Dive deep into the reports and news stories, and it’s easy to find data points, graphs and prognostications that conflict. Promoters throw up propaganda and hype, further clouding the issues. Finding a clear picture of the trends can be almost impossible.
But there are five key trends in the Spanish market that will provide indicators of the true status of the property industry. When these numbers change, then the market will be in an actual recovery, all hype aside.
The trends to watch:
1. Supply: We all know there is vast supply of empty homes in Spain. One recent report suggested the number was coming down, but the supply still sits somewhere around 650,000 homes. In reality, many of these homes are unsellable, which makes the overall supply number a bit misleading. But no nationwide recovery will take hold until there is a distinct drop in the supply.
2. Bank Sales: The market won’t return to normality until banks start reducing the vast stockpile of property they control. That means pricing the property at reasonable levels and accepting deals. When bank sales start to spike, the market will be back on a positive track. Unfortunately, banks are incompetent property sales organisations, and not much better at banking.
3. Mortgages: If there is one the industry executives agree on, it’s the need for mortgage credit to start flowing again. Recent reports from the banks suggest they are starting to issue more mortgages, but the numbers are relative to almost non-existent lending a year. When the banks are willing to lend again, middle class buyers will return to the market.
4. Secondary Markets: In popular high-end destinations like Barcelona, Ibiza and Marbella, there are already signs that demand is picking up. The key indicator for the overall market will be activity in Spain’s secondary markets. When buyers return to the cities and towns of the Spanish interior, then it will be time to hail a recovery.
5. Domestic Sales: Foreign buyers are driving sales in many coastal segments, which is not a sign of a long-term healthy market. Sooner or later, domestic sales will have to perk up before pundits can proclaim a sustainable rebound. Mortgage lending will play a big role (see above.) But a drop in unemployment and a growing economy will play a bigger one.