The Spanish arm of Colliers International, a global real estate service firm, has published its latest report on the residential market in Spain.
The salient points of the report are as follows:
- The contraction in demand in 2020 was much more pronounced in the resale market than the new home market, and could decline by as much as 25% by the end of 2021 (compared to 2019), if the economy does not improve.
- “The contraction in demand and sales prices principally affects resale homes, especially areas most hit by the tourism shock,” says Jorge Laguna, Director of Business Intelligence at Colliers Spain.
- Buyers lent much more on mortgage financing this year, going from 67 mortgages / 100 home sales in 2019 to 91/100 in the first half of this year, suggesting a depletion of savings.
- The pipeline of new homes will be restricted going forward by a lack of financing, with a decline of 30% of new housing starts to around 70,000 in 2021, similar to 2016. They expect a higher bar to be set for presales before financing is available, which would be an insurmountable barrier for some developers.
- They see new home prices consolidating without declining, but expect resale prices to decline by between 5% and 15% on average.
- Housing affordability is set to deteriorate, despite falling house prices. A young couple need more than 10 years of savings to afford their first home, and the problem is expected to get worse with the economic crisis.
- That said, the financial effort to rent a home in Spain is less than 30% of average local income in all cities except Barcelona (38%) and Madrid (36%).
- The rental market will continue to grow, especially in Madrid and surroundings.
- Build to rent will be an investment opportunity in provincial capitals, and other consolidated urban areas with demand.
- Madrid is the most dynamic housing market, whilst Barcelona is suffering the negative effects of government intervention, making Valencia city an attractive alternative to Barcelona for investors.