The Spanish property market will have to live with a “new normal” of falling prices and mortgage credit restrictions in some segments, argues Fernando Encinar, head of research at Idealista.com, a Spanish property portal, in an article published in the daily El Mundo.
2014 was a better year than 2013, says Encinar, with some segments of the market leaving the “intensive care unit” as he puts it, which could be the first signs of light at the end of the tunnel. If nothing goes wrong in 2015 we’ll know it isn’t a “train coming the other way.”
Nevertheless, we must fall victim to wishful thinking, warns Encinar. Although sales in 2014 were up by 15% and mortgage approvals by 30% compared to 2013, if you go back to 2012 we’re still 1.8% below for sales, and 10% below for mortgage approvals, just to put it in perspective.
Looking at the year ahead, Encinar sees some segments starting to recover whilst others remain in the mire.
Segments that improve in terms of transactions and prices will be driven by small investors looking for rental yields of 4% to 7%, he predicts.
Barcelona is a good case in point, where sales prices went up 3.5 per cent and rentals by 7.4 per cent in 2014.
Also Madrid, where sales and rentals prices have started to rise slightly in the most expensive areas, as well as some prime coastal areas or niche markets such as the Basque Country, where prices have stopped falling or registered small increases (Marbella and San Sebastián share this upward trend).
But beyond these prime segments, the outlook is far from rosy, says Encinar. Large segments of the market as still blighted by a glut of homes and falling demand leading to negative returns, which will keep investors away.
The mortgage market is also troubled by a paradox. Lenders know they need to start approving more mortgages, and increased competition is compressing the spread they charge, but tighter lending criteria mean that huge numbers of potential borrowers are still firmly barred from the Spanish mortgage market.