Despite the fact that the Spanish economy is far from back on track it seems that overseas investors are warming to Spanish property with a 20% year-on-year increase in property transactions. Even though the performance of individual property prices in various areas of Spain is mixed it does seem as though the more prominent cities and coastal areas are set for a significant recovery in 2015.
There are a number of factors to take into consideration when looking at the Spanish property market some which are directly associated and others indirectly.
Spanish property prices
The wider property price performance of Spanish real estate is not spectacular but has shown one percent growth over the last 10 months and is 2% higher than 2012. In order to fully appreciate this you need to take a look at the wider picture and the fact that the Spanish property market has been in freefall for some time. Shunned by overseas investors and with domestic investors struggling to make ends meet it was the more prominent coastal areas and major cities which took the worst hits.
A 1% increase in property prices over the last 12 months is not spectacular and on its own would not necessarily represent a recovery in the sector. However, it is perhaps the number of transactions which is more important at this stage of the recovery.
Inventory on the way down
The Spanish property market suffered due to a number of factors surrounding the 2008/9 economic downturn and the impact of property developments which were many years in the planning. This caused the double whammy of investors running for the hills and long-term property developments coming onto the market. It is common knowledge that inventory in the new build sector of the Spanish real estate market has been way too high for many years but overseas investors have for some time picked up the slack.
Recent figures suggest that resales are up 44% with new property sales down 19%. As we touched on above, a reduction in new property sales of 19% would historically have alarmed many investors but this is simply a case of running down new inventory. By reducing growth in the number of properties for sale across Spain this has focused the minds of investors and increased demand.
Other factors to take into consideration
The Spanish mortgage rate is one of the lowest in the world which led to an impressive 29.8% increase in mortgages during September. The Spanish government has also assisted the real estate sector with various provisions for expat investment which have in many cases helped to support the price of property. These provisions will not last forever but their short-term impact has been welcomed and added at least some stability to the sector.
One potential issue on the horizon, and out of the control of the Spanish authorities, surrounds Greece. There is turmoil within Greece with the general public turning against the European Union and the Euro amid suggestions that the country could eventually exit the EU and the Euro. This would potentially prompt yet more concern about the long-term stability of the Euro and with the UK government also questioning the right to free movement and immigration regulations there could be problems ahead.