The 5% rise in house prices in the first half of the year will peter out as the recovery loses momentum in the second half, forecasts a new report from the Valuations Observatory – an industry observatory run by the Spanish Association of Value Analysis (AEV) for companies in the appraisals sector, including mortgage valuations.
All the experts surveyed for the report said they see no sign of substantial improvements in the Spanish residential sector.
The average national price increase in future will fall in line with GDP growth of around 2% to 3%, they argue, whilst pointing out that some segments will see much higher levels of price growth due to local market dynamics in hot locations such as city centres. The same is also true of hot coastal markets like Marbella, Mallorca, and Ibiza.
Despite rising housing starts most of the experts consulted for the report are sceptical about the start of a new growth phase in the business. They see a feeble recovery in home building, limited to certain areas and segments, with the sector lacking a “vigorous impulse” to drive the market into a healthy recovery.
They also point out that the large percentage increases in new home building reported in recent times give a misleading picture of a booming business, coming as they do from a very low base.
Looking at other key indicators for the business like jobs in the sector and lending to builders, they see no signs of a significant recovery.
Valuers are also gloomy about the recovery in household spending power, which continues to be constrained, they say. Spanish households still have their belts tightened, whilst the improvement in the job market seems to have lost steam in recent quarters. The overall effect is a brake on demand for housing, they explain.
Recent positive signs like rising housing starts and prices “still fail to show the vigour needed to be optimistic about a new cycle of growth,” says José Manuel Gómez de Miguel from the AEV. “On the contrary, these positive factors exist alongside doubts and storm clouds that could disturb their future evolution.”
So despite some good news coming from the Spanish property market, the professionals in the valuations sector are anxious the recovery will not last. And they are not the only ones. “The worries we see amongst developers and builders are more than justified,” says Gómez de Miguel.