Guifré Homedes Amat, the International Sales Director of Amat Immobiliaris, shares his view of Barcelona’s housing market recovery in a new report for the first six months of the year. Amat’s long history and market knowledge give him a unique perspective that should interests anyone looking at the Barcelona property market today.
His report is based on company data for the first six months of the year compared to the same period last year, from Amat offices in Barcelona and the city’s surrounding areas like Sant Cugat. The overall picture is one of a market in full recovery mode, though supply constraints are holding back the market in some segments, and housing affordability is not what it should be for local buyers.
The rental market in Barcelona is hot and getting hotter, in large part due to scarcity on the supply side. Prices are rising by just over 10% based on the company’s rental transactions, and now stand at 11.57 €/m2/month, which is 2% higher than the average published by the regional Govt. The average time on the market for a rental home in Barcelona has fallen from 4 months in 2014, to 2 months last year, and 1.5 months now, so homes offered for rent quickly find a tenant. But transactions are going down as fewer people move house in the face of higher prices and little to choose from. The average rental contract duration has gone up from 3.2 years to 4.5 years, based on company data.
The big problem in Barcelona, and one that is driving up prices and reducing the average time on market, is the “low supply or rental apartments on the market,” explains Homedes. This is a problem in all the areas where Amat have offices, including the suburbs and surrounding towns. In Barcelona city, the likes of Airbnb are partly to blame. “Many long-term rentals have been transformed into legal or illegal tourist rentals,” explains Homedes. “A couple of years ago tourist rentals were concentrated in very specific areas of the city, but nowadays the business has spread to all neighborhoods.” And “misguided policies” from all levels of the Spanish state, including Barcelona City Hall, such as policies to promote the sale of subsidised housing over social rental housing and discourage landlords from renting, make the situation worse.
Turning to Barcelona’s property market, Amat see sales up a total of 50% so far this year, driven mainly by an increase in new home sales, and “exceptionally competitive” mortgage financing that is “one of the main drivers of the market recovery,” explains Homedes.
Resales are up 5% and would be more were it not for the scarcity of homes for sale in conditions that match demand, and the average time on market has fallen from six to five months, so properties are selling faster. The supply does fluctuate over time, and when the inventory of homes for sale increases, sales follow suit. The situation by area is explained by Homedes as follows:
Sant Cugat del Vallés
Perhaps the area where the market has changed most significantly, both in terms of transaction numbers and price increases. The price range of sales is much higher this year, rising from an average price of almost € 350,000 to an average price of almost 600,000€. The average price in terms of €/m2 is up 15% over the same period last year.
Sant Just Desvern and surroundings
This area has also experienced an improvement, though on a smaller scale than Sant Cugat. The average selling price remains close to 400,000€. Prices in €/m2 have stayed similar to the same period last year, and sales activity has increased approximately 10%.
The city itself is the only area where Amat have seen sales go down, though the average price has rise to above 500,000€. The market behavior in districts where we work was as follows:
- Diagonal Mar continues to be an area of low stock and high demand. Prices remain high, in our case, the highest in all areas where we have made sales this year.
- Uptown Sant Gervasi remains a very active market where the condition and characteristics of a property has a big impact on the price. On average, sales prices were higher than last year, and the average price in €/m2 was 3,800 (built area) ranging from 2,600 to 4,800.
- Barcelona’s Gracia district is where we have maintained a level of sales and prices almost unchanged from the same period last year.
- The Eixample has very variable prices depending more on location than conditions. The average price in €/m2 is similar to last year in a range that goes from 3,200€/m2 to 5,400€/m2.
NEW HOME MARKET
The new home market in Barcelona is where Homedes has seen the biggest transformation take place since last year. More Barcelona new developments are coming onto the market, and not just in the city centre targeted at foreign buyers like before. This year there are big projects for sale in surrounding districts and the centre of town targeted at domestic buyers, and all the company’s buyers for new homes this year have been locals, suggesting a strong rebound in national demand. The sales rhythm has increased to more than 10 transactions per month, and more than half of all buyers are in their 40s or under, with a majority buying close to where they already live in rented accommodation.
A strong recovery in local demand for new homes is a healthy sign for Barcelona’s housing market, which has been heavily reliant on foreign demand in recent years. It shows that locals can now afford to buy new homes in Barcelona, argues Homedes. This was not the case during the crisis, when it was difficult to get a mortgage, or during the boom years a decade ago, when new homes in Barcelona were more expensive than today.
That said, housing affordability in Barcelona is still too high for locals judged by the yardstick of between 3 and 4.5 years recommended by most experts. “This data is not entirely positive,” writes Homedes. “Affordability measured as the ratio between the price of housing and gross annual household income, was 6.93 years in the first half of 2016, within the average values of recent years (6.3 in the 3rd quarter of 2015 according to the Bank of Spain), but still above what is considered acceptable (between 3 and 4.5 years), despite the drop in house prices during the crisis.”
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About Amat Immobiliaris
Amat Immobiliaris is a family-run real estate company founded in 1948 specialising in Barcelona and its surroundings. The company’s long history and family continuity mean Amat clients benefit from a deep understanding of the local property market built on many decades of experience.