The following article is an abridged translation of an article by Felix Lores – an economist working for the BBVA Real Estate research division – first published in the Spanish daily El Mundo on the 8th June 2017, arguing that Spanish house prices have the wind in their sales.
“After six and a half years of contraction, Spanish house prices have risen for eight consecutive quarters,” explains Lores, with prices recovering 4.6% since Q2 2014, “after an adjustment of almost 38% in real terms.”
“With this one can say that the property market has embarked on a new cycle and recovering house prices are a reality.” Rising property values are on the cards for the next few quarters driven by residential demand fueled by job creation “around one million new jobs between 2017 and 2018,” growing consumer confidence, and low interest rates.
“To all that one has to add the positive tone of foreign demand: greater economic growth in the EU, plus the insecurity of competitor countries will continue to stimulate foreign demand.”
“On the other hand, and although housing starts continue increasing, inventories have not stopped falling.” Construction competitions are near all-time lows and will stay there for the next two years, given long lead times in home building. “We mustn’t forget that two years ago less than 50,000 homes were started, which will be the homes that, more or less, join the Spanish housing stock in the course of 2017,” whilst some 500,000 homes are sold in the same period.
“Therefore, the expansion of demand in the context of a still timid recovery in supply points toward further increases in house prices in the coming quarters.”