The Spanish property market will see continued growth this year as new build property prices, home sales and the number of new mortgage agreements rise, according to a report by the Spanish Property Evaluation Society.
Supported by a rise in demand, new home prices will rise by 5.5% in 2018 accompanied by a 14.1% increase in home sales. When we consider figures published by the Ministry of Public Works we can see an emergence of a recovery within the new-home market; in the first nine months of 2017, permits for new homes totalled 60,695, representing a rise of 26.8%.
The number of new mortgage transactions will not match the growth rate of property sales (14.1%) but will in turn rise by 9.4%, says the Spanish Property Evaluation Society, which in growth terms is still quite impressive.
More importantly, the Society is confident that the market is not overheating through excessive and unrealistic financing from the banks.
CEO of the Society, Juan Fernández-Aceytuno, says: “The relationship between mortgages and transactions – there will be around half a million operations at year-end – remains healthy. We are not talking about a market which is being heated up by the financial sector,” reports The Corner newspaper.
When the Euro was introduced in 1999, interest rates fell to an historic low. Banks, property developers and home buyers alike collectively borrowed. Financing was common place and people took advantage of the market conditions, causing a giant property bubble to form; between 1996 and 2007, property prices in Spain tripled, compared to price rises in the UK. But like with all housing bubbles they are unsustainable and at some point they will burst which is what happened in 2008.
However, the market as improved significantly, the economy has expanded and favourable financing conditions have returned; the 12 month Euribor has maintained the record low of -0.19%, making new mortgage interest rates around 2.2%, according to the Spanish Banking Association. In fact, “in the last few months, 60% of housing transactions have been made possible via a mortgage loan,” Jose Luis Martínez Campuzano, a spokesperson for the association, said recently.
The overall picture emerging from analysts and professionals within the property sector is that although the property recovery will continue to gain momentum and spread further across the country, there is still some way to go before reaching pre-crisis levels.
“The market will continue the recovery started two years ago, although it still has a relatively long stretch ahead to reach the desired cruising speed,” says Juan Fernández-Aceytuno.<< New Build Property Licence Applications Grow over 26%