July 2004 news review

Prices are still rising in most areas of Spain but time-to-sale periods are getting longer and visits per sale are going up. Estate agents are sounding a tad nervous and it looks like the cycle is turning after a long bull run in the Spanish property market. What will happen next? Well of course nobody knows but we are of the opinion that property prices in Spain are likely to fall though not across the board and with considerable differences by regions and types of property.

We also believe that some lean times are exactly what the Spanish property market needs to cure it of the worst aspects of the easy money boom of the immediate past. A business in which anyone can make a bundle of money selling any old rubbish tends to attract the wrong sort of people. Developers and estate agents in for the fast buck are the first to go when the going gets tough so a sputtering market won’t be all bad. It will be interesting to see what the second half of the year brings. Insight will keep you informed.

MARK STUCKLIN

40% of all new Spanish coastal properties bought buy the British according to Barclays Bank

According to a recent study by Barclays Bank 40% of all newly built coastal properties in Spain are purchased by English buyers. Insatiable demand amongst the British for newly built Spanish coastal property has been one of the principal drivers of property price increases in Spain over the last few years. The bank concludes that the boom in Spanish coastal property has in turn been driven by the increases in UK property prices, low European interest rates and the growth of low cost airline travel. The Spanish Government has indicated that it the growth in residential tourism lead by the British is good for the Spanish economy and that it intends to conduct a more in depth study on the subject.

Spanish Property Bubble? OECD warns of the risks of a brutal price correction

In its 6 monthly report on the economic outlook the OECD has warned of property prices in Spain that “property price could increase further and continue to stimulate private consumption, though this would increase the risk of a collapse in prides in the medium term”. In response to this report by the OECD Gregorio Mayayo, President of the Spanish Association of Mortgage Lenders, has stated that he considers a sharp drop in price impossible in the medium term.

Spanish mortgage lending reaches new heights

Spanish mortgage lending has reached 62.97% of Spanish GDP, up from 47.87% in 2001 and 25% in 1997. On the other hand the level of defaults on Spanish mortgages has reached historic lows in the same period.

Spain builds more new properties than 4 leading European economies put together

According to Sigfrido Herráez, the housing executive of the Municipal authority of Madrid, the number of new properties built in Spain during 2003 was in the region of 700,000. This means that Spain built more new properties in 2003 than the UK, Germany, France and Italy combined.

Land prices on the Spanish coast rise dramatically in 2 years

According to the Forum of Real Estate Consultants the boom in second homes on the Spanish coast has resulted in a dramatic increase in the price of land between 2002 and the end of the first quarter of 2004. In parts of Valencia the increase was 42%, in Murcia 52% and in Estepona on the Costa del Sol land prices per square metre rose 34% in the previous year alone.

Spanish developers expect residential tourism to move inland

In the 4th edition of the Marbella Meeting Point it is claimed that the supply of coastal development land is drying up and in future promoters will have to look to the interior for land for residential development projects targeted towards second home buyers. We are told to expect increasingly large urbanisations to be built further and further away from the coast.

Average property prices increase to 6.7 times gross average annual earnings

According to the financial sector magazine Cuadernos de Información Económica the average price of a 90m2 apartment in Spain has risen to 6.7 times the average gross annual income, up from 4.7 in 1997. In Madrid, Barcelona, The Basque Country and The Balearics the average price for a 90m2 apartment is more than 8 times the gross average annual income.

Property prices over 6 years higher in Spain than in any other Euro zone country

According to a new report published by the economic consultancy FUNCAS and authored by its Director Julio Rodríguez, average property prices in Spain rose at an annual rate of 10.9% between 1998 and 2002 whilst the European average was 4.5%. After Spain the countries with the greatest increases were: The Netherlands (9.1%), Greece (8.6%), Ireland (7.6%), France (6.5%), Italy (5.4%) and Luxembourg (5.1%). On the other hand property prices fell over the same period at an annual rate of 0.6% in Germany and 3.4% in Austria. Since 1980 the average annual increase in Spanish property prices has been 11%.

BBVA reports signs of a softening in the demand for property

The Spanish bank BBVA reports early signs that demand for property in Spain could be getting weaker. The average time to sell coastal property has increased to 26 months and in cities to 12 to 14 months, both of which represent an increase in time to sell of 2 to 3 months. Furthermore the bank reports a decrease in mortgage enquiries from one every 3 minutes to one every 30 minutes.

Smaller apartments to be built in Barcelona

Due to a decrease in size in the average Spanish family from 3.6 to 2.5 people over the last 30 years and with a view to reducing the price of apartments in Barcelona the municipal authorities have modified building regulations to allow the construction of smaller apartments. The idea is to reduce the legal minimum size of apartments that can be built and thus achieve an increase of 25% in the number of apartments built per hectare of building land.

The Autonomous Region of Valencia has more properties than Madrid despite a smaller population

The Autonomous Region of Valencia has the 3rd largest number of properties in Spain behind Andalusia and Catalonia but in front of Madrid, despite having a smaller population than Madrid. There are now 2.5 million properties in the region, of which 40% are second homes or are empty (for sale, for rent or abandoned).

Prices rises for coastal property in 2003 higher than for any other type of property

According to the organisers of the Marbella Meeting Point trade fair the price of coastal property in Spain rose by 16.4%, beating other types of property, which only rose by 15.8%. One of the main drivers of this above average rise in the price of coastal property was the demand for second homes which now account for 18% of all properties in Spain (3.8 million properties as compared to 22 million primary residencies). Experts also believe that 180,000 second homes will be sold a year in Spain up to the year 2008, of which more than 50% are expected to be sold to foreign buyers. The British are the biggest group of foreign buyers (52%) followed by the Germans (22%), the French (8%), Italians (6%), Belgians (3%) and Scandinavians (6%).

© Mark Stucklin (Spanish Property Insight)

 

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.