BBVA, Spain’s second-biggest bank, says that signs of housing market recovery rest on three pillars: Increased mortgage lending, rising house prices, and growing construction activity.
The Spanish property sector showed clear signs of stabilisation in the first quarter of the year, judging by the expansion of mortgage lending, property price trends, and the rise in construction activity, say BBVA Research in the latest “Real Estate Snapshot” report published by them. The recovery story is backed up statistics, they say.
RISING HOME SALES
Home sales were up 2.3 per cent in the first quarter, according to Government data, building on a growth trend that started last year. The General Council of Notaries confirmed this tendency with the figure of 34,756 properties sold in March, a big increase of 12 per cent on the same month last year.
The report cites figures showing that growing demand, together with interest rates at record lows, have stimulated the mortgage market, with a year-on-year increase of 22 per cent in mortgage approvals in Q1 this year, and an increase of 20 per cent on the credit volume of new loans for property in the same quarter.
HOUSE PRICE TRENDS
The picture is mixed when it comes to house price trends, but at least big declines appear to be a thing of the past. If anything, average house prices at a national level look to be stabilising, say BBVA, declining just 0.1 per cent over 12 months to the end of Q1, according to the latest data from the Housing Department (though the latest data from the notaries shows a national decline in Spanish house prices of 7.5% in March).
On a regional level, however, there are still big differences in price changes, with prices rising in areas of strong demand boosted by foreign buyers, and falling in areas with weak demand and high inventories. For example, prices are rising in the Canaries, where foreign demand leads the market, and falling in Cantabria, Murcia, and Asturias.
BUILDING A RECOVERY
The third pillar of the housing market recovery identified by BBVA Research is construction output, which is finally showing signs of growth after almost a decade of steep decline. Planning approvals year-on-year growth was 23 per cent in Q1, and the number of people employed in the sector who signed on to the Spanish social security system grew by 0.4 per cent in April compared to March, as employment continues to grow in the Spanish construction sector.
Jan Hoggarth says:
Unfortunately a fourth pillar is desperately needed in Spain – changes to the law and better enforcement to provide greater protection for buyers. The Spanish senate recently rejected a change which would have given greater protection to people who bought in good faith only to find that their property was illegal. What’s to stop a repeat of the property frauds suffered by many buyers in the last decade? Watch the sharks – unscrupulous developers and corrupt officials – come sniffing around again as property building increases.