Fotocasa: Rental Prices Soar by 11%+ in Madrid, Valencia & Málaga

20 November 2018 – Expansión

The rental market has reached cruising speed faster than usual in the main Spanish capitals. The new normal has become double-digit increases, which have been accumulating on a sustained basis now for several months.

Madrid, Valencia and Málaga are leading the trend. In Madrid, rental prices soared by 13.2% in October in YoY terms; meanwhile, in Valencia, they leapt by 13%; and in Málaga, they rose by 11.3%. They are closely followed by Santa Cruz de Tenerife, where rental prices increased by 10.2% in YoY terms. These rises contrast with the overall moderate increase in rental prices in Spain, which were up by just 2.7% on average in October, according to the latest data published by the online portal Fotocasa.

“The average price of rentals in Spain are continuing to rise, but at a much lower rate than they were a year ago, when we were seeing double-digit YoY increases” explains Beatriz Toribio, Head of Research at Fotocasa.

In fact, the 2.7% increase is so heavily influenced by the large capitals that if we eliminate the increases in Madrid, Valencia and Málaga, the market would register a decrease of 3.2%.

Even so, the data for October constitutes a recovery, after a YoY decrease of 4.2% in the third quarter, the most acute reduction since the third quarter of 2007.

The strong tensions in prices in the main capitals are striking”, said Toribio, “above all, taking into account that a large part of them mean that we have now exceeded the maximum prices recorded in 2007 and 2008”.

This sustained increase in prices in the rental market is mainly explained by strong demand. On the one hand, the increase in house (sales) prices in the major cities means that the proportion of people who are ending up renting is increasing – a change in trend that is also being influenced by the preferences of young people to rent. On the other hand, the dynamism of tourism in these cities, together with the appearance of new accommodation platforms, such as Airbnb, in an environment characterised by low interest rates, have made rental an attractive option for investors. That, taking into account the scarce supply available in cities such as Madrid, is pushing prices up.

By contrast, rental prices are falling in cities with less economic dynamism, many of which are located inland, with acute problems in terms of depopulation and ageing demographics. Such is the case of Huesca, where prices fell by 25.7% in October, followed by Vitoria, with a decrease of 23.1% and Soria (-21.5%).

Although the rental market is more elastic than the purchase market against possible macroeconomic shocks, a significant slowdown in economic growth could have a negative impact on the real estate market.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake

Activity Abounds In Spain’s Second-Hand Home Market

13 September 2017 – El Confidencial

Second-hand homes are the undisputed star of the Spanish residential market. Despite the fact that the volume of transactions involving second-hand homes plummeted following the burst of the real estate bubble, they now account for 8 of every 10 sales closed in Spain. In addition, more second-hand homes were sold during the first seven months of this year than between January and July 2008. The renewed appetite for these types of homes has resulted in an upwards rally in prices. In fact, over the last year, prices registered their highest increase for the last 10 years.

There are several factors behind this furore. Even though the construction of new properties has grown in recent months, it is not sufficiently voluminous to meet demand, which, having overcome the crisis and after emerging from its lethargy, now wants to purchase. Moreover, the gap in prices between both types of homes (new and second-hand) has led many buyers – including investors – to opt for second-hand homes.

According to data from the notaries, the square metre of a new build home is €569/m2 more expensive, on average, than of a second-hand dwelling. At the national level in June, the average price of a second-hand home amounted to €1,478/m2, whereas that of a new build residence stood at €2,047/m2 (…).

The sale of second-hand homes hit rock bottom in 2012 when 160,000 units were sold, compared with almost 450,000 in 2007. Nevertheless, with the exception of 2009 and 2010, more second-hand homes are always sold than new builds. In 2008, the first year after the bubble burst, the figures about equal. But, a definitive gap emerged again in 2015, to the extent that last year, 8 out of every 10 homes sold in Spain were second-hand.

Prices rise by 5% in one year

This buyer appetite has had an immediate impact on prices. During the month of August, prices rose by 4.9%, the greatest YoY increase in the last 10 years. As such, the average price per square metre now amounts to €1,708/m2, according to data from Fotocasa (…).

Once again, the behaviour has been very irregular throughout the length and breadth of Spain. There were significant increases in the Balearic Islands (16.2%) and Cataluña (11.6%), the only autonomous regions that saw prices rise by more than 10%. They were followed by price rises in the Canary Islands (5.6%), Andalucía (5.4%), Castilla-La Mancha (4.7%), Madrid (4.2%) and Extremadura (3%).

Nevertheless, we should not forget that the decrease in house prices from their peaks is still very significant across the vast majority of the country. The average price of second-hand homes in Spain has recorded a cumulative decrease of 42.2% since the peak of April 2007 (€2,952/m2). In this sense, 11 autonomous regions still record cumulative decreases of more than 40% compared to the maximum prices recorded nine years ago. They are led by La Rioja (-56.8%), and followed by Navarra (-53.8%), Aragón (-51.4%), Castilla-La Mancha (-51.3%), Murcia (-49.4%), Asturias (-46.8%), the Community of Valencia (-45.7%), Cantabria (-43.1%), Cataluña (-42.1%), Madrid (-40.9%) and Extremadura (-40.6%).

“Meanwhile, the housing market is registering levels of activity that we have not seen for 10 years, as a result of the improvement in the economy and employment, as well as of a return of confidence to the sector (…)”, explains Beatriz Toribio, Head of Research at Fotocasa. Nevertheless, Toribio points out that “despite the chunky growth in the number of mortgages, transactions and prices, the sector is still at much lower levels than during the golden years” (…).

General increases in Madrid and Barcelona

Madrid and Barcelona, two of the most active markets from a real estate perspective are by no means unaffected by the rise in the prices of second-hand properties. Prices rose in 19 of the Spanish capital’s 21 districts in August (…). In terms of the most expensive and cheapest districts, Salamanca is the most expensive for buying a home, with a price of €4,923/m2. It is followed by Chamberí (€4,681/m2), Centro (€4,453/m2) and Chamartín (€4,448 /m2). At the opposite end of the spectrum, Villaverde is the most affordable district for buying a second-hand home, with an average price of €1,518/m2.

Meanwhile, in Barcelona, house prices rose in seven of the 10 districts analysed by Fotocasa in August (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Fotocasa: Rental Home Prices Rose By 9.5% YoY In Q1

28 April 2017 – El Mundo

The average price of rental housing in Spain rose by 9.5% YoY and by 5.9% QoQ during the first quarter of 2017, according to the Real Estate Index compiled by the online portal Fotocasa. In this way, the average rental home cost per square metre amounted to €7.93/m2 as at March 2017.

This quarterly increase in rental home prices was in line with the trend observed in 2016. In the absence of official statistics, the index from Fotocasa corroborates the anecdotal evidence being seen on the street.

“Rental prices are rising significantly because demand is much higher than supply, above all, in those areas with the largest volumes of economic, tourist and demographic activity. Month after month, in regions such as Cataluña, Madrid and the Balearic Islands, we are seeing how the distance between the peak prices recorded in 2007 and 2008 is decreasing, and in some cities in those areas, the price per square metre has now reached the pre-crisis maximum, such as in the case of Barcelona”, explained Beatriz Toribio, Head of Research at Fotocasa.

In fact, the increase recorded during the first quarter of 2017 is the most markedsince Q1 2007, according to the Real Estate Index, when prices rose by 4.9%. Since then, the quarterly rental price has done nothing but decrease, with some exceptions in one-off quarters in 2011 and 2014. In 2015, the quarterly rental price began to recover, with increases of 2.8% and 1.5% in the first and second quarters, respectively, trends that continued in 2016, with the exception of Q3 2016, when prices fell by 2%.

At the inter-annual level, rental prices rose by 9.5%, the most marked increase in the history of the Real Estate Index, which has been compiled since January 2006. Moreover, during Q1 2017, rental prices rose in 14 autonomous regions at the quarterly level and in every region at the annual level. (…).

Evolution by autonomous region and province

Since reaching their maximum price in May 2007 (of €10.12/m2), rental home prices have recorded a cumulative decrease of -21.7%. In this regard, only three autonomous regions have recorded cumulative decreases of more than 30% since they peaked five years ago. In this way, Aragón is the autonomous region where rental prices have fallen by the most (-38.7%), followed by Castilla-La Mancha (-34.1%) and Cantabria (-31.3%).

During the first quarter of 2017, rental price increases were recorded in 14 autonomous regions, with the rises ranging from 5.4% in Cataluña to 0.4% in Castilla y León. Regarding the evolution by province, rental price increases were recorded in 36 provinces with respect to December 2016, with the rises ranging from 8.6% in Guadalajara to 0.2% in Alicante. By contrast, rental prices decreased in 14 provinces with the reductions ranging from -0.2% in Toledo to -3.6% in Ávila. (…).

By municipality, the town with the highest rental price was Barcelona, at €15.15/m2/month, followed by Eivissa (€14.60/m2/month), Sant Cugat del Vallès (€13.41/m2/month), Sitges (€12.85 /m2/month) and Castelldefels (€12.85/m2/month).

Original story: El Mundo

Translation: Carmel Drake

“Lifestyle Investors” May Be Essential For The RE Recovery

9 July 2015 – El Mundo

The international estate agency Lucas Fox has published a report about the Spanish real estate sector, which illustrates the changes that the market has experienced since 2005, with prices peaking in 2007 and subsequently dropping until the middle of 2013. During 2014, the sector experienced a period of moderate stabilisation, before the current recovery kicked in with a stronger emphasis on high-quality properties and a long-term view of investment linked to lifestyle.

According to the agency, prices peaked in 2007, and remained stable in popular areas, such as the Costa Brava and Sitges, where they peaked in mid-2008. House prices then decreased by up to 40% in most areas, but less significant declines were observed in the “lifestyle markets” of Ibiza and the most sought-after areas of Marbella.

Meanwhile, prices experienced a steady decrease in Barcelona until Q3 2013, when the sector began to recover gradually to reach €3,263/m2 by the beginning of 2015.

On the other hand, Madrid and Valencia followed a similar pattern, but with lower values. The report prepared by the estate agency shows that both cities still have to maintain their quarterly growth rates in 2015. According to Alexander Vaughan, “over the last two years, thanks to the growing confidence in the recovery of the Spanish economy and in the Euro, in general, we have seen a revival in the market, with price adjustments at the global level”. Moreover, he adds that “Spain is as charming as ever and we are seeing a huge boom in the number of “lifestyle investors”.

Since mid-2013, the number of transactions has increased continuously in all of the regions served by the estate agency. This, the agency explains, indicates greater confidence in the market and more recognition from buyers. Nevertheless, there is still a long way to go before sales volumes return to their 2007 levels.

Original story: El Mundo

Translation: Carmel Drake

Tinsa: House Prices Decreased By 3.67% In February

12 March 2015 – 20 Minutos

House prices have recorded an average cumulative decrease of 42.6% since the end of 2007.

Homes on the Mediterranean Coast have lost more than half their value.

Prices may bottom out in the next few months.

In areas with low demand and significant stock, further price decreases are expected.

A change in the real estate cycle has begun; but since it is a cycle, the changes will not happen overnight. In this way, although prices are now rising in some areas of Spain, in many others, they are still declining and those areas are, for the moment, in the majority.

According to data published by Tinsa, house prices fell by 3.67% in February with respect to the same month in 2014. On the Mediterranean Coast, homes have lost more than half of their value due to the crisis, but prices may bottom out in the next few months.

With respect to the peak prices recorded at the end of 2007, house prices have recorded a cumulative decrease of 42.6%, according to the index prepared by Tinsa. On the Mediterranean Coast, the decrease has been much more pronounced, according to the appraisal company, which highlights that in this region, the cumulative decrease during the crisis has amounted to 51.1%.

In February, house prices decreased by 4.9% and 4.4%, respectively, in large cities and metropolitan areas. Since the peak of the cycle, capitals and large cities have recorded a cumulative decrease of 46.5%, whilst metropolitan areas have experienced a cumulative reduction of 45.5%.

By contrast, the Balearic Islands and Canary Islands recorded a year-on-year increase of 0.7% (in Feburary), whilst on the Mediterranean Coast, the decrease was 4.7%. From the peak levels recorded before the crisis, house prices on the islands have decreased by 32.4%.

In the towns included within “other municipalities”, the decrease in February with respect to the same month in 2014 was 2.1% and since the peak, was 36.1%.

Optimistic forecasts?

Tinsa notes that average house prices began a stabilisation process in 2013, characterised by a moderation in the rate of decline in average prices. “If the optimistic forecasts that various official bodies are predicting for economic growth and employment are fulfilled, then average prices in Spain may bottom out in the next few months”, says the company.

However, it warns that this forecast does not exclude the fact that in localised markets, where demand is particularly weak and there are significant levels of stock, (downwards) adjustments are still expected and there may yet be significant year-on-year decreases.

Original story: 20 Minutos

Translation: Carmel Drake

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