After 8 years of crisis for the market, 8 years of plenty?

Joseph interpreting Pharaoh’s dream. 1894. Reginald Arthur.
Joseph interpreting Pharaoh’s dream. 1894. Reginald Arthur.

The Spanish property market goes in cycles of 16 years, with 8 years of expansion followed by 8 years of contraction, according to the theory of one industry insider. Does that mean we have 8 fat years ahead?

juan-fernandez-aceytuno-socieadad-tasacionJuan Fernández-Aceytuno (pictured left), the head of ST Sociedad de Tasación, a valuations company, recently mused that Spain’s real estate market takes 16 years to go full circle, and is now moving into the expansive phase, suggesting the best part of the cycle lies ahead.

8 good years followed by 8 lean years sounds almost biblical, like the story of Egypt’s 7 years of plenty followed by 7 years of famine, which a groovy guy called Joseph with a technicolor coat foretold from Pharaoh’s dream. Let’s hope this theory is true, not just a dream.


Fernández-Aceytuno uses various indicators to judge where we are in the cycle, including the relationship between mortgage lending and sales, and the change in the value of outstanding mortgage loans.

In the growth phase of the cycle, if I understood it correctly, mortgage lending grows faster than home sales. “In Spain, that relationship inverted in 2011,” explains Fernández-Aceytuno. “The good news is that since 2015, the number of new mortgages signed has grown faster than the volume of sales.” That indicates we are in the growth phase.

On the other hand, the value of Spain’s outstanding mortgage loans is still falling, as mortgages are retired quicker than new ones are signed. So whilst it’s obvious that house prices have stabilised, Fernández-Aceytuno says it’s still too early to talk about a “complete recovery and return to normal”, which will remain just an “objective” whilst the net value of outstanding mortgage loans continues falling.

It is also unlikely that the Spanish real estate market will boom again until new household formation gets back to normal, as first time buyers are crucial to the market. There were 75,000 new households created in Spain last year, according to figures from La Caixa, a bank. That is just 20% of the maximum achieved. The normal rate should be 250,000 says the Bank of Spain.


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