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Spanish House Prices To Rise Five Per Cent Next Year Say Bankinter

spanish property glut
Spanish new homes in the middle of nowhere. Photo credit: besos y flores / Foter / CC BY-NC-ND

The average price of property in Spain will rise nearly 1.5 per cent in certain locations this year, followed by a generalised increase of five per cent in 2016, according to Bankinter’s quarterly property market report.

The Spanish property market now has a tail wind, and recovery will start this year, argues Bankinter, a Spanish bank.

“The growth of the economy, higher levels of confidence, and the improvement in access to loans, will consolidate an increase in demand for property with a rise of over 15 per cent in the number of transactions,” says the Bankinter report, claiming the market cycle has turned.

Bankinter cites strong demand for new developments in Madrid, and the reactivation of the Castellana development plan – a major development project along Madrid’s central avenue La Castellana – as concrete examples of the sector’s incipient recovery.

Bankinter forecasts total demand for homes will grow to nearly 400,000 properties this year, and 450,000 in 2016, mainly driven by the resale market. New home sales are expected to rise to around 100,000 units in 2016.

The current glut of property for sale will not stop new building because much of the glut is in the wrong place, argue Bankinter. Unless prices go down even further some 100,000 homes will never be sold because of their unappealing locations, while in other prime locations there’s already a shortage of supply.

The main driver of demand will be higher economic growth and employment in Spain. The rate of GDP growth is forecast to increase to 2.2 per cent in 2015, creating more jobs. Although a significant number of these new jobs will be temporary, the improvement in the job market will still be the cornerstone of the housing market recovery.

Bankinter also expect demand from small investors to pick up as buy-to-let looks more attractive compared to other investments like bank deposits earning savers paltry returns.

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