HOUSE PRICES: Forecasts for 2016 and beyond

spanish property prices oct 2015

House prices are rising according to five of the seven indices tracked by Spanish Property Insight (see graph above). The data seems to suggest that years of depression have come to an end. So what do some of the housing market experts regularly quoted in the Spanish press have to say about the outlook for house prices in 2016 and beyond?

Economics professor, and director of the master’s degree in real estate at the University of Barcelona, Bernardos told El Mundo that prices are rising most “in prime zones of the cities, where there is a shortage of good product.” Pointing to rising mortgage lending, rising middle-class household income, increased optimism about the economy, and the resurgent preference for buying over renting, he forecasts that prices will continue rising in 2016, and at a faster rate. He talks of future increases of 12% on average, and up to 20% in the best locations.

Bernardos forecasts the biggest increase in prices will come next year. “After that, 2017 will be worse than 2016, and 2018 worse than 2017. They won’t be bad years, but room for price growth will be lower. 2015 has been the year of total recovery, and 2016 will be the peak, the year of expansion,” he says.

Prime property on Barcelona's Paseo de Gracia
Prime property on Barcelona’s Paseo de Gracia

Property market consultant Ruiz Bartolomé is optimistic about house prices next year, pointing to rising land prices as a big reason to expect rising values in the housing market. Land prices rose 9.7% on average in Q3, but as much as 59% in the big cities, and sooner or later these increases will filter through into house prices, he argues. The new homes being built are also bigger and of better quality than in the past, which will also influence prices.

“An increase of 5% to 6% on average, and 10% to 12% in the best locations is nothing,” he told El Mundo. “It’s just a consequence of the fact that prices have fallen too far. The market has a capacity to rise and adjust upwards, adapting back to an economy where mortgage financing is normal.”

“If there are no fiscal changes and the banks don’t go mad, housing could rise up to 20% and then stabilise. In Dublin, prices have risen 15% and the same will happen in Madrid. That’s normal.”

President of the Foundation for Real Estate Studies, Gil strikes a more cautious note in a recent article in El Mundo. 2015 has been “moderately positive, especially in comparison to previous years,” he writes, but it is a two-speed market, with the recovery confined to the best areas of the city and coast. He also worries the recovery story is being exaggerated in the press. “We have gone from total depression to exaggerated optimism, euphoria,” he says.

“We are heading in the right direction, but just because the sharp adjustments have stopped it doesn’t mean to say we are going to entre into an upward spiral, or anything like that. 2015 has been a step forward, but we still have a long road before us and it’s not without risks. We should play it “game by game.” That’s the philosophy.”

SPI Member Comments

Thoughts on “HOUSE PRICES: Forecasts for 2016 and beyond

  • I disagree with all of them Mark, official figures and “experts” alike. The fact that there are so many official figures and they all differ says enough, however the experts all concentrate on prime areas. Prices haven’t risen yet at all. What has happened is that there are not so many desperate sellers selling at whatever price they can get which was bringing the average down. We have hit bottom for sure but there are very few areas actually rising at the moment. The average seems higher due to their being fewer real bargain bucket price sales.

    Nevertheless price rises will happen in the next year in certain areas due to lack of product in the prime areas of course, more bank lending, increased numbers of foreign buyers coming into the market as other countries’ recoveries consolidate more and the low prices attracting investors. Also the scare tactics of Osbourne in the UK so that fewer people go into buy to let mean more funds, institutional and individual, are investing here.

    Merry Xmas to you and all your readers

  • Do you not think that the new uncertainty with political parties in Spain will further deter potential buyers, I wouldn’t buy until that was sorted out, it’s a bit risky to invest with this unknown?

    • Not at all David. What would put me off is the PP carrying on taking away people’s rights as they have the last four years. Germany is an example where there are always coalitions. Doesn’t seem to worry them that consensus rules

  • Ah but you’ve got your agent’s hat on Graham whilst I’m impartial.

    This is Spain not Germany so let’s not forget re coalitions or anything for that matter, not least corruption, overblown and completely different property market, Club Med land and all that. To be totally truthful, I’ve never heard of property scams nor of anyone being ripped off in the German property market, whilst in Spain?? Therein lies a completely different story.

    If anyone is holding off, I certainly would not be rushing in until there’s more certainty and then only for lifestyle change and not for investment!

    • Actually putting in my agents hat would make a change but to say it’s not a place to invest… Up to you. We started doing it a couple of years ago and let’s just say it is going very very well 🙂

  • Brenda Mellor says:

    Location, location, location. Whoever is right on the predictions, whatever the political situation, the reality is that prices are low and if you choose your location wisely and are prepared for “hassle factor” this is a good time to invest. Especially for those benefiting from the euro/sterling exchange rate.

  • Let’s see. Buying costs 12% or more. Low rental returns, council tax and on the Costas high community charges. Selling costs around 5% plus IVA. Plus sundry taxes and legal fees. As I wrote about the same as buying a car, in negative equity, possibly for years.

    Despite all these claims about rental returns many properties to rent on the Costa del Sol remain empty at least 10 months of the year. Not to mention the high rate of non payers. Getting them out is costly and can take forever.

  • One person’s ‘overheads being minimal and easily covered by rentals’ is not typical on the Costas for those who bought in the last 8 years or so, many of whom are nursing big capital losses and low rentals with poor security of rents. There’s simply too much choice of properties to buy and to rent, and an exchange rate of 1.36 euros to the £ is still way short of the 1.65 it was which made some sort of financial sense. People forget those juicy exchange rates.

    ‘Good time to invest’? with the caveat of being prepared for ‘hassle factor’ Lol sums it up in a nutshell, there’s too much ‘hassle factor’ to make it a good time to invest and now with political uncertainty to boot. Marion is right, there are too many overheads and a combined buying/selling transaction of roughly 20% negates any thought of profit making for years.

    • I have to agree with David’s comments, as a potential new investor- looking to obtain a Catalan property for personal use, not profit, I was already concerned about the regional separation issues. The “result” of the General Election simply adds to the uncertainty coupled with the “hassle factor”. I am approaching this with the view that to simply be able to recoup my outlay at a later date would be acceptable – but unless the legal system can be relied on it looks as though I will be deferring my decision to purchase, at least for the short term.

  • The Telegraph article by Kate Palmer in the recent SPI news seems to confirm what some of us have said above, and that prices will be held back by oversupply. Plus Yahoo today are talking of property crashes or downturns elsewhere in the world including the UK now that BTL has been hammered by Osborne and this will reduce further investment from many UK would be purchasers. It also talks of the world’s stock market crash of late and that Chinese and Russian buyers are unable to buy as they were, all of which will dampen Spanish property and other property markets.

    Too much Global financial uncertainty plus Political uncertainty in Spain for risking investment!

Leave a Reply

Facebook Comments