Posted on April 21, 2016 in Property
According to the latest edition of the Real Estate Situation Spain report, published by BBVA Research, employment and household income will stimulate the demand for housing in Spain, and in fact the study estimates that home sales in 2016 will register an increase of around 10%, while building permits for the construction of new homes will grow by 30%, year-on-year.
The change in trend began in 2015, with home sales rising by 8.6% compared to 2014, thanks to the strength of demand and the easier access to credit, and building permits for new housing climbed by 43% compared to 2014. Moreover, in the first month of 2016 alone, home sales transactions increased by 20.4% over the month of December.
With regards to the demand for housing in the medium- and long-term, BBVA Research explained that the improvement in the economy is encouraging less emigration by Spanish nationals and is also an attraction for the arrival of new immigrants, and pointed out that: “If in the long run, the Spanish economy grew at its potential average GDP, immigration will be the element that mitigates the limitations of an ageing population. Forecasts point to positive migration balances in the short-term, which will be a new incentive for residential demand”.
El País reported that prices are not expected to fall further since, according to the entity, they have left behind their minimum values, and by the end of 2015 had already showed improvements, at the aggregate level, in all of Spain’s regions, both for new and second hand housing. In the regions where the prices began rising earlier, such as Madrid and the Balearic Islands, the increases have already exceeded by more than 10% the minimum values of two years ago. The forecast points to a price rise of around 3% on average in 2016 at the national level.
Mortgage financing is playing an important role in the recovery of the Spanish housing market. BBVA Research explained that “credit flows to households for home purchases are evolving at a good pace, and the trend shows that this should continue throughout 2016”, and that “financing to developers has already presented positive flows in 2015 and will gradually strengthen in 2016”.
The report highlights that housing investment is expected to grow in 2016, raising its weight in the economy to levels close to 4.5% of the GDP while, according to the BBVA, the improved housing market, together with the greater dynamism in the land market, will ensure the increase in construction activity.
The only thing that could have any bearing on the investment decisions of households and businesses, say the BBVA, which could ultimately end up affecting both the demand as well as the residential offer, are the existing uncertainties over global growth and those related to economic policies in Spain in the coming years.