Another housing bubble will inflate between 2018 and 2020, warns Ignacio de la Torre, economist and head of the investment firm Arcano, speaking at a recent industry conference. An association of Spanish estate agents has been echoing similar concerns, albeit for different reasons.

Back in the boom years Spaniards went on a reckless investment spree fueled by easy credit and the mistaken assumption that real estate was a one-way bet. “Property never lets you down” was the popular slogan at the time (el ladrillo nunca te falla), used by sales-types and investors alike. We all know how well that turned out.

Back then the investment logic was prices will always rise, in a classic bubble dynamic. The more people invested, the more prices rose, so the more people invested, and so on, until the bubble burst.

This time round it’s different, at least for now. Spaniards have sound arguments for investing in their property market today. What other options does the average Spaniard have, given that knowledge of financial investments is lower in Spain than other Western countries? In the bank for a pitiful interest rate, and the nagging doubt that banks can’t be trusted? In stock markets that many Spaniards don’t understand and vaguely distrust? Or in property – an asset that everyone is familiar with that now looks cheap after capital values were hammered by the crisis? It’s easy to understand why more and more Spaniards opting to invest in local real estate, many of them using mortgage financing that has never been so cheap.

The problem is, the attractiveness of property as an investment could inflate another bubble in the next two years, argues De La Torre. “Speculative money will go to the residential sector in search of yield, and prices will rise further than expected, and than salaries,” he said. “And it will all happen sooner than we think,” he warned, calling on the ECB to stop banks lending more than 60% LTVs. However, if he is right, I think there is only a bubble risk in some hotspots in the big cities and on the coast, and not all over Spain, as happened last time around. In many parts of Spain the property market is still depressed.

ESTATE AGENTS RAISE THE ALARM

The Association of Spanish Property Agents (API) has also warned of another bubble in the making, and called on the Government to take measures to head it off.

The Association has called for “urgent measures to increase market transparency and consumer protection,” to make the market “safer and more stable” and avoid a repeat of the disastrous consequences of the last boom and bust.

Diego Galiano, President of the association, claims that the bad practises so common in the last boom are starting to appear again, making Government intervention necessary, including tightening up mortgage lending.

The API association has a vested interest in exploiting fears of another bubble to call for more regulations if it means more members and fees for the association, and less competition. But I have to agree that regulation is necessary. Almost anyone can set up as a broker in Spain, so professional standards can be dismal, especially when it comes to selling property to foreign buyers. In the last boom some of the biggest companies in the business were nothing more than unscrupulous hard-sell operations, and I hear that some of the key players from those companies are back in business preying on unsuspecting buyers in the new cycle. When sales boom, and especially when bubbles form, unsuspecting foreign buyers walk into a minefield.