Savills & HomeAway: 60% of Second Homes are Bought to Let

17 September 2018 – Eje Prime

Buying a second home with the objective of putting it up for rent. Currently, that is the main reason why more than 60% of owners around the world acquire an asset of that kind, according to a study prepared by Savills and HomeAwayTM.

“In a low-interest rate environment, investors look for assets that generate income”, says Paul Tostevin, associate director at Savills and the person responsible for the report. The situation has changed in recent years, given that, for example, at the beginning of the 2000s, only 14% of second homes were purchased with the objective of letting them and not for personal use. During the credit crisis, that figure increased to 19%.

The average purchase price of a second home in the Spanish market was €245,000 in 2017. Nowadays, almost 40% of owners obtain profits from their properties and approximately 30% partially cover the expenses associated with the asset.

In terms of the location of the asset, less than 5% of the second homes owned by Spaniards are located overseas. The main regions where they do own second homes in Spain include the Canary Islands (12%), the Costa del Sol (9%) and the Balearic Islands (9%). The increase in the arrival of international tourists in recent times has caused the owners of these homes to lease them more frequently to be able to obtain income.

In terms of the rest of Europe, the study reveals that Brits purchase the most second homes outside of their own country. Only 24% of their properties are located within the United Kingdom, 19% are located in France and 16% in Spain.

Original story: Eje Prime

Translation: Carmel Drake

Ibiza’s Real Estate Market is a “World of its Own”

11 July 2018 – Diario de Ibiza

The real estate market in Ibiza is not encouraging (for the majority): the available stock of homes “is residual”, the majority of homes bought there are rented out, the peak prices reached in 2017 have been exceeded…and all of this is being compounded by a distinct shortage of land. All in all, it is a troubling scenario for those wishing to live on the island all year round.

Tinsa’s Regional Director for the East and South of Spain, José Antonio López, warned on Wednesday that the lack of land, combined with the demand for housing “is generating a dangerous melting pot” in the Balearic Islands. As such, he is asking the administration to get involved to facilitate the availability of land for property developers.

Those were the words used by López in response to a question from participants at a Proinba-Tinsa real estate meeting held in Palma on Wednesday, where the situation of the residential real estate market was discussed, in particular, the market on the coast.

López warned that this situation may “lead to serious problems” on the islands, where “young people need primary residences” and they “need options”. “For this reason, land is required, and the administration needs to get involved”, said Tinsa’s Regional Director, before adding that the supply of urban land with building permission is “almost non-existent”.

What’s more, “the supply is going to decrease” and with the “surplus demand”, we are seeing “dangerous growth that cannot be met”. In this context, “rental is not an option because those circumstances are also being taken advantage of”. In fact, according to data from Tinsa, in areas such as Ibiza (town), many people are buying to let (…).

Based on data from Tinsa, the average monthly mortgage payment on the Balearic Islands is very high, €792, well above the average for Spain as a whole, €543/month. The financial effort being made by families on the islands is also greater, given that they spent 22% of their household income on mortgages during the first year, compared with the national average of 16.8%.

Ibiza and Formentera set a new record

Of the 12 coastal municipalities analysed on the Balearic Islands, Sóller leads the increase in prices over the last year, with price rises of 21%. Ibiza and Formentera towns came in close behind, with 17.8%, followed by Santa Margalida (17.7%), Palma (14.7%) and Llucmajor (13.8%).

Palma is one of the top five most expensive capitals in Spain, with an average price of €1,951/m2, and in the last year, its growing trend has exceeded the average for the autonomous region.

By contrast, the municipalities that have grown by the least are Sant Lluís and Mahón (3.7%), Ciutadella (4.5%) and Manacor (7.1%) (…).

Ibiza is “recovering too quickly”

According to data from Tinsa, the real estate sector on the coast in Mallorca is “clearly recovering”, whilst in Menorca, there are “signs of recovery” and in the case of Ibiza, there may even be an “excessive recovery”, in López’s opinion.

Prices have been “rising rapidly” on the white island, on a consistent basis for the last few years, and the YoY variation is well above the average. In fact, current prices have already exceeded the maximums seen in 2007.

On the basis of all of these indicators, the Regional Director at Tinsa said that Ibiza’s real estate market could be considered “a world of its own, set apart from other islands and provinces” (…).

Original story: Diario de Ibiza (by E.P.)

Translation: Carmel Drake

Large Investors Manage Only c. 3% of Spain’s Rental Homes

28 May 2018 – Cinco Días

In recent months, a new name has been added to the list of alleged culprits to blame for the fact that rental prices in large cities are rising at a dangerously accelerated pace – they increased by between 10% and 18% last year. They are what the experts call the large owners of rental home portfolios. And are otherwise known as Socimis, investment funds, servicers and, to a much lesser extent, public companies.

But, how many homes are we talking about (…)? And what percentage do they represent over the total stock of rental homes? Taking into account that no official figures are compiled for the number of rental homes in Spain, and that we only talk about percentages of the total number of households (…) the truth is that the task seems complicated.

Nevertheless, according to the calculations performed by Cinco Días and after having requested data from the large funds, the resulting figure is so small, both in absolute and relative terms, that it seems to have almost no or limited influence on the evolution of rental prices. The figures compiled by CBRE reveal a balance that ranges between 2% and 4% of the total stock of rental homes. “It is possible that they have an influence at the local level in areas where more homes managed by those kinds of companies are concentrated, but it is clear that they cannot be blamed for what is happening to rental prices”, explains Sandra Daza, Director General at Gesvalt.

Thus, the statistics compiled by the Government and Eurostat reveal that approximately 22% of Spanish households live in rental properties, a figure that has increased considerably from 15% before the outbreak of the crisis (…).

Multiple factors

In this way, if we take as the reference the most recent figure for the number of households during the first quarter of this year, according to the Active Population Survey (EPA), of the 18.55 million households in Spain, 4.07 million were rental homes.

Of that volume of household-homes, a total of 114,000 homes are in the hands of the 15 largest investors, which together account for just 2.8% of the total stock of rental homes (…).

As Samuel Población, the National Director of Residential and Land at CBRE, explains, the increase in this regime of tenure over buying is driven by several factors. The new labour market, with more instability and lower salaries, is forcing many households to rent, plus all the demand that was expelled from purchasing during the crisis (…).

This increase in demand has not been accompanied by a parallel rise in the supply to the same extent and that is what is causing most of the tension in terms of rental prices, together with the effect of tourist apartments in certain neighbourhoods of large cities and higher visitor numbers. Not even the fact that one out of every five homes purchased is destined for rent to make the investment profitable has managed to generate more homes for rent.

“The current rise is a consequence of the large gap between demand and supply”, says Wolfgang Beck, CEO of the Socimi Testa Residencial, one of the largest owners of this kind of asset (…).

“It does not make sense to attribute the rise in rental prices to the funds. They have a long-term focus and are actually responsible for increasing the stock of rental homes on the market”, says Javier Rodríguez Heredia, Head of the Residential team at the housing manager Azora.

“Establishing regulations that provide certainty for institutional investors to make it attractive for them to enter the sector would result in the creation of a rental home stock commensurate with the needs of the country”, he said (…).

Original story: Cinco Días (by Raquel Díaz Guijarro & Alfonso Simón)

Translation: Carmel Drake

CBRE: House Prices Will Rise by 6% in 2018

25 May 2018 – Expansión

Good omens for the Spanish residential market. After experiencing a serious setback five years ago, with a significant decline in demand and, as a consequence, a decrease in prices, the housing market is now well on the road to recovery, with a positive outlook for the year ahead. In this sense, for 2018, the predictions are optimistic, with an estimated increase of 6% in average house prices at the national level, according to data compiled by the real estate consultancy firm CBRE.

“We expect strong growth over the next six to twelve months, which will reach 6% compared to the current YoY rise of 5% and, then growth at a lower intensity from then on of between 3% and 5% for 2019”, says Álvaro Martín, Head of Research at CBRE.

This growth rate of 6% will be more acute in the large cities such as Madrid and Valencia, as well as in tourist towns such as Málaga and the Balearic Islands, where the YoY increases will reach up to 10%, according to the consultancy firm.

“In large cities such as Madrid and Barcelona, we have seen price tension but prices are still 50% lower than the average prices over the last ten years”, explains Samuel Población, National Director of Residential and Land at CBRE España. According to estimates from the consultancy firm, house prices in Madrid will increase by between 8% and 10% this year with respect to 2017.

Despite these price increases, the absolute values are still well below those seen during the real estate boom. In this way, although house prices have been rising at the national level since 2014, the intensity of that growth has been moderate, with YoY increases of around 5%. “In recent years, price rises of between 5% and 6% have been recorded, but during the boom, those figures reached 12%”, recalls Población.

Nevertheless, there are exceptions to that moderate rise: such as the case of towns like Madrid, Barcelona and Palma de Mallorca, where new build house prices have risen by 23%, 34% and 13%, respectively with respect to the historical minimums recorded at the beginning of 2014. Meanwhile, in the second-hand segment, the increases registered amount to 28% in Barcelona, 27% in Palma and 21% in Madrid (…).

Transactions

The price rises are being accompanied by an increase in demand, which, currently, is focused on those buyers who are looking for homes to reposition themselves or as investments.

“House sales have grown at a constant rate since 2015, but they have been very oriented towards the second-hand market, which accounted for 90% of transactions in 2017, due to the lack of supply in the new build segment and the absorption of much of the unsold stock”, says Población (…).

The consultancy firm predicts that demand for housing will continue to grow, with more than 575,000 transactions being closed in 2018, up by 8% compared to the previous year.

Of those operations, foreign buyers will retain an important role, above all, in the market for second homes. “The bulk of that demand is concentrated around five provinces, with established tourist infrastructure: Alicante, Málaga, Barcelona, the Balearic Islands and Tenerife, which accounted for more than half of the average annual volume of transactions by overseas citizens between 2006 and 2017”.

Another buyer cohort will be investors who buy properties to let them out, taking advantage of the growth in the rental market, which currently accounts for around 22.5% of the total stock of Spanish households. “The expansion of the rental market is attracting lots of investors, something that wasn’t happening ten years ago, given that they can now achieve returns of between 4% and 6% on average”, says Martín. By city, in Madrid, the average gross return amounts to 4.7% p.a., compared with 5.4% in Barcelona and 5.8% in Sevilla.

“If we also consider gains from the appreciation in property values, we see yields of up to 9% in the large cities”.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Residential Rental Specialist VBare Launches €14.1M Capital Increase

4 April 2018 – Eje Prime

VBare is pushing ahead with its business plan and is continuing to put together its perfect portfolio of assets. The company, which specialises in the acquisition of residential buildings, has launched a €14.1 million capital increase through which it is hoping to acquire new properties in the main cities in which it operates, according to sources at the real estate group speaking to Eje Prime.

“On 23 March, the company’s Board of Directors approved an increase in the share capital up to a maximum of €5,310,465.00, with the aim of continuing with its growth and investment acquisition strategy, as set out in its business plan, through the issue of a maximum of 1,062,093 ordinary shares”, explain company sources.

VBare’s new shares will be issued with a nominal value of €5 plus an issue premium of €8.30 per share, resulting in an issue price of €13.30 per share. “The total amount of the capital increase, in the event that it is subscribed in its entirety, will amount to €14,125,836.90, in other words, €5,310,465.00 as share capital and €8,815,371.90 as the issue premium”, they add.

The funds obtained through the capital increase will be used to equip the company with the capital resources necessary to continue with its expansion and growth strategy, “through the acquisition of identified real estate assets that fulfil the criteria established in the strategic guidelines, as well as allowing it access to external sources of financing with the aim of achieving the target returns”, say sources at the Socimi.

The products that the Socimi is going to consider acquiring once it has completed this capital increase include “entire buildings, portfolios of (geographically) scattered assets and portfolios of assets in the same complex, with the aim of maintaining a balanced portfolio to avoid concentration risks, and to obtain a competitive advantage over other players in the market, involving the identification of opportunities with limited competition and the achievement of below market prices”.

Moreover, the company’s roadmap involves acquiring assets with a net direct asset yield of “no less than 4%, as well as properties that it can acquire for an average discount over the market value of no less than 10% overall”.

In March, the company acquired a package of assets comprising 12 homes and a commercial property at number 5, Calle Concordia in the Madrilenian town of Móstoles, according to a report submitted by the group to the Alternative Investment Market (MAB).

Of the twelve homes that it acquired from the Eureka business group, five of them have tenants and the others are “in optimal conditions to be let out immediately”. The net yield on these assets is estimated to amount to 5.9% when they are fully occupied.

“VBare’s objectives for 2018, which it presented together with its results for last year, include, not only to generate returns from its assets when the portfolio is fully operational, but also to make investments in other cities, besides Madrid, wherever the firm expects a potential increase in rents in the short-medium term”, explain sources at the group.

VBare is a real estate investment vehicle specialising in the acquisition and management of residential assets for rent. The company was constituted in March 2015 (…) and currently manages a portfolio of 197 assets. To date, the company has analysed assets worth more than €500 million and it is constantly on the lookout for new business opportunities within the scope of its investment policy.

Original story: Eje Prime (by C. Pareja)

Translation: Carmel Drake

Solvia: Buy-to-Let Returns Reach 11% in Alicante

3 March 2018 – El Mundo

If you want to generate some decent returns from your savings and are thinking about getting into the world of real estate, to buy a home and let it out, then the best options in Alicante can be found in the neighbourhoods of Carolinas Altas and Bon Repós, where rental yields currently exceed 11%. The lowest returns are being recorded in the centre and in the old town, with 5.8% and 5.6%, respectively. That is according to the report Solvia Market Overview: Alicante, the forecast for 2018, prepared by Solvia, the real estate arm of Banco Sabadell.

The analysis indicates that in the local rental market “prices are rising at a faster rate than sales prices, taking the average rent to €614/month, up by 9.6% compared to one year ago”. Tenants paid €6.6/m2/month. The stock of rental homes has increased to 3,297 units, up by 0.5% compared to the previous quarter. The average return on a rental property in Alicante amounts to 6%, which significantly exceeds the returns generated by other conservative investment options such as bank deposits and treasury bonds, whose yields are in tatters. The average return on rental properties across Spain is 6.1%.

The most expensive rental prices are located in the centre of the city: €8.65/m2/month, which means that for a 90m2 home, the monthly rent amounts to around €778 on average. Playa de San Juan is the second most expensive location, at €8.61/m2/month, which corresponds to an average monthly rent of €774.

The most affordable areas are La Florida Alta and Florida Baja, with rents of €5.64/m2/month and €6.23/m2/month, respectively. Moreover, the most profitable neighbourhood for a landlord to rent out a flat is Carolinas Altas. The €560 that can be obtained for the rent on average, taking into account the sales prices in the area at the moment (around €60,000 per property on average) allow for the generation of a return of 11.2%; that is much higher than, for example, the dividend yield of any company listed on the Ibex.

Upwards trend

In its report, Solvia highlights that the forecast for 2018 is that house prices “are going to continue to rise in the city, with an expected increase of 5.3%, slightly below the 6.1% that is forecast for the whole of Spain”.

Property prices in Alicante recorded a YoY increase of 4.1% at the end of 2017 to reach €1,258/m2, above the national average. Specifically, second-hand properties reached a sales price of €1,207/m2, whilst new build homes cost €1,653/m2. “The amount per square metre is still considerably lower than the highest peak, reached in 2007 in the case of second-hand homes (€1,765/m2) and in 2008 in the case of new build properties (€2,041/m2). The most expensive areas are in the centre (€2,250/m2), the old town (€2,126/m2) and Playa de San Juan, where prices have soared by 9.7% over the last year.

Original story: El Mundo (by F. D. G.)

Translation: Carmel Drake

Rental Boom Triggers Investment in Madrid & Barcelona

27 January 2018 – Expansión

Markets are booming / The central parts of Spain’s two largest cities are the most sought-after by those investing in housing in search of returns, but rental prices are increasing more quickly in the districts on the outskirts of those cities, with rises of more than 10%. The experts forecast an accentuation of this trend, given that the supply of rental properties in the prime districts is starting to prove insufficient to cover all of the demand.

The real estate recovery is happening at three speeds. On the one hand, the large cities and most established areas along the coast are experiencing significant house price rises, a notable increase in sales, an increase in rental prices, a rise in non-residential investment and even a shortage of land for sale. On the other hand, medium-sized cities have left the lethargy behind and are now recovering, although with less energy than the large real estate centres. Finally, the less populated provinces are still recording ups and downs, although even there it is clear that the worst of the crisis is now over.

A large part of this improvement is due to the country’s underlying macroeconomic performance, but not all of it. The impact of private investors is playing a crucial role in the strengthening of the two large real estate centres, whose prime areas are the most sought-after by those looking to buy homes to put them up for rent, where they can obtain returns of more than 10%. Why? Because, in addition to the immediate increase in value that they are obtaining, a kind of rental boom is also happening in Madrid and Barcelona.

That said, “rental prices may be starting to peak in cities such as Barcelona and Madrid” says Beatriz Toribio, Head of Research at Fotocasa. “The market is normalising”, and so “although rental prices will continue to rise during 2018, they will do so at a lower rate than they did in 2017”, she adds.

The district of Chamberí exceeded the district of Salamanca in 2017 as the most expensive in the capital for renting a home. The average price of a rental home in Chamberí is €16.41/m2/month, followed by Salamanca (€16.07/m2/month), Tetuán (€14.94), Chamartín (€14.46) and Retiro (€14.35). At the other end of the spectrum, the district of Villaverde, with an average rental home cost of €8.91/m2/month was the most affordable. It was followed by Vicálvaro (€9.58), Moratalaz (€9.68), Villa de Vallecas (€9.90) and Usera (€10.15).

Almost all of the districts in the capital saw rental prices increase with respect to 12 months earlier. The district that rose by the most was Hortaleza, which increased by 13.1%, followed by Puente de Vallecas (12.9%), Ciudad Lineal (11%), Usera (9.4%), Retiro (9.1%) and Tetuán (9%) (….).

In Barcelona, the same thing is happening. The two districts that closed 2017 with decreases in rental prices are two classics in the rental market: Eixample (-1.4%) and Ciutat Vella (-1.2%). How come? “The rental boom started in the best locations and so when those areas reach very high prices, demand starts to withdraw from these areas and move to other more peripheral neighbourhoods”, says the real estate consultant José Luis Ruiz Bartolomé, Managing Partner at Chamberí AM. “The push from investors is also moving to other less central neighbourhoods, which are very well connected and cheap compared to the city centre”, he adds (…).

Specifically, the district of Ciutat Vella is the most expensive in all of Spain when it comes to renting a home. The average price there amounted to €17.16/m2/month in December 2017, despite the decrease seen YoY. It was followed by the second most expensive district, Sarrià-Sant Gervasi, whose average price amounted to €16.63/m2/month in December (…). Compared to 2016, prices rose in eight districts in the Catalan capital. The leader of that ranking was Sant Andreu, where prices rose by 12%, followed by Gràcia (9.5%), Les Corts (8.1%), Sants – Montjuïc (6.7%), Nou Barris (6.4%), Horta–Guinardó (4.8%), Sarrià-Sant Gervasi (3.9%) and Sant Martí (2.7%).

Gustavo Rossi, President of Alquiler Seguro, adds that “2017 will be remembered as the year in which the supply of rental housing became insufficient to meet demand”. The sector needs to be professionalised and the owners of empty properties need to realise that putting them on the market is a good option”, he says.

“Over the last decade, rental has established itself as the preferred option for young people and new families. In 2018, we are going to move closer than ever to the European model, where the rental segment has many followers”. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Catella Accelerates Its Investments In Spain

19 September 2017 – Expansión

Catella Asset Management is stepping on the accelerator in Spain. The Swedish fund manager, which arrived in the country just two years ago and which has already invested €150 million in assets, plans to boost the pace and make purchases amounting to €350 million over the next two years, whereby taking the firm’s total investment volume in the country to €500 million, according to Javier Hortelano, Managing Partner at Catella Asset Management in Iberia.

Until now, the company has undertaken five transactions in the residential rental market – four properties in Madrid and one in Barcelona – and has participated in the purchase of two shopping centres. Specifically, the fund manager has bought the Portal Mediterráneo shopping centre in Vinaroz (Castellón), together with the fund Aberdeen, and the El Manar retail complex in Massalfassar, in the Valencia metropolitan area, with the Belgian investor Mitiska Reim. In both cases, Catella is responsible for managing the assets.

The fund manager, which is listed in Stockholm, has a presence in 12 countries and manages assets worth around €3,400 million in Europe. “Spain is one of the markets that the firm is backing the most. Until now, we have invested €150 million, but the group’s ambitions go beyond that, given that we consider that the Spanish market offers a lot and has great potential”, he adds.

Spain ranks in the group’s Top 5 behind Scandinavia, Germany and France. Hortelano revealed that Catella is already analysing assets and expects some of the operations under consideration to materialise within the next couple of months. Specifically, the manager expects to invest €60 million in the residential sector before the end of the year.

Operations under consideration

In the future, the company will continue investing in the retail and residential sectors, where it is considering entering new locations such as Valencia, Málaga, Sevilla, Alicante, Madrid, Bilbao, San Sebastián and Vitoria, where it is identifying opportunities. “There is an increase in demand, oriented towards leasing. Spain is gaining ground, in line with other European countries, such as Germany and the United Kingdom”, says Eduardo Guardiola, Partner at the firm.

Guardiola believes that Spain suffers from a lack of supply and professional management in the residential rental market, which is adding to greater potential demand.

Moreover, the firm is considering entering other tertiary markets and wants to invest in offices and halls of residence for students. “Catella has a fund that invests in halls of residence for students at the European level. It is a very interesting asset, with lots of potential in Spain”, say the partners.

Both have a long history in the real estate sector. Before joining Catella, Hortelano was a Partner at PwC and previously served as the Director General of Operations at Redevco and was a member of the Dutch multi-national’s Board of Directors. Meanwhile, Guardiola has held positions of responsibility at PwC, Bouygues and Decathlon.

Potential

In terms of the real estate market, Catella believes that Spain is consolidating its position as one of the most attractive markets in Europe, but that, after years of rising returns, the sector has entered a new phase in which, in order to create value, you have to invest capex, professionalise the management and improve the rental market. “We have the opportunity to go from being an opportunity country to being a core country with a recurrent volume of investment every year”, say the executives.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Registrars: 99,343 Second-Hand Homes Sold In Q2 2017

4 September 2017 – Expansión

More than 1,000 second-hand homes were sold per day in Q2. During the second quarter of 2017, 99,343 second-hand house sales were recorded, the highest quarterly figure since 2007. That statistic confirms the consolidation of the residential market.

Over the last 12 months, 429,624 properties were sold, and so the experts consider that the sector is reaching its cruising speed. Moreover, they forecast that prices will rise by around 5%, which is the “healthiest” rate to avoid a bubble (…).

Each day, 1,090 second-hand homes are sold in Spain, according to data from the College of Registrars. It is true that not all of those homes are strictly “second-hand”, given that although they have all been sold in the past, some of them have never been lived in (those sold to the banks). However, new build sales are also recovering and overall, demand is booming. Over the last twelve months, 429,624 homes were sold, which is very close to the psychological threshold of 450,000, which real estate analysts consider would represent a return to normality in the housing sector.

“In most markets, the recovery is starting to take hold or has already been established”, said Julio Gil, President of the Real Estate Research Foundation. In his opinion, there are three speeds of recovery: “The first, in large capital cities, islands and the most established areas along the coast. The second, in the most heavily populated capital cities. The third, in small capital cities and areas without much activity”.

“The forecasts indicate that 2017 will close with between 450,000 and 500,000 residential property sales. I think that we are going to reach cruising speed”, says Manuel Gandarias, Founding Partner and Director General at Civislend PFP (…).

New build sales are taking off

“New builds are starting to gain ground. All of the off-plan sales made in 2014, 2015 and 2016 are starting to be recorded in the statistics now. The numbers are going to start to grow”, says Gandarias. According to Julio Gil, this recovery depends “on demand from the youngest generation, i.e. from first-time buyers, being able to access the market”. In reality, new families have been displaced to the rental market, which is experiencing a boom: rental prices are rising significantly and returns on homes are much higher than those being offered on deposits and public debt.

Gandarias explains the effect of this displacement on the buy-to-let market as follows: “There is still a lot of upwards potential for new builds. We are always talking about pent-up demand, and that demand exists, but it still doesn’t fulfil the solvency criteria demanded by the financial institutions”. Gil adds that “ It is absolutely necessary (for society) to redouble efforts in terms of access to housing for young people, with help to make purchases that can be reversed. That is one of the major challenges facing the housing market.

In other words, the market could still grow more. That will happen if employment continues to grow. However, there is a significant threat to mortgage financing and therefore home buying: that of a possible increase in interest rates.

The inevitable rise in interest rates

“A large part of the current recovery is due to the extraordinarily low interest rates” says Gil. “A rise in rates, which will happen sooner or later, will have a significant impact on the real estate market”. The other factor that will determine the behaviour of the future growth of the sector will be the behaviour of demand from first-time buyers.

Meanwhile, house prices are continuing to rise, but not by too much, dispelling fears of a new bubble. In comparison with the same period last year, second-hand house prices have risen by 1.7%, according to Idealista, up from €1,529/m2 in August 2016 to €1,554/m2 now. The highest rises were seen in the Balearic Islands (+1.7%), followed by the Canary Islands (+0.8%), Cataluña and Castilla-La Mancha (+0.7% in both cases). They were followed by prices in Comunidad Valenciana (+0.6%) and Andalucía (+0.5%) (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Gentrification Drives Up House Prices In Barcelona

13 March 2017 – El Periódico

It never rains but it pours: property prices in Barcelona are rising in a continuous and alarming way; a bullish process that echoes the trend seen in residential rental prices in recent times. Only those who are very optimistic – or very cynical – will be able to argue that these price rises are not a reflection of the improvement in the economy and that the laws of the market are as follows: the more pressure in terms of demand (from property buyers), the more the supply benefits (owners and real estate companies alike). According to all indications, the worst of the crisis is over, but the reality of the daily economy is far from the one seen during the years before the bubble burst, in 2007-2008 (and probably will not be in the next few years): average salaries have decreased, employment is more precarious and young people looking to emancipate themselves are finding it very difficult to put a roof over their heads.

But Barcelona is fashionable, a phenomenon that seems unlikely to end (nor would that be desirable) – and moreover, available land for new homes is in short supply. The combination of these two factors is fuelling the purchase of properties as investments, in many cases by foreigners and, is leading to a price spiral that, according to reliable samples, means that 80% of the homes currently up for sale cost at least €200,000. Below that price, properties abound only in the neighbourhoods of Nou Barris, Sant Andreu and Horta-Guinardó.

The Town Hall, led by Ada Colau, has taken some initiatives to alleviate these perverse effects of Barcelona’s appeal, but its legal and economic capacity is limited. The problem requires coordinated action with other administrations if a mockery is not to be made of the Constitution, which establishes that: all Spaniards have the right to decent housing and that the public authorities must ensure as such, “by regulating the use of land in accordance with the general interest to avoid speculation”.

Barcelona, at the forefront in many periods in history, still has time to show that success does not have to denaturalise a city to the point of turning against its inhabitants and driving them out through a large-scale gentrification process. Nobody wants Barcelona to end up like Venice, a paradigm of a city, with lots of glamour and many visitors but with increasingly little soul.

Original story: El Periódico

Translation: Carmel Drake