Bullish headlines from the real estate market need to be understood in context, cautions one of the leading estate agents in Barcelona.
The housing market data coming out of Spain last year was largely positive, showing substantial increases in sales, new mortgage lending, housing starts, and – depending on who you believe – prices. And Barcelona was one of the hotspots with some of the best numbers, influencing the expectations of market participants. However,Amat Inmobiliaria, one of the leading estate agents in the Barcelona area, in business since 1948, suggest 2015 might not have been as good as the headlines suggested.
UPS AND DOWNS
“There is a widespread feeling that 2015 was a very good year in the real estate market, but our view is prudent and less euphoric,” says Guifré Homedes, international director at Amat (pictured far right, with other members of the family business). After a “significant improvement in 2014”, last year was mixed, and more volatility, with “no clear trend of improvement,” says Homedes. “In summary, a year with ups and downs.”
Homedes points out that almost any improvement, however small, is good news after the tremendous real estate crash that Spain has lived through in recent years. “ We must always be clear that we have been very low, in a sector almost paralyzed, so any minimal improvement means a large percentage increase,” explains Homedes.
The problem with euphoric headlines is they give market participants unrealistic expectations, he warns. “In our opinion, the problem we have is that a small improvement creates very high expectations, and these are far from the real market situation, so this may end up creating frustration.” The last thing the market needs now is unrealistic expectations leading to fresh disappointment, which would undermine confidence at a delicate moment.
Amat have seen a steady improvement in rental demand and prices in the Barcelona property business, but the market is hamstrung by a lack of supply. “Good rental properties are scarce, and are rented very quickly,” says Homedes. As a result, “the behavior of prices has generally been upward, and with very high rotation.”
From Amat’s perspective, the property market in and around Barcelona was volatile last year, with ups and downs. “It seems the first months of 2015 were good, but after the second quarter there was a decrease in activity, and in the second half it was oscillating, with some good weeks,” explains Homedes, based on company data.
As agents working in Barcelona, Amat see supply problems and growing competition, as low barriers to entry mean many more estate agents opening up as the market recovers.
On the supply side, Homedes distinguishes between resales and new build. “If we talk about new construction, during 2015 the stock has stabilised, and it will continue to grow gradually in 2016,” he says.
Even so, new homes continue to be relatively scarce – the excess housing inventory has “practically been absorbed” – whilst demand for new homes is growing, leading to a mismatch between supply and demand for new housing. That has pushed up prices in the new homes segment.
The resale market, on the other hand, is well supplied on the face of it, but lacks the kind of homes that appeal to buyers today. That means fierce competition between a growing number of estate agents for the best listings, which creates duplication and price confusion that is bad for the market. “From our point of view,” says Homedes, “the supply side has been a little abused due to the fact it is divided among so many real estate companies.”
BARCELONA HOUSE PRICES
Resale property prices were stable or slightly up last year, with increases below 2% in many areas, according to company data.
New home prices are higher, and have risen faster, though comparisons over time are complicated by the lack of new projects in many areas, says Homedes.