This Week's Focus: Is real estate really coming back in Spain?

This Week's Focus: Is real estate really coming back in Spain?


While still wonder whether Spain is really out of the economic crisis as the government claims, it should take a look at the state of the construction and services related to real estate business sector. At the peak of the last economic cycle, the weight of construction activity in the Spanish GDP exceeded 10% and the real estate sector as a whole 18%:

According to official data available, the weight of construction in GDP has dropped to just over 5% in 2013, while real estate services have gained weight until about 11% of GDP.

If you look at the numbers, ie in the number of housing starts and transactions of existing homes, you may notice abrutal fall in activity, which is more evident in the new housing market than in the second hand one.

Thus, the beginning of new housing have risen from about 70,000 units monthly average in early 2007 to just over 200 in the first quarter of 2015.

In this sense, we can not talk of recovery in housing starts, since the sector remains at a standstill, with only pulse.

Looking at the existing homes market, the situation is somewhat different. Transactions in used housing, after bottoming out in December 2013, have initiated a timid but steady recovery in number of units.

Conversely, even under the economic logic of market, prices of both types of housing follow conflicting paths, with a rise in prices of new housing (something difficult to sustain for reasonable market circumstances) and fall in second hand.

It is true that the limited supply of new construction, since as mentioned above the number of new housing starts is under minimum, it can lead to increase prices if demand does. It seems, in view of how's the new housing market that is the case, although investment demand and by falling interest rates, could be behind the behavior of prices. At least, expectations that make prices rise.

In any case, what is apparent is that the property market in Spain is still frigid by both supply and demand, albeit no longer getting worse and we could say that has hit the ground.

An increase in demand for new housing, which would have little justification from a demographic point of view and, of course, caused by improved conditions of access to housing for the working population, could lead to increased prices. However, we should see recovery in employment and wages, or a purchasing power large immigration flow, to think that this might cause. With the current demographics and Spanish payroll, can not be expected at that stage.

Similarly, the funding is in line with sectoral decline, falling both mortgages and its total amount, while the average amount per formalized mortgage stays around 100,000 euros from the bursting of the bubble.

In short, some specific measures such as the Golden visa to non-residents who purchase a home, transactions that originate in bank restructuring or purchase for investment may be arguments for stabilizing the sector. But of course, the recovery is still far.