Valuation wonks warn of weak demand for years to come

spanish property sales august 2015

Latest sales figures (INE) show the market still far below normal levels for a country the size of Spain

The Spanish housing market may have stopped contracting in terms of price and demand, but a recovery across the board will be hampered by weak demand for years, concludes the latest half-year report from the Valuations Observatory (Observatorio de la Valoración), run by the Spanish Association of Value Analysis (AEV).

Average house prices might have stopped falling, but they show little sign of decisive recovery, despite growing GDP and employment, explains the report, which incorporates opinions from valuation professionals and other experts in the real estate sector.

Prices are rising in some specific areas thanks to local market conditions, but those areas are not representative of the overall market. 95% of the experts surveyed say demand has not recovered in sufficient volume to get prices to respond at a national level.

One reason why better economic figures are not translating into rising house sales and prices is because the new jobs being created today are low paid and precarious, and don’t give young adults the economic security they need to commit to buying a home, and taking on a mortgage.

MORTGAGE LENDING NOT DECISIVE

In contrast to some market watchers, who claim increased mortgage lending will drive up house prices, the Observatory argues it will not be decisive, as lending criteria are still so stringent that only the most creditworthy borrowers can get a mortgage, and even they need savings to pay the high transaction costs.

Upcoming elections are also making people wait and see, but more serious is a new culture of not aspiring to buy a home taking root in young adults, disincentivised by precarious, low paid jobs and high unemployment.

The report points out that, despite double digit growth in recent months, housing starts are still near record lows, and will not recover to normal levels for at least two or three years, that is if the glut doesn’t cover demand for longer than that.

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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.