Fitch: House Prices In Spain Have Bottomed Out

12 February 2015 – El Mundo

The ratings agency expects prices to stabilise at their current levels, 40% below their peak.

It also predicts that the increase in house prices will be “marked” by the greater availability of credit and a substantial improvement in the labour market.

The credit rating agency Fitch Ratings expects house prices in Spain to stabilise at their current levels, 40% below the peak levels recorded before the crisis. The agency notes that the data now shows that an equilibrium has been reached and prices will not decrease any further.

According to its report about the mortgage market in Spain, the theoretical benefits of greater access to credit are still a long way off from compensating for the over-supply (of homes) and the lack of confidence caused by high unemployment. Similarly, Fitch adds that the increase in house prices will be “marked” by greater availability of credit and a substantial improvement in the labour market.

In this sense, it stresses that interest rates are currently low and that it expects debt servicing to continue to be manageable in the medium term, but it warns that households that are in the process of deleveraging remain sensitive to interest rate rises.

On the other hand, it considers that banks are more willing to grant mortgages to solvent customers and are gradually reducing their margins, as a result of their own lower financing costs. Nevertheless, the low forecast Euribor rates for 2015 will restrict any further decline in these margins.

The agency notes that, according to data from the National Institute of Statistics (el Instituto Nacional de Estadisticas or INE), house prices rose by 0.2% in Spain in the third quarter of 2014, the first time they had risen for two consecutive months since the third quarter of 2007.

Finally, Fitch notes that unemployment decreased by 2.3 percentage points year-on-year in the fourth quarter of 2014, to 24.2% and it believes that the “less bad” conditions in the labour market are reflected in a decrease in the number of loans falling into arrears.

Original story: El Mundo

Translation: Carmel Drake

Housing: 319,389 Homes Were Sold In 2014, Up By 2.2%

11 February 2015 – Expansión

After three years in decline, INE confirms that the residential sector is on the road to recovery. The greater increases in the number of transactions were recorded in the Balearic Islands (18.5%), Navarra (13.9%) and the Canary Islands (12%).

The National Institute of Statistics (el Instituto Nacional de Estadística or INE) confirmed yesterday that house sales have turned the corner around Cape Horn. The crisis is not behind us yet, by any means, but the sector has begun its long road to recovery, and that is the best news to come out of the property sector in over six years. Residential property transactions increased by 2.2% in 2014.

Last year, 319,389 homes were sold, compared with 312,600 in 2013 and 318,534 in 2012. This represented the first annual statistical increase since 2010, although that year was clearly affected by the termination of the tax relief for first home purchases for individuals earning more than €24,107, which caused numerous families to bring forward their house purchases so as not to miss out on the tax incentive of up to €1,350 per year.

“The year-end figure reflects a rise that, although timid, is a symptom of a significant change in the pace of operations. It is an encouraging piece of data that emphasises the stabilisation of the sector and it is based on the return of financial institutions to the field of finance and on the price adjustments undergone in the market”, said Manuel Gandarias, Head of Research at

In reality, 2014 was the first year since 2007 in which demand grew by itself, without tax incentives or other decisive policies. The worst years of the crisis for the property sector were 2008 and 2009, when residential sales decreased by -28.8% and -25.1%, respectively. In 2010, sales increased by 6.3%. The decline then slowed down gradually in 2011 (-18.1%), 2012 (-11.5%) and 2013 (-1.9%, when tax relief ended completely).

The expected upturn in purchases in due solely and exclusively to the strong sentiment in the second hand market, the real thermometer of the residential sector at a time when new homes are still somewhat mummified, in an over-inflated stock.

Sales of used homes increased to 199,943 in 2014, i.e. 18.4% more than a year earlier. Second hand homes now account for two out of every three transactions (62.6% of the total). These sales had increased by 3.8% in 2013.

Meanwhile, sales of new homes in 2014 amounted to 119,446 (down -6.9% with respect to 2013) and now accumulate four consecutive years of decline.

“This superiority of used homes over new builds is not only based on the larger volume and leeway afforded by the prices of such homes, it is also due to the scarcity of new developments and the effect caused when the banks dumped the new developments they held on their balance sheets, which effectively converted these properties into second hand homes for tax purposes”, said Gandarias.

The number of unsubsidised homes sold increased by 3.2% with respect to 2013, whilst the number of subsidised house sales decreased by 6.2%.

By autonomous region

The autonomous communities that experienced the greatest increases in the number of house sales in 2014 were the Balearic Islands (18.5%), Navarra (13.9%) and the Canary Islands (12%). The largest decreases were recorded in La Rioja (-25.1%), Castilla-La Mancha (-12.6%) and Murcia (-6.3%).

The regions that recorded the most transactions per 100,000 inhabitants in 2014 were Valencia (1,182), the Balearic Islands (1,043) and the Canary Islands (1,015).

83.0% of the sales recorded in 2014 related to urban properties and 17% to rural properties. In the case of urban properties, 55% corresponded to homes. Sales of rural properties increased by 7.3% and sales of urban properties rose by 0.9%. Within this second group, housing was the property type that experienced the highest growth.

The experts expect the improvement in house sales to extend into 2015. The 21st Edition of the Real Estate Heart Rate Monitor (la XXI edición del Pulsímetro Inmobiliario) published by the Institute of Business Practices (el Instituto de Práctica Empresarial or IPE) last week, forecasts that sales will grow by 7.5% this year.

According to the IPE, house prices will grow by 2.5% in 2015. In addition, mortgage lending will increase by 2.5% and the construction of new builds will grow by 7.5%.

Sales have already increased. Will prices rise too? We will know on 9 March, when INE publishes data abour the average house price at the end of 2014.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Spain House Sales Rose Last Year (For First Time Since 2010)

11 February 2015 – Bloomberg

Spanish home sales increased last year for the first time since 2010, adding to signs that the property market is recovering from the worst recession in the country’s democratic history.

Transactions rose by 2.2 percent from a year earlier to 319,389 units, according to data compiled by the National Statistics Institute. That’s still far below the peak in 2006, when 955,186 properties were sold.

“We are out of the operating room but we are still in the hospital,” said Fernando Encinar, co-founder of, Spain’s largest property website. He said 2013 was “the worst year of all for Spanish real estate sales, so any comparison will look good.”

More than two years since applying for a European Union rescue of its banking system, Spain has become one of the fastest-growing economies in the euro area as exports surge and investment rebounds. The country is poised to have the highest growth since 2007 this year.

Tinsa, Spain’s largest homes appraiser, said today that home prices fell 2.7 percent last year, taking the drop since values peaked in 2007 to almost 42 percent.

Original story: Bloomberg (by Sharon Smyth)

Translation: Carmel Drake

INE: House Sales Increased By 15.7% In December

10 February 2015 – Expansión

Sales of second hand homes drove overall house sales to increase by 2.2% in 2014, with respect to the previous year, to reach 319,389 transactions, resulting in a return to positive growth after three years of decline.

House sales rose by 2.2% in 2014 after three years of decline, thanks to a boost from second hand properties, according to the provisional data published today by the National Institute of Statistics (Instituto Nacional de Estadística or INE) regarding the Statistics on the Transfer of Property Rights (Estadística de Transmisiones de Derechoes de la Propiedad or ETDP).

The second hand market was the driver behind this annual growth, the first positive trend since 2010, when house sales grew by just over 6%. That year represented a respite for the real estate market, which had been hit hard by the economic downturn.

The increase in the sale of second hand homes was notable last year with a rise of 18.4%, to reach 199,943 transactions. By contrast, the number of new homes sold decreased by 16.9%, to amount to 119,446.

25,998 houses were sold in total in December, an increase of 15.7% on the same month last year – the fourth consecutive monthly increase – and 3.2% more than in November.

After three years of decline, house sales have returned to positive territory in the context of a strong price correction. In fact, since their peak in 2007, house prices in Spain have decreased by more than 40%.

During the crisis, the worst years for house sales were 2008 and 2009, when the number of transactions plummeted by 28.8% and 25.1%, respectively. Double-digit decreases were also recorded in 2011 and 2012 (-18.1% and -11.5%, respectively), however, the decline eased in 2013 to 1.9% as the tax relief for house purchases ended.

89.7% of homes sold last year were unsubsidised (free housing) and 10.3% were subsidised (protected). In total, sales of unsubsidised homes increased by 3.2% in 2014, whilst sales of subsidised homes decreased by 6.2%, a smaller decline than in previous periods.

Andalucía leads the ranking

By autonomous region, Andalucía recorded the highest number of house sales last year (64,349 transactions were closed there), followed by Cataluña (47,113), Valencia (46,678) and Madrid (44,231).

The autonomous regions that recorded the fewest number of transactions were La Rioja (2,263), Cantabria (3,917) and Navarra (4,403).

In relative terms, the number of house sales rose in eleven autonomous communities in 2014 and decreased in six. The regions that experienced the highest increases in terms of the number of transactions were the Balearic Islands (+18.5%) and Navarra (+13.9%), whilst the ones with the largest decreases were La Rioja (-25.1%) and Castilla-La Mancha (-12.6%).

Original story: Expansión (by )

Translation: Carmel Drake

Housing In 2015: Some Vital Statistics

10 February 2015 – Expansión

For translation of the first part of this article, refer to: Housing In 2015: More Sales And Higher Prices

Vital statistics about the housing sector in 2015

House sales: +7.5%: House sales have returned to positive growth. After seven years of decreases, in which the end of tax reliefs barely affected the market – only in an artificial way – a real increase in the number of house sales was recorded in 2014 (up 2.6%). According to the Real Estate Heart Rate Monitor (Pulsímetro Inmobiliario) from the Institute of Business Practices (Instituto de Práctica Empresarial), 7.5% more sales will be closed in 2015 than last year.

House prices: +2.5%: The key indicator for buyers is price, which, combined with necessity, is the factor that tips the balance towards the purchase of a home or not. According to the Real Estate Heart Rate Monitor, prepared by the Institute of Business Practices, house prices rose by 6.47% last year and will increase by 2.5% in 2015. The average value of homes sold in 2014 was €141,718 and this year will close with an average price of €145,261, i.e. we will see a return to 2012 levels.

Construction: +7.5%: Timidly, slowly, the cranes will return to the skyline of Spain’s major cities. In 2014, the construction of new buildings began to increase. Specifically, 37,418 new builds were started in 2014, an increase of 20% on 2013. In 2015, the upwards trend will continue, but it will be less pronounced. According to the IPE, at least the first brick will be laid on 40,225 homes, i.e. 7.5% more than last year.

Mortgages granted: +2.53%: The number of urban buildings financed through mortgages will return to positive growth after no less than eight years in decline. This year, 306,639 loans will be signed for the purchase of property, i.e. 2.53% more than the 299,064 recorded in 2014. Last year, the total volume of mortgages amounted to €39,472 million, i.e. 13.8% more than in 2013. In 2015, the figure will increase to €41,840 million, i.e. 6% more.

Average mortgage: +3.4%: The average size of the loans granted by financial institutions to cover the purchase of residential property in 2014 was €131,984, i.e. 15.8% higher than in 2013. This year the figure will continue to rise, to reach €136,477, i.e. 3.38% more than last year. The average mortgage is equivalent to 93% of the average sales price of homes (note, we should remember that mortgages are granted for all kinds of real estate property).

Construction permits: +5%: Having seen the beginning – timid but evident – of the recovery in the real estate sector, professionals in the market are starting to glimpse a more promising future. And so, permits for the construction of residential developments will grow again in 2015, after eight consecutive years of marked decreases. This year 64,591 permits will be granted. That is 5% more than last year and 24,000 more than the number of new homes started.

All properties: +1.8%: The report from the Institute of Business Practice focuses on the residential market in particular, i.e. the housing market, but the real estate sector is more broad. If we consider all urban properties – shops, shopping centres, offices, housing – 717,471 properties will change hands in 2015, i.e. 1.8% more than in 2014, the year in which the increase was similar, boosted by the arrival of vulture funds looking to purchase bargain properties with high yields.

Housing stock: -29.1%: For the fourth consecutive year, the number of surplus homes decreased in 2014, from 777,000 in 2013 to 662,761. That is, 115,000 fewer homes or 14.7% of the total. In 2015, the decrease in empty properties will be even greater. According to the IPE’s forecasts, the figure will drop to 469,708 properties this year, i.e. 29.1% fewer (193,000 homes). Valencia, Castilla-La Mancha and Andalucía account for 54% of the total stock.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Housing In 2015: More Sales And Higher Prices

9 February 2015 – Expansión

Forecasts / This year the construction sector will emerge from negative numbers in all of the major indicators.

If 2014 was the turning point for the housing market, then it looks like 2015 will be the year 1 a.c (after the crisis). After seven years of hell, the residential sector is seeing the light again with positive data across all of the key indicators. That is the main conclusion drawn from the 21st Edition of the Real Estate Heart Rate Monitor (la XXI edición del Pulsímetro Inmobiliario), which will be published by the Institute of Business Practice (el Instituto de Práctica Empresarial or IPE) in the next few days.

The report has been prepared by MAR Real Estate, the real estate arm of IPE, in collaboration with the Network of Qualified Property Consultants (la Red de Asesores Inmobiliarios Cualificados) (around 600 professionals from all over Spain have participated in the study). And their predictions indicate that a period of great prosperity is upon us: sales, prices, mortgage lending, construction, stock…everything will improve in 2015. From low levels, yes, and still with limited strength, but this can only be good news when we are talking about the impoverished residential market, where the metastasis has been more devastating than in any other sector.

There is a great atmosphere. To begin with, sales will increase by 7.5% this year, having closed 2014 with an increase of 2.6%, the first rise since 2010, the year in which the market was shaken by the removal of tax relief for buying a first home. According to MAR Real Estate’s forecasts, 344,000 residential properties will be bought and sold in 2015; 24,000 more than last year (320,063).

The second major indicator in the residential world is price, the eternal purchase thermometer. According to IPE’s report, house prices rose by 6.47% last year and are expected to increase by a further 2.5% in 2015. The average value of homes sold in 2014 was €141,718 and this year is expected to be €145,261, showing a return to 2012 levels.

Price rises

“The trend is rising, something which is evidenced by the fact that the vulture funds have now left Spain”, says José Antonio Pérez, Director of Real Estate at IPE. “The properties being sold are those in good locations, in prime areas that are nicely finished and ready to live in. Speculative purchases have practically disappeared”, he adds.

Furthermore, a phenomenon not seen since the years before the Great Crisis is now happening: homes are being sold off plan and prices are rising during the purchase process.

There are two examples that illustrate this. Both are on the Costa del Sol, which analysts regard as the area where the trends in the rest of the housing market are first seen (that was the case in the 1980s and 1990s and it is starting to be the case again now). In Estepona, the British company Taylor Wimpey put a development containing 44 properties up for sale. Off plan. They now have only three loft apartments left to sell – the original asking price for these properties was around €400,000….and they are now being sold for €500,000. A 25% increase. The majority of its customers, are foreign (around 85%-90%).

The second example is that of Inmobiliaria Sur, which has a strong position in the domestic market, away from luxury properties. To the extent that it has been putting homes up for sale – also off plan – in its developments in Marbella and Mijas-Costa, the prices of the best properties that it has not yet sold have increased from between €200,000-€220,000 to reach close to €300,000.

“In prime areas, prices are rising. In mid-market areas, prices will be stable in 2015 and in the areas that still have a lot of surplus, there will be further price decreases”, says Pérez.

In other words: good properties have already been sold; but structural stock, born out of the excesses of the real estate bubble, has not. In the case of the former, bargaining power has decreased, although there are still bargains to be had; in the case of the latter, there is simply no demand, aside from investors looking to obtain yields from their properties, or to renovate them and wait for better times. “Buy-to-let homes will continue to generate good returns and so money will continue to move from the financial system into the real estate market in 2015”, predicts José Antonio Pérez.

There are potential buyers in the market, but they cannot obtain access to credit. Experts believe that natural demand in Spain would generate around 400,000 transactions (per year), but it will be a while before we see that figure again, especially given that the construction of new homes is clearly following a downwards curve. The return to sustainable figures will depend heavily on financial institutions opening the mortgage tap, which is currently shut off to ordinary mortals, i.e. to anyone that does not fall into the vague category of “solvent”.


According to Pérez, we are now seeing a rise in the number of loans being granted for property purchases, but lending is still scarce. In 2014, 299,064 mortgages were signed, which is 2.3% fewer than in 2013, but we expect to see the first increase in nine years in 2015, with 306,639 mortgages being signed for urban properties. In 2006, the last year in which an increase was recorded, that figure stood at 1,816,878, i.e. 592% higher.

“The mortgage market will continue to be very restricted in 2015, very focused on the products that are marketed by the banks themselves”, says Pérez. Moreover, “two thirds of sales will be paid for in cash”, he adds.

The average mortgage size grew by 15.8% in 2014 (from €113,972 to €131,984) and will increase by 3.4% in 2015 to reach €136,447. The volume of these loans will increase by 6% to take total mortgage borrowing to €41,840 million by the end of the year.

One question remains unanswered: if everything is going to start growing again, will the cranes return to Spain’s urban landscape? And the answer is yes. Very slowly at first, but yes. In 2015, 40,255 new homes will be constructed, i.e. 7.5% more than in 2014.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

AEV Less Optimistic About Real Estate Recovery In 2015

4 February 2015 – Cinco Días.

House construction will not be revived until the upwards trend in prices grows stronger.

Analysts believe that the crisis “has cleaned up” the sector.

The macroeconomic recovery will come first, driven by increased activity and job creation, and then an improvement in the real estate sector. That is the expected path of recovery for the house building sector, one of those hardest hit by the recent crisis.

Paloma Taltavull, Head of the Department for Applied Economics at the University of Alicante explained this yesterday. She is one of the experts that has participated in a study conducted by the Spanish Association of Value Analysis (AEV), which represents more than 90% of the appraisers that operate in the market.

Thus, unlike the forecasters that resolutely claim that the real estate market will recover in 2015, the members of this organisation are much more cautious.

“Construction activity is still at historically low levels, with house prices now bottoming out, having been in decline since 2008”, state the conclusions of the study. However, for how long will prices remain at these low levels? That is the million-dollar question that all of the experts are asking themselves and to which investors, developers, vendors and buyers want the right answer. The problem is that getting the forecasts right with everything that still might happen seems, at the least, very complicated, according to the Chairman and Secretary of the AEV, Gonzalo Ortega and José Manuel Gómez de Miguel, respectively.

Two variables, in particular, always determine the future of this market: employment and access to credit. Although the official statistics for 2014 still need to be corroborated, it seems that there were more house sales in 2014 than in the previous year for the first time since the crisis began. And prices showed a clear trend towards zero growth or stabilisation.

Less property, more rent

And that was because last year was the first year in which Spain created jobs again, rather than destroying them. Moreover, financing terms were relaxed, thanks to the lowering of interest rates and the overall improvement in the banking sector.

However, according to the experts who prepared the AEV’s report, this recovery in employment is still insufficient to boost the housing market. Furthermore, the report highlights the “precariousness of the new jobs that have been created, along with wage deflation and mass youth unemployment” as the three most important factors that give us “few reasons to be optimistic”.

In this context, and given that the restrictive conditions surrounding access to credit for those that do not have a stable job and/or a certain level of income, the appraisers and experts at the AEV are unanimous in their view that “it will take a real and prolonged recovery for young people to be able to buy their own homes. Therefore, everything suggests that the majority of young people will opt to rent homes, whereby aligning with the European average”.

This is causing a build up in the back-log of demand from buyers, who still do not meet all of the requirements to make buying a house a reality. The appraisers’ report reveals that the most recent census data (2011) shows that almost 900,000 nuclei of new homes could have potentially been formed, but were not. If the improvement in employment continues, a large part of this potential demand will become effective and house prices will start to rise slowly as a result, “although we do not expect them to do so on a widespread basis or across the whole country until the end of this year”, predicted Taltavull.

And as for the construction of homes, the experience of past crises indicates that the return to previous levels of construction will be very slow over the next few years and will not become a reality until prices have recovered.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Happiness Will Return To The Housing Market In 2015

3 February 2015 – Expansión

REAL ESTATE RECOVERY / The return of banks to the mortgage market and the increase in domestic investment are allowing Spain to emerge from the deepest and most intense crisis to hit the housing market in decades. During 2015, 440,000 homes will be sold, 20% more than last year, but far fewer than the 950,000 transactions recorded in 2006. Some of those currently renting properties will now purchase their own homes, thanks to the low interest rates.

Happiness yes, cause for celebration, no. The party ended in 2007 and there is no prospect of it returning, in either the short or medium term. Nevertheless, despite the high levels of unemployment (5,457,700 people were out of work at the end of 2014) and the low wages earned by a substantial part of the population (7,861,844 employees declared monthly income of less than €967.94 in 2013), the recovery of the housing market will become a reality in 2015.

And we will not only see green shoots, but rather an upwards trend that will be consolidated over the next few years, since the main variables in the housing market (number of sales, prices and new builds) will perform better in 2016 and 2017 than during 2015. Therefore, 2015 will be the year in which the deepest and most intense crisis to hit the housing market in decades, which battered the housing market in Spain for 7 long years, finally came to an end.


The recovery will be significant in terms of the number of transactions, which will increase by approximately 20% with respect to 2014. Thus, if sales in 2014 amounted to approx. 365,000 homes, in 2015 they will be close to 440,000. Although we expect there will be approx. 75,000 more transactions than in 2014, this figure will still be 500,000 below the one recorded in 2006 (when 955,186 homes were sold – the highest number of sales ever made in Spain). Furthermore, the figure will be less than the number of sales made in 2009 (463,719 homes), a year when GDP fell by 3.6%. But that was, undoubtedly, a very different environment to the one we are now facing in 2015, with economic growth forecasts for the year of 2.2%.

The increase in the number of transactions will mainly take place in the large cities and especially in the streets where the wealthiest populations live (the upper and upper-middle classes). In those areas of Barcelona and Madrid, sales growth will be dramatic, exceeding the levels recorded in 2014 by almost 50% in certain cases. The main reasons for this differential behaviour with respect to the rest of the country, aside from the higher wealth and monthly earnings of residents will be: an increase in the desire to invest in housing; an improvement in the ease of access to mortgage lending; and the existence of a considerable latent demand for housing from people who have lived in rented properties until now. Sales will also increase in provincial capitals, tourist areas and small towns (those with fewer than 20,000 inhabitants), although at substantially lower rates.

Why will the demand for housing increase?

The main reasons why the demand for housing will increase considerably are:

a) Growth in mortgage lending. Having passed their stress tests, financial institutions will increase the loans they grant as they face reduced opportunities for generating profits from the purchase and sale of public debt or the disposal of non-core assets. This means that mortgages will become a ‘hook’ product once again, i.e. they will be designed to focus more on attracting new clients or retaining existing clients, than on generating large margins per euro borrowed.

This phenomenon will lead to an overall reduction in the spread over Euribor to 0.75% and the appearance on the mass market of 35-year mortgages. On a selective basis, we will also see the return of loans for financing house moves (when a client first buys his new home and then sells his old one), as well as those granted for 100% of the value of the home for properties that are not owned by the bank.

In light of all of this, unlike in 2014, when credit granted to families to purchase homes decreased by around 3.5%, lending will increase by approximately 8% in 2015. Undoubtedly, this will represent a substantial change that will result in a return to normality for mortgages used to finance home purchases.

b) A substantial increase in the number of domestic investors. Neither the Russians (of whom there will be more sellers than buyers in 2015), the British or the Germans will be the leading players in 2015; the main players in the market will be Spanish. The expectation of the recovery in prices, the high volatility of the stock market, the low nominal returns offered by bonds over the short term and the risk of incurring losses over the long term will all cause investors will return to the housing market.

Acquisitions will predominantly be made in the areas where investors reside (a classic real estate investment) or in the centre of cities, with only a small percentage of buyers preferring to acquire a residence on the beach or in the mountains. Despite the attractive prices (in some cases less than €60,000), almost no one will purchase in small towns. The main reasons are: the extreme difficulty of renting out homes purchased in such locations, given the huge over-supply and the population declinethat many of them have suffered, as well as the poor prospects of any appreciation in the value of such assets in the short and medium term.

c) The displacement of some of the demand for rental towards purchasing. In recent years, many families have chosen to rent (rather than buy) in the hope that: house prices would fall further; the uncertainty surrounding their future in the company they work in would diminish; and they would manage to save the capital required to put down a deposit on a house, which banks do not normally finance. Nowadays, many of them believe that house prices are going to go up rather than down in the near future, they see redundancy at work as a less likely prospect and after years of saving, they are now in a position to be able to buy their dream home.

Furthermore, given the historically low Euribor rate in December 2014 (0.329%) and the expectation that the ECB’s reference interest rate will continue at a very low level for at least the next three years, they note that it is now much more advantageous for them to buy a property rather than rent. The reason is that the monthly interest payable on mortgages taken out now, will be lower than the rent charged for a similar home, in the vast majority of cases.

d) The macroeconomic recovery. Economic growth of 2.2% will generate an increase in profits for a significant number of self-employed people and small business-owners. This will cause some of them to decide to move house or invest in an additional property. However, the creation of more than 350,000 full time equivalent jobs (under the national accounts methodology) will have a minor impact on the demand for housing, since the vast majority of the roles generated will be temporary or part-time and will be poorly paid.


Overall, house prices will increase by around 5% across the country, and the key driver will be the significant increase in demand in the large cities. The highest annual increase will be observed in the best areas of Barcelona and Madrid, where it will exceed 10% in some cases. In the tourist areas that are furthest from the beach, ski resorts and in the neighbourhoods of provincial capitals, where there is already a significant over-supply of properties, no price rises are expected. Activity will return (in terms of the number of transactions) in these locations, but prices will remain stable.

In some small towns, prices will continue to decrease, although at a significantly lower rate than in recent years. The decline in population numbers, low rental yields (less than €200 (per month) in many cases) and the inability of most of the population that live in rental accommodation to obtain a mortgage, mean that demand for housing (in small towns) will continue to remain very low, although it will be higher than in previous years.

According to the historical data provided by the Ministry of Development, the 5% price increase means that by the end of 2015, the average cost of an unsubsidised home will be roughly equal to the prices last seen in the second quarter of 2004. This comparison clearly shows the significant decline that house prices have suffered during the crisis; specifically, house prices fell by 42.8% between the first quarter of 2008 and the third quarter of 2014. Nevertheless, due to the large speculative bubble in the housing market in 2007, this statistic does not indicate anything conclusive about whether homes now are cheap or not.

In theory, this aspect should allow us to clarify the indicator known as the ‘degree of effort’, which measures the percentage of the salary of an average family (i.e. the one that has an equal number of families earning more and less than it) that is spent on mortgage repayments. This effort, according to calculations published by the Bank of Spain, currently amounts to 35%, which is lower than in September 2008 (41%), but much higher than in December 1990 (20.2%).

My interpretation is that for many families, especially for the majority of those who earn less than €2,500 a month, buying a house is just not an option. By contrast, for those that have accumulated significant wealth or earn a relatively good salary, housing is currently a cheap asset.

New builds

In 2015, developers will begin the processes required to build around 65,000 homes. This figure represents an increase of 60% on the previous year (40,000 in 2014), but nonetheless represents less than 10% of the number of new builds that were expected to be built in 2006 (915,745 homes) and does not represent even a quarter of the number of new homes that should be built in any given “normal” year (350,000 homes).

Unlike in previous years, if a plot of land is well located, banks will provide loans for construction on it to finance around 80% of the total cost of the development. Some entities may even begin to partially finance the purchase of plots of land in the best areas of large cities.

Despite this positive outlook, it is likely that none of the next few years will be considered as “normal” years in terms of house construction, since the huge over-supply of homes in many small towns; in quite a few medium-sized towns; and in numerous tourist areas, will hamper the construction of new homes in 2016 and 2017, with fewer than 175,000 being built each year.

In summary, 2015 will see the beginning of a recovery in the housing market and this will result in a period characterised by moderate price rises and significant growth in terms of the number of transactions. Nevertheless, during the coming years, both variables will continue to remain well below the figures achieved in 2006 and 2007.

Therefore, no one should confuse the recovery that is now beginning with the birth of a new bubble.

Original story: Expansión (by Gonzalo Bernardos, Director of the Masters Program in Real Estate Advice and Consulting, at the University of Barcelona)

Translation: Carmel Drake

Homes: New Builds Are Returning To Cataluña

28 January 2015 – Expansión

Cataluña started to construct between 4,300 and 4,500 homes last year, putting an end to seven consecutive years of decline in the number of new homes started.

At a press conference, the President of Barcelona’s Developer Association, Lluís Marsa, explained that since 2006, when 126,000 homes were built, the number of new builds has decreased year after year to a minimum of 3,036 homes in 2013.

Although the increase in the number of new builds since 2013, compared with the estimated closing figures for 2104, reveals a growth rate of 48%, Marsa recalled that in absolute terms, the number is still very modest, and so the sector “is still a long way” from what would be considered normal, he said.

The Developers’ Association estimates that Cataluña should be building between 20,000 and 25,000 new homes each year, but Marsa did not hazard a guess as to how many years it would take for the region to reach that volume, although he did say he was certain that the trend would continue to be positive in 2015.

In any case, builders understand that, gradually, the market is returning to normal, since “the price correction process has now been completed”.

One example of this is the study presented today by the entity, in collaboration with the the Housing Ministry, the Town Hall and Barcelona’s Provincial Council.

The study analysed 815 housing developments in the province of Barcelona, covering 20,165 homes and concluded that only 24.1% of the properties were pending sale, i.e. 4,859 homes.

Although this study analyses the supply of new housing only, and not the stock (of second-hand homes) accumulated in recent years, the data serves to verify that the few developments that are currently being built in Cataluña are being located only in areas with proven demand.

In this way, from the supply of 4,859 homes in the province, 924 are located in the city of Barcelona. It also highlights the current supply in cities such as Terrassa (where 377 new homes are up for sale), Sabadell (250 homes), Badalona (485 homes) and Sant Cugat de Valles (133 homes).

The price per square metre in the province of Barcelona decreased by 7% in 2014 with respect to 2013, and amounts to €3,046.

In contrast, in the city of Barcelona, where there are homes for sale in 166 developments, the average price per square metre is €5,000, down 4.1% from 2013, according to the study.

Nevertheless, there are important variations between districts, since a buyer could expect to pay €9,146 per sqm (13.1% more than in 2013) for a new build in Sarria-Sant Gervasi, versus €3,034 per sqm for one in Sant Andreu.

Meanwhile, Marsa complained about the difficulties that developers face when trying to access credit from banks to start or finish developments, and he pointed out that the restructuring of the banking sector has substantially reduced the number of entities and even more significantly decreased the number banks willing to lend.

The high level of unemployment and the strict requirements that still apply when it comes to applying for mortgages are just two of the other difficulties that individuals face when they want to buy a new home.

Likewise, Marsa said that although during the ‘boom’ years, 50% of all homes sold were new builds, they now barely account for one in three sales, and he forecasts that second-hand housing will continue to gain ground over the next few years.

Original story: Expansión

Translation: Carmel Drake

The Gap In House Prices By City: Falls Of 10% And Rises Of 3% In 2014

27 January 2015 – Expansión

House prices are evolving at different rates, depending on the region or city that you look at. Whilst in 2014, seven provinces and eight capitals recorded decreases of more than 10%, others experienced increases of close to 3%, according to Tinsa’s IMIE Local Market Index.

Overall, prices declined by 4.5% during the last quarter of 2014, compared with a year-on-year decrease of 4.3% in the third quarter and the fall of 8.3% from a year earlier.

“Although average house prices in Spain began to stabilise a little over a year ago and there has been progressive moderation of year-on-year decreases, the statistics show that some areas have started this stabilisation process more slowly and are still experiencing significant decreases”, says the document.

The gap that exists between cities is very noticeable. For example, whilst in Malaga, prices increased by 4.7% during the fourth quarter with respect to the previous year, house prices in the city of Ávila recorded a year-on-year decrease of 11.7%. “Another seven capitals recorded decreases of more than 10% in 2014. Namely, Huelva and Bilbao (both with a decrease of 11.1%), Almería and Badajoz (both with declines of 10.8%), Córdoba (-10.6%), Oviedo* (-10.4%) and Vitoria (-10%)”, adds the document published by the valuation company Tinsa.

By city, the most notable increases were in: Melilla (+2.3%), Palencia (+1.3%), Palma de Mallorca (+0.5%) and Barcelona (+0.2%). Meanwhile, prices stabilised in Burgos (0.0%). Three capitals recorded decreases of less than 2%: León (-0.5%), Murcia (-1%) and Vigo (-1.7%).

Looking back, Ávila is the capital that has experienced the greatest cumulative decrease in prices since 2007, at 56.1%, followed by Zaragoza and Guadalajara capital, where the decline during the crisis years reached 55.1% and 55%, respectively.

By province, the behaviour of prices in Navarra (-14.1%), Lérida (-14%) and Cuenca (-12.7%) contrasts with the increases in Palencia (+3%), Teruel (+2.8%) and Melilla (+2.3%).

In terms of the data by autonomous region, only two regions have experienced notable price increases: Melilla and the Balearic Islands (by 2.3% and 1.5%, respectively). On the other hand, decreases were recorded in Navarra (-14.1%), Asturias (-9.4%), the Canary Islands, Castilla y Leon and Valencia (all -6.8%) and Murcia (-6.5%).

*Provisional data

Original story: Expansión (by M. G. Mayo)

Translation: Carmel Drake