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Update on the Spanish property market

28 Aug
2017

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BBVA released its last update on the Spanish residential market

 

The Spanish economy is more stronger than expected

The good news is that the Spanish economy is growing much more than expected three months ago. In fact, BBVA Research has just announced a rise of its forecasts for the Spanish economic growth to 3.3% in 2017 and 2.8% in 2018. This should be compared to growth forecast from the EU at 2.3% and 2.1% respectively. Follow the link to read our “Must see charts on Spain” for more on that.

The direct impact according to BBVA are:

  • the creation of more than one million jobs in Spain in those two years,
  • a higher consumer confidence

 

The Spanish Residential market is strong

Consequently, the real estate sector is benefiting from this positive environment: it will be responsible for about 10% of the GDP growth rate in the next two years.

As you can see from our table of the “National market activity in Spain“, the number of building permits up to March 2017 is 67000, much more than the 56000 of last year.

Financing remains favourable

Another specific favourable condition to the real estate sector remains the low mortgage rates: under 2.3%. Of course, long-term rates are very low at 1.6% and short-term rates, Euribor 1 Year, are negative. At the same time, as you will read it in our tables, the gross yield on rent estimated by the central bank of Spain at end 2017 is 4.3%. Check the current market conditions on our updated tables dedicated to real estate investment. Demand remains strong from both Spaniards and foreigners as you can see on our chart: the number of properties purchased in Spain was of 520.000 for the last year ended in March 2017. The highest level has seen since 2008!

 

Real estate transactions in Spain are at highest level since 2008

Spaniards and Foreigners are very active, both are buying the most since 2008, check this chart:

Yearly data. Source: Ministerio de Fomento

As you can see on this table, the number of transactions is increasing strongly to 520.000 transactions vs 420.000 at the same time last year. Foreigners bought 14% of the properties sold during the last year. English are less active due to the Brexit uncertainty but other countries like Italy and Belgium are more active.

Check on this chart the 12-month rolling buying activity of real estate by foreigners in Spain:

Which nationalities are the biggest buyers in Q1 2017?

  • United Kingdom 14.5%,
  • France 9.6%,
  • Germany 7.7%,
  • Belgium 6.9%
  • check our infographic on that (data Q3 2016).

 

Who are the foreigners buying real estate in spain? Infographic

 

Not homogeneous market

Although the market is strong, on average, as you can see on our map on our homepage: Madrid, the Mediterranean cities and the islands are leading the way but at the same time other regions are showing negative price evolution on a yearly basis.

 

The pick up of sales drives the prices

In this market environment, BVBA foresees a 10% growth of transactions in 2017 and a rise of real estate prices of 3% as the new build properties are coming much slower to the market.

 

Rental prices are rising fast

BBVA highlights as well the significant rise in residential rental prices in its report. They give a very interesting statistic from the INE:

The number of households being on rental rose from 9.6% in 2001 to 16.3% in 2016 while those being owner of their homes decreased from 84.7% to 77.1% during the same period. This ownership rate remains one of the highest of any European country. Countries like Germany, United Kingdom are more in the 65% range.

The price correction experienced by the real estate sector and the low financing costs have significantly cheapened mortgage payments related to rent.

Have a look at where we come from:

You will find this charts as the first of “our 10 reasons why you should buy real estate in Spain“.

 

What are the expectations?

BBVA concludes that the expectations are positive:

  • GDP growth expected to be at 3.3%
  • 1 million job creation of jobs to move the unemployment rate further down
  • the number of transactions expected in 2017 is +10% vs 2016, driven by local and foreign demand
  • Low-interest environment
  • New building activity is back in growth territory (20% more visas)
  • Reduced inventory => impact of demand on prices
  • Prices expected to rise by 3% per year
  • Strong growth of rental prices

 

As a conclusion:

the strong economic conditions for the coming quarters should ensure a good tone for the real estate market.

Have a look at the full report in Spanish here.

Looking for an expert in Spain? Ask us directly!

 

 

 

 

 

Stéphane 

Senior analyst and strategist at HTBIS

Check the full HTBIS team here

 

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