The latest property market report from BBVA Research, part of Spain’s second biggest banking group, paints a picture of a market in the process of turning around.
BBVA Research argues the recovery of the Spanish property market continues its course, which started with price stabilisation in 2014, followed by modest increases in regions with the biggest tourist attraction.
All the statistics point towards a recovery in the process of consolidation. According to the bank, property purchases, construction and new mortgages will continue to increase, boosted by the favourable economic climate.
BBVA points out that property sales in January confirm the growth trend they have shown for some months. In January a total of 21,320 property transactions were made, according to the latest data from notaries, 2.4 per cent higher than those in December 2014.
Spanish Mortgage activity rose again in year-on-year terms in January to the point that both the number of new operations and the volume of credit associated with them increased compared to the same month in 2014, according to the Spanish Statistical Institute (INE).
In addition, BBVA highlights that, according to the Property Price Index published by INE in March for Q4 2014, property values grew by a year-on-year rate of 1.8 per cent.
“This [price] data shows major regional differences,” BBVA cautions. After seasonal variations were corrected, quarterly prices rises were seen in Andalusia, the Balearics, Cantabria, Castilla y León, Catalonia, Extremadura and Madrid. In terms of annual averages, in 2014 property went up in price in the Balearics, Cantabria, Catalonia, the Valencian Community and Madrid. In Murcia and Andalusia prices remained virtually the same.
New home starts returned to growth, after dipping in the last quarter of 2014. In January new-build starts registered an increase of 34.8 per cent compared to December. Cement consumption was stable once again in February, although in year-on-year terms, the total amount for the first two months of 2015 showed a year-on-year growth of 6.6 per cent.
The improving job market largely explains the positive trend in housing, say BBVA. Employment is “one of the main fundamentals for residential demand,” explain BBVA. “For their part,” the report continues, “consumer expectations of future changes in the economy recovered again and are now at record high levels,” whilst “gross disposable household income continues to recover”. As a result, household wealth is growing again after years in decline. “In the last quarter of last year, the increase in property income and salary remuneration led to a rise of 3.5 per cent in household wealth”.
Monetary policy in the Eurozone now also favours the Spanish housing market. “In January the mortgage interest rate for new purchases fell yet again to reach 2.58 per cent.” Further QE measures are expected to drive down the cost of borrowing even further in the coming months. More and cheaper credit is bound to increase demand for Spanish property.