The research division of BBVA, one of Spain’s biggest banks, has upped its forecast for investment in Spanish housing this year, despite acknowledging the potential negative impact of the UK´s Brexit vote to leave the EU.

BBVA Research now forecasts a growth of 3.4% in residential investment this year, up from 2.8% since its last ‘Spanish Situation’ report on the economy. “The recovery of the real estate sector will continue,” say BBVA.

However, looking further out, BBVA are now more bearish than before. For 2017 they have reduced their forecast for residential investment growth from 4.4% to 3.3%, suggesting that the recovery is still fragile and could be derailed by any number of shocks.

“The surprisingly positive level of residential investment in the first half of the year will start to dilute in the coming quarters,” explain BBVA.

BREXIT MENACE

The UK’s Brexit vote to leave the EU is one of the factors menacing the Spanish property market over the next couple of years, along with uncertainty at home (the Spanish political situation), and “new fronts of scepticism”, say BBVA.

Pointing out that the UK is the largest source of foreign demand for Spanish property, BBVA say “the depreciation of the pound against the euro and the [UK’s] economic deterioration will weigh down on the income and wealth of British households, which could reduce demand for property in Spain.”

Nevertheless, the bank forecasts that overall demand will continue growing on the back of favourable financing conditions, and Spanish new developments will benefit from a gradual decline in the supply of homes for sale.