In the latest of its influential reports on the property market, Spain’s second biggest bank forecasts that, even if the recovery loses some momentum, Spanish house prices will continue rising for the rest of the year.

The first half of 2016 has been clearly positive for the Spanish housing market, with rising sales, prices and building activity, and rising prices create a virtuous circle that stimulates demand, explain BBVA Research, part of the BBVA banking group, in their latest Real Estate Observatory report.

The market will continue recovering after a positive first half of the year, thanks to favourable mortgage conditions and record numbers of tourists, which helps lift demand for holiday homes on the Spanish coast.

That said, the second half of the year might not be as good as the first half, caution BBVA, as economic growth might moderate in the face of political headwinds as the gridlock in Madrid starts to drag on the economy and consumer demand.

Lower economic growth and what that does to consumer confidence is expected to knock some of the wind out of the sails of the housing market recovery.

Even so, BBVA expect new development to continue expanding on the back of stronger demand and the gradual disappearance of the new homes glut, at least in areas where there is demand, such as big cities and popular coastal regions [like the Costa del Sol and the Costa Blanca].

Growth in residential development will be significant this year, they forecast, albeit from a low base. The latest figures from the notaries showing that building land transaction were up 82% YOY in the second quarter of the year, which is a clear sign of growth in the home building industry.