S&P: House Prices will Rise in Spain by More than in Other Major Eurozone Economies

24 February 2019 – La Vanguardia

House prices in Spain are going to continue rising for at least the next three years, although the rate of growth will slow down as the economy loses momentum and the European Central Bank (ECB)’s monetary policy normalises, according to forecasts from the agency S&P Global Ratings, which points to larger rises in the Spanish real estate market than in the other major Eurozone economies.

According to the ratings agency, house prices in Spain, which registered an estimated nominal rise of 6.6% in 2018, will increase by 4.5% this year, by 3.4% next year and by 3% a year later, although S&P warns that if prices continue to grow by more than the expected incomes of households, then access to housing will continue to worsen over the coming years.

In this sense, as a result of the deep fall in real estate prices in Spain during the crisis, access to housing is still at better levels now than it was before the burst of the real estate bubble, with a ratio of prices with respect to income that is 29% lower than the maximums observed in 2007, albeit 25% higher than the long-term average.

Similarly, S&P considers that the low interest rates applied to mortgage loans for the acquisition of homes will continue to serve to support access to housing in Spain, indicating that, given the rise in inflation between May and October 2018, real rates became negative.

In addition to Spain, the agency forecasts that real estate price will continue to rise across the Eurozone, although at a lower rate than in previous years, with the exception of Italy, where an increase of 0.5% is expected this year, which will accelerate to 1.3% in 2020 and to 1.6% in 2021.

In the case of Germany, prices will rise by 3.9% in 2019, although those increases will moderate to 3.3% and 3% in the subsequent two years, respectively, whilst in France, house prices are predicted to rise by 2.4% this year and by 2% in the following two years (…).

Original story: La Vanguardia 

Translation: Carmel Drake

Hotels Suffer from the First Decrease in Overnight Stays since 2012

24 January 2019 – Expansión

The record number of tourists registered in 2018 has not removed the bitter taste from the mouths of Spanish hoteliers, who are starting to suffer from symptoms that the sector is worn out. In 2018, Spanish hotels recorded the first decrease in the number of overnight stays in six years. A moderate decrease, of –0.1%, according to data from INE, but one that has not been seen since 2012, when Spain was in the midst of the financial crisis.

Spain is receiving more tourists than ever, and they are increasing their spending year on year, but they are also gradually reducing their average stay, and some of the demand is opting for alternative destinations, such as Turkey, which are competing on price, which is eroding the margins of many hotels at home (…).

According to data from Exceltur, Spain lost 21 million overnight stays in 2018, due to a decrease in the average stay. The boom in low-cost airlines, amongst other factors in the sector, has favoured the democratisation of tourism. Increasingly more people are travelling, but they are doing so for shorter periods. Whilst in 2008, the average stay was 9.4 days, it is now 7.4 days.

That change can be observed most easily amongst overseas tourists, who account for 65.8% of overnight stays and who decreased the number of nights spent in Spain by -0.4%, whereas domestic tourists increased their overnight stays by +0.4%.

The change in trend is being observed primarily in the traditional beach and sun markets, and in the most important months for the sector, in the height of the summer. In the Canary Islands, the primary destination for international tourists, accounting for almost one third of all overnight stays, visits by foreigners decreased by 3.6%(…).

According to explanations provided recently by the Head of Research at Exceltur, Óscar Perelli, these decreases reflect “the recovery of competitor countries”. Hotels, especially those on the beach, are being affected by competition in terms of prices from countries such as Turkey, Egypt and Tunisia. Those markets have recovered around 12 million tourists in recent years and they are still 20% below the levels they reached before their own crises (…).

Travellers from the United Kingdom and Germany account for 46% of all of the overnight stays made by non-resident visitors, and yet, there was a -0.9% decrease last year in the case of British tourists.

As a result, many hotels are trying to compete through promotional packages and cost reduction policies, and so prices barely increased in 2018. The Index of Hotel Prices from INE reflects a 1.5% increase in hotel tariffs, barely three decimal points above inflation for the year, making it the lowest rise in prices since 2013.

In terms of tourists who increased their hotel stays by the most, those who have to travel long distances, including visitors from the US (6.1%) are also the travellers who spend the most (€113 per tourist per day, compared with €98/tourist/day for those visiting from traditional markets), and so representatives in the sector recommend focusing promotional strategies to attract tourists from those countries.

Original story: Expansión (by Inma Benedito)

Translation: Carmel Drake

Housing CPI Skyrockets, Rising 3.7%, the Highest Figure in the Last 14 Months

14 August 2018

Broad-based inflation also rose by 2.3% for the Spanish economy as a whole, the highest level since April 2017.

The Consumer Price Index (Housing) shot up in July. Rental expenses and provisions increased by 3.7% in relation to the same month in 2017, an inter-monthly increase of 1.1% and the highest increase since May last year (5.4%).

According to data from the National Institute of Statistics (INE), the CPI – Housing started the year in retreat, with a year-on-year decrease of 2% in January, rising at rates of between 0.8% and 1.4% in the following three months.

However, in the last three months, housing inflation has exceeded the broad-based CPI, reaching over 2%, levels that last seen in November of last year.

As for the broad-based CPI for the Spanish economy, the indicator decreased by 0.7% in July compared to the previous month and decreased by one-tenth of its interannual rate, to 2.2%, according to the data published by the INE.

Original Story: EjePrime

Translation: Richard Turner


ACR: Residential Construction Costs Rose by 12.1% YoY in 2017

25 January 2018 – Cinco Días

The rate of inflation in the house building sector is causing concern. That has been reflected in recent months not only by the trade association but also by companies in the sector and other entities such as Sociedad de Tasación. On Thursday, some of the first data evidencing this phenomenon was published. Over the last year, to December 2017, the cost of residential construction rose by 12.1%. That is reflected in the recently created Index of Direct Construction Costs, prepared by the Navarran construction group ACR.

The index also shows that the increase has amounted to 17.5% over the last two years. The figure indicates that in 2017, these costs grew dramatically and that they accelerated. “Costs mainly grow for two reasons, a shortage of labour and a lack of manufacturing capacity in trades such as structures and façades”, said Michel Elizalde, CEO of the ACR Group.

The company has obtained this data from its construction sites in Madrid and is convinced that the inflationary figures can be extrapolated to other companies in the sector and to other regions such as Barcelona, Málaga, País Vasco and Zaragoza, where the housing market has reactivated.

Nevertheless, at the level of the general Spanish market, that rise is not being reflected in the most active areas. The statistics from the Ministry of Development indicate that in October 2017 (latest available figures), the cost of residential constructions had risen by 5.5 points since 2010. Sources at ACR report that the minimums were recorded in 2012 and 2013 after prices had been contained and have only been starting to rise since 2016.

“There is more tension when it comes to labour costs”, acknowledged Elizalde, basically due to the lack of qualified professionals in certain trades such as framers and rebar workers, according to ACR, as well as those involved with bricklaying, experts in partition walls, façades, flooring, tiling and carpenters. That causes teams and subcontractors to change construction site in the middle of house building projects if another company offers to pay them more.

“Contractors are suffering from this situation,” said the Head of ACR, given that property developers are contracting turnkey projects with fixed costs and the construction companies are, in turn, those who are suffering from a lack of professionals.

“There is a shortage of trained professionals because many of those who left during the crisis are not coming back or have now retired”, said the director.

In YoY terms, prices have increased by the most in glass making (25.2%), façades (15.4%), earth moving (15.6%) and structures (13.4%).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

Ministry of Development: House Prices Rose By 2.7% In Q3

23 November 2017 – ABC

The average price of private housing rose to €1,540/m2 during the third quarter of the year, up by 2.7% compared to the same period in 2016 and by 0.7% compared to the second quarter, according to data from the Ministry of Development.

This is the tenth consecutive quarter of annual house price increases in nominal terms. The increase of 2.7% is the highest since the start of the recovery. In real terms, after discounting inflation, private house prices rose by 1% in YoY terms in the third quarter. Prices have recovered by 5.8% since the minimums recorded during the third quarter of 2014.

Nevertheless, the average price in Q3 was still 26.7% below the maximum peaks reached during the first quarter of 2008.

House prices recorded twenty-six consecutive quarters of decreases in YoY terms from the end of 2008. In real terms, current prices are still 35.5% lower than the peaks of 2008.

The average price of social housing properties amounted to €1,130.80/m2 during the third quarter, up by 2% compared to the same period in 2016.

In QoQ terms, social housing prices fell by 0.3% compared to the second quarter.

Original story: ABC 

Translation: Carmel Drake

Why Are Spain’s House Price Rises Concentrated Is So Few Regions?

11 September 2017 – Cinco Días

It is becoming increasingly more apparent, with the statistics on the table, that when we talk about the recovery of the real estate market, in reality, we are referring to just a few markets. The Index of House Prices (IPV) published on Friday by Spain’s National Institute of Statistics (INE) shows this very clearly.

The study, which INE prepared using data provided by the notaries, concludes that house prices rose by 5.6% on average during the second quarter of this year compared to the same period last year. In this way, in isolation, it seems that rather than recovering, the market is heading directly towards another bubble, given that the aforementioned figure is no more and no less than three and a half times the level of inflation (which amounted to 1.6% in August). Nevertheless, an analysis of the figure by regions shows that the gulf between what is happening in one region and what is happening in others is persisting and even intensifying in some cases.

Madrid led the ranking of real estate price rises for another quarter. Homes in the region rose by 10.9% per annum on average during Q2, compared to 10.6% p.a. the previous period. In this way, price increases consolidated and even accelerated by three decimal points, the same increased recorded by the national average, which rose from 5.3% in Q1 to 5.6% in Q2.

The second region with the highest price rises was again Cataluña, where the recovery accelerated by even more (five decimal points) up from 8.8% to 9.3%. And the podium of the top three regions where house prices are rising the fastest was completed by the Balearic Islands, where the increase rose by almost two percentage points to 7.4% in Q2, up from 5.5% in Q1.

Beyond those three autonomous regions (…), the truth is that the price rises are proving a lot more moderate. In fourth place is País Vasco, where prices rose by 4.5% on average in Q2, followed by Cantabria, at 4.1%.

These increases contrast significantly with, for example, the 2.4% recorded in Andalucía, a region with a high proportion of tourist housing, and the Community of Valencia, where house prices rose just above the rate of inflation, by 1.8% p.a. in Q2, i.e. by one tenth less than the previous quarter.

In Castilla-La Mancha, Extremadura and Murcia, house prices rose by less than 1%. And Asturias was the only autonomous region where house prices decreased, by 0.3%, in Q2, after rising by 1.4% in the previous quarter.

How come the national average is 5.6% then? Essentially, due to the greater weight that the transactions undertaken in those regions that have the most expensive homes.

New builds

Another phenomenon that INE highlighted in its explanatory note that accompanied the data is the different behaviour in terms of the prices of new homes and second-hand properties. The first saw their prices increase by one percentage point less (4.4% in Q2 compared to 5.5% in Q1). The reason for that deceleration is that increasingly more developments are being started in places where companies are detecting that more demand exists. And since the supply is increasing, so the price rises are, logically, more moderate.

By contrast, in the case of second-hand homes, the recovery in prices remained above 5% p.a. for another quarter and accelerated to increase by 5.8% on average in Q2 compared to 5.3% in Q1.

In this way, house prices have now recorded thirteen consecutive quarters of increases, in other words, they have been rising for just over three years. However, according to various studies, they are still more than 40% below the maximum prices recorded between the end of 2007 and the beginning of 2008. (…).

In terms of the future, Moody’s estimated recently that house prices will continue to rise by around 5% p.a. until 2019 (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

New Tax Rules Increase IBI Charge In 11 Provincial Capitals From 2017

5 December 2016 – Expansión

Property owners in some of Spain’s largest cities will start the new year with a tax blow. The Royal Decree that was approved by the Council of Ministers on Friday and published in the BOE on Saturday contains…a measure that will significantly increase the Tax on Real Estate Assets (IBI) in hundreds of towns, including in eleven provincial capitals, specifically: Valencia, Alicante, Badajoz, Cádiz, Córdoba, Teruel, Granada, Jaén, Huelva, Tarragona and Huesca.

This tax will accrue from 1 January 2017 and will depend on the cadastral values, given that they form the taxable base for the IBI calculation. The Tax Authorities have approved updates to these values in 2,452 towns, i.e. in almost one third of the towns in Spain.

The Town Halls set the cadastral values on the basis of value proposals performed by the Catastro. However, all of the property values (homes, garages, premises, offices, hotels, etc) affected by proposals made prior to 2004 will be revised upwards, with coefficients ranging from 1.03 to 1.08, according to the Royal Decree from the Tax Authorities.

For example, in Córdoba, whose valuations were last reviewed in 1995, the update will be 1.06. Thus, if a home had a cadastral value of €100,000 in 2016, it will have a cadastral value of €106,000 in 2017. The IBI payments will increase without the need to raise the tax rate. In Valencia, whose valuations were last reviewed in 1998, the coefficient will be 1.04.

Most of the towns that requested the review, which seeks to reflect property values to 50% of their market price, did so to increase their coefficients and, ultimately, to increase the IBI raised without changing the tax rate . Many of the affected towns have not reviewed their values since the real estate boom, or even earlier. In fact, numerous town halls have not updated their valuations since the 1980s.

The valuations last performed between 2005 and 2011 will be updated with a coefficient of less than one, of between 0.87 and 0.92. They include four provincial capitals: Almería, Santander, Lleida and Ávila.

The reason for the measure

(…) For the avoidance of doubt, the Royal Decree explains that the measure “is necessary given that it contributes to strengthening municipal financing, tax consolidation and budgetary stability for local entities”. In other words, it is a necessary measure to balance the deficit. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Ministry Of Development: House Prices Rose By 1.8% In 2015

26 February 2016 – Expansión

The residential market is continuing to show signs of stabilisation and is now bracing itself, gradually, for an undeniable improvement. To this end, we have now received official confirmation of the real estate recovery. The news was announced yesterday by the Ministry of Development: house prices increased by 1.8% last year.

It is the first YoY increase in house prices for eight years and the third consecutive quarter of positive growth. The average appraisal value per square metre of free (unsubsidised) homes amounted to €1,490.10/m2 (in Q4 2015), which represents a positive QoQ variation of 1.0%. In real terms, excluding inflation, (unsubsidised) house prices increased by 2.1%.

The average home now costs 29.1% less than in the first quarter of 2008, at the peak of the real estate bubble. On the other hand, compared with the minimums recorded in the third quarter of 2014, prices have now recovered by 2.4%. New homes (those that are less than five years old, according to the Ministry, led by Ana Pastor) became 1.1% more expensive last year, taking their average value to €1,738/m2, whilst second-hand homes decreased in value by 1.8%, to €1,481/m2.

By region

The appraisal value of residential properties is now on the increase in 14 regions, in particular, in the Balearic Islands (5.4%), Madrid (3.4%), La Rioja (3.2%), Cataluña (3.0%), the Canary Islands (3.0%), Castilla y León (2.6%) and Navarra (2.2%). By contrast, Cantabria (-4.0%), País Vasco (-1.3%) and Murcia (-0.1%) are still recording decreases. The highest house prices in towns with more than 25,000 inhabitants were recorded in San Sebastián (€3,133/m2), Getxo (€2,699/m2), Barcelona (€2,553/m2), Ibiza (€2,513/m2), Sant Cugat del Vallès (€2,505/m2), Madrid (€2,504/m2) and Pozuelo de Alarcón (€2,490/m2).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake