Spanish house prices have increased at their fastest rate since the last boom turned to bust, according to the latest quarterly report from the Property Register.

Average spanish house prices increased by 5.12% over twelve months to the end of June this year, up from an increase of 2.65% at the end of the previous quarter. Over three months house prices rose by 2.8% in the second quarter. Peak-to-present, prices are down 29% according to this house price index.

Explaining the latest figures, the report from the Registrars says “these growth rates are clearly getting more intense,” and that “everything indicates that the gradual decline in average prices are increasingly a thing of the past, though that is not the case everywhere.”

RECOVERY LIMITED TO BEST LOCATIONS

The report points out that house prices changes are driven by local factors of supply and demand in different regions. House prices are rising in areas with strong demand, “whilst in areas with less attraction and levels of demand, house prices can still be going through an increasingly intense adjustment.”

The areas enjoying the strongest recovery fueled by demand are to be found in Madrid, the Balearics, the Canaries, Catalonia, and the Valencian Community. “Without doubt this is reflected in prices,” explains the report.

Vendors and buyers are adjusting their expectations accordingly. In more and more areas, market participants are not expecting prices to continue falling. Potential buyers, who have been sitting on their hands whilst prices fell, are now entering the market expecting that “house prices in those zones are not going to continue falling, and could even increase.”

Despite the steep upward curve of house prices in recent quarters (see chart below) the Registrars say that high levels of growth in the coming quarters are not a given. But they also see numerous indicators supporting a recovery, such as low interest rates, improved housing affordability, better mortgage conditions, and a sustained foreign demand for property in Spain.

They hope that the recovery will take place in the context of moderate price growth, avoiding the speculation that did so much damage in the past. “Now more than ever rational decision making is needed to avoid the errors of the past, which came at such a high cost to our economy and society,” then conclude.