The following article is an abridged translation of a report by Arturo Marín – head of Strategic Analysis at Solvia – recently published in the Spanish daily El País (before the constitutional crisis erupted in Catalonia) arguing that the Spanish property market is recovering, albeit unevenly, and predicting steady annual price increases.
The model for price predictions developed by Solvia, which in this case includes the new property market cycle (2016-2020), forecasts an average price increase at national level of 7.3%. However, price rises in places such as Barcelona and Madrid will be notably higher than in the rest of Spain. Furthermore, Solvia expects average annual price increases of between 2% and 3% over the next few years, in line with Spain’s GDP performance.
It’s worth remembering that only recently Spain led the world ranking for biggest price declines – between 2008 and 2013, prices fell by an average of 40%. 2014 was the turning point when things changed and prices stopped falling so fast, which led to the start of moderate rises. At the moment, we can say that the Spanish market is still attractive in terms of prices.
We forecast that Barcelona and Madrid will experience average price growth of over 4% during this period and recuperate 13% and 14% of property values respectively. At some distance below them are the Balearic and Canary Islands with average annual growth of 3%, sustained by demand from non-resident buyers. The rest of the Mediterranean coast will see moderate increases with rises of 1.5% a year. In inland areas and the north of Spain we’re not forecasting recovery with the exception of large cities, because of unfavourable demographics and the internal migration of young people towards more dynamic areas with their regions.
The property recovery in Spain is due to the considerable increase in sales and not so much to price increases. Since 2013 when sales of property in Spain hit rock bottom, sales have gone up by 50% in three years. At the end of 2016, over 450,000 sales had taken place.
For the next few years, we predict annual growth in sales of between 8% and 10%. A significant number will be to buyers looking to upgrade and to small investors interested in buy-to-let properties. Demand from non-resident foreigners will continue to post positive growth, reinforced by record figures for tourism in Spain.
We therefore predict that the property sales will exceed 550,000 units between 2018 and 2019. The figure will gradually fall in the future, mostly because of the increase in rentals among new generations and the fall in natural demand (people between 25 and 44).