Since 2007, property prices in Spain have fallen by more than 40%. Now the market is entering a new phase of development. Housing will be expensive for a minimum of 2-3 years, demand will continue to grow and the construction sector will be revived. Many experts agree that now is the best time to buy property in Spain, as the objects are sold at the most favorable prices for buyers.
Prices: For the first time in seven years, there has been an increase. In 2007, Spanish property prices reached a peak (2,862 euros/m²). After they began to fall, and by 2014, the cumulative fall was 44% (average price – 1 594 euros/m²). However, in 2014 the rate of decline slowed down, and at the end of the year there was an upward trend. In April 2015, housing prices in Spain rose by 0.2% compared to the level of the end of 2014. In early 2015, in some regions of Spain prices showed different dynamics, although in general the fluctuations were minor (+0.1% on average in the country). The most expensive housing in Madrid – by 1.6%. In Andalusia, prices increased by 0.9%, in the Balearic Islands and Barcelona – by 0.8%, in the Canary Islands – by 0.5%. If you want to take a closer look at real estate by the sea, open this link https://yes-mallorca-property.com/offers/select/palma/apartments/.
Despite the fact that since 2007 prices have fallen by more than 40%, the real estate market is still overvalued. According to Fitch’s rating agency, published at the beginning of the year, the price level is 10% higher than adequate. Despite this, they will continue to rise. According to Bankinter forecasts, in 2015, property prices in Spain will rise by 1.5%, in 2016 – by 5%. Whether they will reach the level of 2007, and when it happens, it is difficult to say. But most likely, in the coming years, prices will continue to rise.
The growth period may last at least 2-3 years, perhaps longer, as the approximate period of the market cycle is 6-9 years. Over the decades, the Spanish market has experienced several ups and downs. From 1985 to 1991 prices increased almost three times compared to the previous period, from 1992 to 1996 they remained stable, from 1996 to 2007 they rose again by more than 150%, and from 2008 to 2014 real estate has fallen in price by 40%. It is likely that real estate will be more expensive as the growth of the Spanish market exceeds all expectations. Thus, last year analysts predicted that prices will begin to rise in 2020, but it happened already in 2019.
In the future, prices will continue to rise due to two major factors:
Growing domestic demand. On the one hand, real estate prices have been falling in recent years, on the other hand, the country’s economy and, consequently, its income has been growing, so housing has become more affordable for the local population. Thus, while in 2007 it took an average family about 12 years to buy a house, recently this figure has been 7.8 years. However, there is a risk: unprecedentedly low mortgage rates may provoke re-lending, and once the rates are raised, some borrowers will not be able to repay their debts.
High demand from foreign players – both private and institutional investors.
Further price dynamics will also depend on the state of the economy and employment. According to Bloomberg, in the first quarter of 2015, the Spanish economy grew at the fastest pace in seven years. GDP growth was 0.9% compared to the fourth quarter of 2014 and 2.6% to the first quarter of 2014. The economy is forecast to grow by 2.9 % in the whole of 2015, accelerating to 3 % in 2017 and 2018. Harvard University predicts that by 2023 Spain will be the fastest growing economy in the EU with an average annual GDP growth of 3.7%.