year, to 36,031, the highest figure since 2011, according to the department led by Ana Pastor.

“The increases that we are seeing in terms of the number of mortgages being granted and homes being sold are a reflection that now is a good time to buy a home”, explains Beatriz Toribio, Head of Research at Fotocasa. “The decrease in house prices, above all in the second-hand segment, the opening up of the credit tap and the increased competition between financial institutions to offer the best mortgages are reactivating the market”, she added.

Cumulative decrease

Effectively, the second hand market, which comprises homes that are more than five years old (previously it comprised homes that were more than two years old, but now the banks have so many older homes that have never been lived in that the threshold was changed) decreased in Q3. Specifically, prices fell by 0.1% to €1465.90 /m2, on average. The average value of new residential properties (those completed during or since 2010) amounted to €1,741.90/m2, up by 1.6% YoY.

The cumulative decrease in average house prices since they reached their peak (in Q1 2008) is 29.8%, according to historical data from the Ministry of Development. That figure exceeded 30% in 2014. In real terms (including the variation in CPI), the cumulative decrease amounts to 34.1%.

The average appraisal value of homes surveyed by the companies that form the Association of Value Analysis (AEV), which serves as the Government’s benchmark for the evolution of house prices, increased in 12 autonomous regions and decreased in 5 during Q3 2015.

The highest increases were recorded in Madrid (with a YoY increase of 3.5%), the Balearic Islands (3.2%), Aragón (3.1%), La Rioja (2.9%), the Canary Islands (2.4%) and Navarra and Valencia (2.1%). The highest decreases were recorded in Asturias (-3.6%) and País Vasco (-1.4%).

It is worth noting that in general terms average house prices fell by 0.1% QoQ in July, August and September.

The provinces in which house prices rose by the most were Salamanca (4.2%), Zaragoza (3.9%), Jaén (3.6%), Madrid (3.5%), the Balearic Islands (3.2%), A Coruña (3.2%), Palencia (3.1%) and Soria (3%).

The other big news for the real estate sector, revealed yesterday, was that the number of permits granted for the construction of new homes soared by 30.5% between January and September. 70% of requests related to block properties, which amounted to 25,238 in total, representing a YoY increase of 34.8%. The number of requests to construct family homes rose by 21.5% to 10,777.

This data indicates that there will be an increase in construction activity over the next two years. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake