Eurostat: Rental Prices Rose by 2% in Spain in 2017

8 February 2018 – Eje Prime

Rental prices are resuming momentum in the Spanish market. After years of gentle rises followed by three consecutive years of decreases, rental prices closed 2017 with an increase of 2%, almost double the rate seen in France and Italy, according to data from the European statistics agency, Eurostat. For the first time since 2008, the rise in Spain is higher than the average recorded for the European Union as a whole.

Although owning your own home is still the preferred model for the majority of the population in Spain, the rental segment has been gaining strength in leaps and bounds, especially since the crisis.

According to the latest available data, also compiled by Eurostar, in 2016, 22.2% of Spaniards lived in rental properties, compared to 77.8% that lived in their own homes. Specifically, 13.8% of the population was paying rent at market price, whilst 8.4% had a reduced or free rent.

In 2006, just 19.8% of Spaniards lived in rental properties, well below the European average, which amounted to 27.2% at the time. Nowadays, the average for the EU stands at 30.9%.

Despite the rise in rentals, prices have evolved very unevenly in recent years. In 2008, at the height of the economic crisis, residential rents soared by 4.1% in Spain, above the average for the EU, which amounted to 3.7%.

In the following years, rental prices continued to rise, except for a slight dip in 2009, although below the EU average. Nevertheless, after four years on a bullish streak, rental prices started to fall in 2014 and have been declining since then, with reductions of 0.2% in 2014, 0.6% in 2015 and 0.3% in 2016.

In 2017, for the first time in almost a decade, Spain was once again one of the fifteen countries where rental prices rose by more than the EU average, which stood at 1.7%.

The country that recorded the highest increase in rental prices was Turkey, where rents soared by 11.1% last year. It was followed, albeit at a distance, by Estonia, Lithuania, Serbia and Latvia. The first mature market to appear on the list is the United Kingdom, where house inflation reached 2.7%.

Prices also rose at a similar rate to Spain in the Czech Republic, Hungary, Belgium, Austria, Sweden and Norway. By contrast, other mature markets such as Germany, the USA (which Eurostat also analyses), Italy and France registered more moderate rises of 1.7%, 1.7%, 1.3% and 1.2%, respectively. The only country in Europe where rental prices decreased in 2017 was Island.

This data corresponds to the House Price Index, compiled by the European statistics agency Eurostat. In Spain, several sources are published each year about the evolution of rental house prices, primarily by real estate websites and agencies, although the Ministry of Development recently announced the launch of a new official quarterly statistic.

Original story: Eje Prime (by I. P. Gestal)

Translation: Carmel Drake

Fitch Warns Of RE Bubble In The Centres Of Spain’s Large Cities

25 October 2017 – El Mundo

The ratings agency Fitch is warning that a real estate bubble is now visible in the centre of Spain’s large cities, although it does not anticipate a widespread bubble in house prices across the country as a whole in the short term, due to the high volume of stock that still needs to be absorbed and the restrictions facing people wanting to access a home.

Those were the findings of analysis performed for the Housing Sector in Spain report published by the entity, which explains that bubbles involving these types of localised assets are now very evident: the strong demand and limited supply of housing in the country’s main cities are leading to extreme price increases that are becoming increasingly “unsustainable”.

According to the agency, in the central neighbourhoods of Madrid and Barcelona alone, prices have recorded an annual increase of between 15% and 35%.

For Fitch, this demand is being influenced by quantitative easing, purchases by foreigners and investment decisions, given that investors are looking to benefit from the appreciation in asset prices and rental yields. Nevertheless, the agency forecasts that these “ingredients” will not influence the overall real estate market in the short term.

Similarly, the ratings agency asserts that it is “highly unlikely” that the problems in the real estate market are correlated with the economic recovery in general and it forecasts that the average discounts being applied to sell foreclosed homes are going to continue to be very high and stable over the next few years.

This situation will continue for as long as the banking sector continues to have an excess stock of housing and for as long as buyers insist on significant discounts to acquire foreclosed homes, said the ratings agency.

According to data from the company, the discount on the sale of foreclosed homes is still “high”, up to 60% on average, compared to the initial valuation, whilst discounts can range from between 50% to 75%.

In this sense, the dispersion of the discounts on the sale of foreclosed properties is decreasing. In fact, the gap between the range of discounts decreased to 25 percentage points at the end of 2016 from 35 percentage points during the period comprising 2010 and 2011. Nevertheless, it says that this reduction is not widespread.

Problems accessing housing

On the other hand, Fitch explains that access to housing will continue to be complicated because the velocity of the house price index is exceeding wage variations.

In this way, the families’ capacity to save is increasingly reduced, also due to the labour market that favours temporary contracts over permanent ones, which makes it hard for would-be buyers to save enough to make the initial down payment of 20% necessary to buy a home.

The report also underlines that access to housing over the long-term may be limited by the gradual elimination of monetary stimuli in the market and the likely scenario of higher interest rates.

Original story: El Mundo

Translation: Carmel Drake

INE: House Prices Rose By 4.7% In 2016

8 March 2017 – Expansión

House prices rose by 4.7% on average in 2016 with respect to the previous year, their third consecutive annual increase following six years of decreases and the highest rise since 2007, according to the House Price Index (IPV) published today by Spain’s National Institute of Statistics (INE).

By house type, second-hand house prices rose by 4.4% in 2016, to register their highest increase since 2007. In the case of new homes, average prices rose by 6.5% in 2016, also recording their highest rise since 2007.

During the fourth quarter of 2016, private (unsubsidised) house prices rose by 4.5% with respect to the same quarter in 2015, whereby increasing the YoY rise recorded in the third quarter (+4%) by half a point. In this way, house prices recorded eleven consecutive quarters of positive YoY variations.

New house prices rose by 4.3% in Q4 2016 compared to the fourth quarter in 2015, in other words, by three points less than during the previous quarter, whilst second-hand house prices rose by 4.5%, one point above the increase recorded in the previous quarter.

In inter-quarterly terms, private (unsubsidised) house prices rose by 0.4%, in other words, by four tenths less than in the previous quarter. Following this quarterly increase, house prices recorded four consecutive quarters on the rise.

House prices rose last year in every single one of Spain’s autonomous regions, as well as in the cities of Ceuta and Melilla. The most marked price increases were observed in Madrid (up by 8.6%), Cataluña (7%), the Balearic Islands (6.2%), Melilla (5.3%) and Ceuta (5.2%). On the other hand, the lowest increases were recorded in Castilla-La Mancha (0.8%) and Castilla y León (1.1%).

In quarterly figures, private (unsubsidised) house prices decreased in ten autonomous regions as well as in Melilla; they rose in four regions and in Ceuta; and they remained stable in Andalucía, Aragón and the Community of Valencia. The largest decreases were recorded in País Vasco (-1.6%) and Extremadura (-1.5%) and the greatest increases were seen in Madrid (+1.5%) and Cataluña (+1.2%).

Original story: Expansión

Translation: Carmel Drake

BdE: Average Yield On Rental Homes Reached 8.4% In Q3 2016

8 March 2017 – Expansión

Housing is once again a safe investment for savers and small time investors looking for high returns and low risk. At a time when debt and deposits are offering very low returns, property is making a name for itself as a safe bet.

Buying a home and putting it up for rent offers an average gross return of 4.4% per annum. If we add to that the appreciation in property prices over 12 months – in other words, the latent gain – then that figure increases to 8.4%. And that number represents the national average; in cities such as Madrid and Barcelona, the rates are even higher, especially in the city centres, where investors are seeing returns of almost 20%, driven by rising rental and property prices.

The figure of 8.4% comes from the most recent data published by the Bank of Spain; it corresponds to the end of the third quarter of 2016. The gross rental yield was 4.4% during that period and INE’s House Price Index recorded an increase of 4%. The official statistics for the fourth quarter have not been published yet, although they are due to be released today. If we consider more recent data from the College of Registrars, the total yield would increase to 10.1%, given that in the fourth quarter of 2016, the average rental yield was again 4.4%, meanwhile prices increased by 5.7%.

The residential sector is set to undergo a year of consolidation in 2017. For starters, property prices are rising significantly. Analysts forecast that real estate prices will rise by around 5% again this year. In addition, sales are growing fast. They rose by 13.6% last year and the forecast is that they will rise by more than 10% this year. At the same time, the mortgage tap is flowing and rental prices are rising steeply: by no less than 15.9% last year.

And so, the million dollar question is, yet again: Is now a good time to buy a home and put it on the rental market to make a profit? The general response from real estate experts consulted by this newspaper is a resounding “yes”, with increasingly fewer concerns. Nevertheless, the choice of investment is fundamental. For example, Jorge Ripoll, Head of Research at Tinsa, points out that it is best to buy “small flats in established areas of large cities, as they tend to enjoy more liquid rental markets”.

Original story: Expansión (by J. M. Lamet)

Translation: Carmel Drake

INE: House Prices Record Largest Increase Since 2007

11 December 2015 – El País

As the year end approaches, house prices in Spain are showing the most significant signs of recovery since the end of 2007, when the real estate bubble burst and prices began their downwards fall. Property prices increased by 4.5% during the third quarter of the year with respect to the same period in 2014, according to the House Price Index, published on Thursday by Spain’s National Institute for Statistics (INE). In this way, the real estate sector leaves behind the significant price decreases of the last six years and heads into 2016 with six consecutive quarters of increases. Between October and December 2007, which saw the last major increase in the series, prices grew by 5.7%.

Whilst, on average, the increase amounted to 4.5%, the price rises varied slightly by house age. New builds have now stopped increasing – they rose by 4.3% between July and September, i.e. by six tenths less than during the previous quarter – , whereas second-hand homes accelerated their increase, with price rises of 4.5%, i.e. five tenths above the figure recorded in the previous quarter. (…).

Nevertheless, the current situation in the real estate market, still requires prudence. “Although the general price increases that we are seeing across all autonomous communities could lead to euphoria, in reality there are still many parts of Spain where demand continues to be weak and where there are large pockets of homes for which no buyers can be found, and which therefore do not count for the official statistics. We recommend caution and common sense to all our property owners in this situation; they should not get carried away by excessive optimism without first analysing their local market”, advises Fernando Encinar, Head of Research at the portal Idealista.

The technicians at Fotocasa are of the same opinion. “The large discounts on house prices have come to an end, but that does not mean that prices have bottomed out”, says Beatriz Toribio, Head of Research at the real estate portal. In her opinion, there will be fluctuations over the next few months “characteristic of the normalisation that is happening in the sector”. “It will become more apparent that the real estate sector is recovering at two-speeds, depending on the region”, she adds.

Prices in the majority of the autonomous regions increased during the third quarter of 2015, with the Balearic Islands (8.4%), Madrid (6.9%) and Cataluña (6.1%) leading the ranking. By contrast, the smallest increases were seen in La Rioja and Aragón (0.9%) and País Vasco (1%). Fotocasa’s real estate index has been registering continuous YoY price increases for several months in regions such as Cataluña, Madrid and the Balearic Islands.

This recovery in prices is much more apparent in major cities, such as Barcelona and Madrid, where prices have been increasing in almost every neighbourhood for several months. By contrast, in Castilla la Mancha and Extremadura, we are still seeing YoY price decreases of 5%.

Original story: El País (by Sandra López Letón)

Translation: Carmel Drake

Notaries: Sales Of Second-Hand Homes Reactivate RE Market

18 August 2015 – Cinco Días

The General Council of Notaries has published its report for the real estate market in Q2 2015 – it shows an improvement in sales and a recovery in prices. Specifically, the notaries’ information, which is based on deeds included in the registries, shows that 37,641 homes were sold in Spain in June 2015, an increase of 19.4% YoY (14.4% if we correct for the effects of seasonality), of which 30,008 were flats and 7,633 were houses, with those segments experiencing YoY rises of 15.7% and 14.5%, respectively.

The most striking data to emerge from the statistics prepared by the notaries is the significant volume of second-hand home sales, compared with the lack of new home sales. 83% of the properties sold during the quarter were used homes. The strong demand (in the second-hand segment) meant that prices stopped falling at the end of Q1 2015 and actually rose for three consecutive months (by 1.9%, 1.2% and 0.4%, respectively), but by significantly less than the figures reported by INE for the period from January to March.

Exactly the opposite happened in the case of new builds. Sales in June amounted to just 3,558 (9.4% of the total), which undoubtedly compromises the Government’s plans to reduce the huge stock of unsold new homes (which stands at 535,734 properties, according to the most recent data from the Ministry of Development) and may force it to use some of those homes for other purposes, such as for social housing, in line with the demands being made by certain social organisations. (…).

The weak demand for new homes has had an inevitable impact on prices, which have continued to fall. In June, they dropped by 1.8% YoY and with the exception of April 2015 (when they rose by 5.3%), they continued to decrease throughout the quarter. The decrease in the price of new homes and the incipient rise in second-hand prices has meant that the general index, which measures the evolution in the prices of all types of homes, recorded a 0.3% decrease in June. That figure contrasts with the information provided by INE in its House Price Index for Q1 2015 (which reported an average increase of 1.5% during the first quarter) and then only a partial improvement.

In this context, the General Council of Notaries states that these figures “continue to show that the Spanish real estate market is stabilising and sales are recovering”. The recovery of the mortgage sector, which began in the first half of 2015, is going to play a key role in the consolidation of this trend. Mortgages granted for the purchase of properties increased by 32.4% YoY in June (to 17,508 loans), due to both an increase in the volume of mortgages granted to purchase homes (+32.4%), as well as a rise in the number of mortgages granted for the acquisition of other properties (+39.7%).

Meanwhile, the average amount loaned for property purchases was €130,343 (+5.2%). The average amount loaned to acquire a home was €121,445 (+4.6%), whilst the average mortgage for the purchase of other types of properties was €221,620 (+5.1%).

Finally, house sales increased in every autonomous region during Q2 2015, with Madrid and Cataluña leading the rise. (…).

Original story: Cinco Días (by Carlos Molina)

Translation: Carmel Drake