A recovery is taking shape in some segments of the Spanish property market, primarily in Madrid, Barcelona, and the Costa del Sol, explains a new report from Solvia – the fourth biggest real estate servicer in Spain.
“Madrid is setting the pace for the recovery,” says the ‘Solvia Market View’ report on the Spanish property market. “It’s positioned as the hottest market, showing a lot of development activity, especially in the north and north east of the city, with house prices on the rise.”
Madrid is not the only market bouncing back after years of crisis. “Along with Madrid, principally Barcelona and the Costa del Sol are registering the best real estate performance in terms of increasing prices, transactions, and residential building activity.” In other areas, however, “the incipient recovery has yet to consolidate.”
PRICE CORRECTION “OVER”
“The price correction is over in Madrid and Barcelona,” said Javier García del Río, Managing Director of Solvia, at a press conference to release the report. He also explained that “prime demand” is driving a recovery in the best areas of the Costa del Sol.
Solvia, which was set up by Bank Sabadell to deal with its real estate portfolio, and now manages €28 billion worth of real estate assets for Bank Sabadell and other portfolio owners like the Sareb ‘Bad Bank’, has seen its own average sales price rise 4% between January and May, compared to the same period last year, whilst Solvia’s home sales increased by 1.5%, and land sales by a factor of three.
García del Río talked of a slight recovery in prices in general terms, but argued a sharp price recovery would be unwelcome. “A bounceback like 1993 wouldn’t be a good thing,” he said.
Turning to the rental market, García del Río said it has to grow because “Spain needs it to, above all, to increase mobility.” Solvia forecast the number of rental homes to rise from 18% of the housing stock now (25% in cities like Barcelona and Madrid), to between 20% and 30% in 2017.
Offering words of advice to developers in the market today, García del Río said they need to operate with “more sophistication” if they are to take advantage of favourable winds like economic growth, rising employment, and increasing mortgage credit. “Supply used to control the market, now it’s demand,” he said, so developers need to micro-analyse the market to understand segments, if necessary “district by district”, then building attractive homes to satisfy demand in each segment.