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Fri 10 Oct 2014

4 signs that the Spanish property market is bottoming out
Most observers of the Spanish property market will have noticed that over the last few months the amount of positive news surrounding Spain’s property sector has increased markedly. This is not to say that the problems have disappeared but there are now clear signs that the market is finally bottoming out.

The Danish financial organization Saxo Bank believes that there are now four main signals of the crisis in the Spanish property sector coming to an end. In a recent report the bank cites changes in prices, mortgage concessions, construction and sales data as clear indicators that the worst is now over for Spanish property.

House prices: The data on Spanish property prices shows varying trends with a rise in the number of positive monthly and quarterly statistics being released. One of the strongest signals that prices are bottoming out was the INE data for the second quarter which showed a 0.8% increase in prices and became the first quarterly rise since 2008. The statistics agency Tinsa, although releasing data which showed a 4.3% decline in prices for the third quarter, believes that prices will stabilise by the end of this year, a view that is shared by many experts in the sector.

Construction licence concessions: The number of concessions of construction licences is a good gauge of the health of the sector as it reveals levels of confidence and expectation of demand. Although today’s figures of around 3,000 applications per month are a fraction of what they were at the height of the boom when the monthly figure was around 70,000, there are positive signs. Saxo Bank states that 2014 data shows applications were up by 30.2% year-on-year for the first six months of 2014.

Sales: Total sales are still down so far this year on 2013 but there are positive signals emerging with a run of five consecutive monthly increases from March to July and a further rise of 13.7% in September according to INE statistics. Saxo Bank claims that sales are now increasing at the equivalent rate of 6% annually.

Mortgage concessions: The numbers of mortgages being granted in Spain has fallen rapidly since the crisis took hold. However, Saxo Bank highlights the fact that the total amount of credit granted has been up year-on-year for the last six months and the number of mortgage concessions has also risen over the last three months. There is an appreciation now that the banks are regaining confidence to lend although with greater restrictions and stricter conditions than before the crisis.

BNP Paribas: Only way is up for Spanish property
Cortal Consors, the brokerage division of the French bank BNP Paribas has released statements claiming that the Spanish property sector has bottomed out. They forecast that we will see growth in both investment and construction of residential and non-residential property in 2015 and 2016.

Estefania Ponte, the company’s strategic and economic director, says that we have already seen positive changes in transactions, sales and investment volume. She states that the forecast improvements in the sector will be due to an increase in new construction and a rise in investment and purchases of properties.

The growth in residential construction which the analysts at Cortal Consors expect to see is 0.5% for 2015 and 1.2% in 2016. They also envisage increases in Spain’s GDP and have released positive forecasts which show a 1.4% rise for 2014 and impressive increases of 2.4% in 2015 and 2.6% in 2016.

The firm believes that Spain has made some important changes to the foundations of its economy which bode well for the future. They especially highlight exports and the fact that Spain has significantly reduced its reliance on other Eurozone countries by successfully diversifying its export network with a greater focus on Latin America.

Uptake of Spanish Golden Visas improves
The number of non-EU buyers that have opted to take advantage of Spain’s Golden Visa scheme has increased substantially since May according to an article published on Spain’s 20 minutos news portal. Data for the first 11 months of the scheme shows that 324 of the visas have now been granted.

This figure represents total uptake of the visa from its launch in October 2013 to September of this year and shows that the number of concessions has risen markedly since May by which time only 72 visas had been granted. The statistics for May had prompted many to write off the visa as a pointless gimmick but the latest figures show a definite improvement.

The Golden Visa programme allows non-EU nationals to apply for a visa to stay in Spain when purchasing a property worth ?500,000 or more. The visa allows the holder to travel freely within the Schengen zone, the possibility to apply for full residency after 5 years and the extens ion of the visa’s benefits to a spouse and children up to 18 years of age.

The total value of the transactions involving the Golden Visa is ?256.1 million so far. Although the new data shows a rise in interest in the visas it is still not as impressive as it was hoped that it would be on its launch. Many expect that the increase in concessions will continue at the current rate and uptake will rise significantly.

The visa is primarily aimed at Russian and Chinese investors and uptake has been strongest so far amongst investors of these nationalities. However, the fact that the scheme provides a fast track route to EU residency could also attract investors from countries such as Turkey and the Middle East.

The Portuguese Golden Visa programme has seen a stronger uptake in its first two years of operation with around 1,600 visas having been granted to date. However there is currently a corruption scandal connected with their programme which has seen seni or officials accused of illegal activity in relation to the concession of visas which may have inflated figures.

Increase in foreign buyers led by British
British buyers have led a strong increase in the number of foreigners buying Spanish property for the third quarter of 2014 according to the data which has been released by Spain’s property registrars. Foreigners now make 13.10% of all purchases of Spanish property which is a new record for the sector.

British nationals made 2.37% of all purchases of property in Spain during Q3 and 18.06% of foreign purchases up from 15.77% in the second quarter. The increase backs up the positive vibes coming from the British market in recent months with impressive attendances at the autumn A Place in the Sun exhibition and a feeling that Spanish property is now undervalued.

The British were followed by the French as the second most prolific nationality of foreign buyers with 1.37% of the total number of purchase in Spain and 10.48% of purchases made by foreigners. This represents an increase on the second quarter when French buyers ac counted for 10.11% of foreign purchases.

The Russians rounded off the top three making 0.98% of all purchases in Spain and 7.50% of all purchases by foreigners. There were interesting developments further down the ranking though as the Chinese increased their share of the foreign market to 3.95%, up from 3.1% in Q2 and providing a sign that the Chinese are gaining importance in Spain’s property sector.


Notaries: Sales up by 20.7% in September
The Spanish Notaries Public have released their sales and price data for the month of September which shows a further drop in average agreed prices but an impressive leap in sales. Sales increased to 26,778 for the month which means they have risen by 20.7% year-on-year in a further sign that they are now rebounding.

The increase for September meant that data for the third quarter of 2014 showed an 8.6% rise in sales. The Notaries explain the positive statistics by saying that they represent a normalization in sales after the elimination of tax breaks at the end of 2012 and also a general stabilisation in monthly property sales in Spain.

It is also impossible to ignore the incredible mortgage statistics for September which reveal a 49.7% year-on-year increase in concessions and a 37.6% rise for the third quarter as a whole. The average value of the mortgages granted during September also rose by 4.5% to ?111,004 per mor tgage.

The sales which were recorded by the Notaries during September did have a lower average value than in September 2013 with a year-on-year drop of 2.9% to an average of ?1,187/m2. The fall in the average value of properties sold was even greater for the third quarter as a whole with a decrease of 4%.

The increase in the number of sales for September was driven by resale property with year-on-year rise of 31.8% in the number of resales to 17,330. As has been the story so far in 2014 new build sales continued to struggle and fell by 32.8% on September 2013 to a total of 2,455 for the month.

Spain leads European construction growth
The data released by the EU statistics agency Eurostat for September shows Spain leading the way in construction sector growth with an increase of 9.1% year on year in construction activity. The figure is less than the 22% growth observed in August but is still a clear sign of the improving health of Spain’s construction sector.

Spain was followed in the rankings by the Czech Republic with 8.2% growth and Hungary with an increase of 7.3%. Spain’s Mediterranean neighbours didn’t fare as well with the largest declines being seen in Italy, down by 10.6%, Portugal, where activity dropped 5.2%, and France with a decrease of 3.2%.

The statistics for the European Union and the Eurozone were also negative with the EU experiencing a 1.7% fall in activity and the Eurozone seeing a 0.4% contraction year on year. Construction activity in the Eurozone was down 1.8% on August but increased 0.9% in the EU as a whole on last month.

The year on year increase for Spain marks the third consecutive month of increasing construction activity in the country with a 1.5% increase in July and 22% increase for August. Construction activity is one of the key metrics used to judge the health of a country’s real estate sector and these positive stats are extremely welcome.

Permission granted to republish. Data supplied by Fuster & Associates

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