In 2016, residential transactions in Spain will experience a 10% year-on-year increment for a total of more than 440,000 homes sold.
- The rising demand, the recovery of investment activities, and improved access to mortgage financing are some of the main factors behind this growth.
- This year, new development stock is expected to continue to drop by 25%, for a final count of 367,500 homes by the end of 2016.
- Home prices will continue to rise, closing out the year with an average increment of 3.8%.
According to the second “Residential Market in Spain” report prepared by Servihabitat, the go-to independent servicer for the management of real estate and financial assets, the recovery of Spain's housing market is taking place at a moderate yet sustained pace. The study, which was carried out by the Servihabitat Trends Observatory with the aim of analyzing the changes in the nation's real estate sector and its forecasts, confirms that certain regions showed clear signs of recovery in 2015, with significant improvements that are expected to continue this year. The increased number of housing transactions, along with the gradual reduction of new development stock, are two of the indicators that confirm this trend.
Nearly 10% increment in the number of transactions for 2016
The number of transactions continued to increase in 2015, and growth rates are expected to continue their upward trend this year thanks to the rising market demand. Specifically, in 2016, transactions are expected to experience a 10% year-on-year growth, resulting in more than 440,000 homes sold, according to the forecasts in the report.
This is due, in part, to the following factors: the activation of the demand-withholding effect in recent years, the rising investment activity aimed at taking advantage of the Spanish market’s appeal, and the recovery of mortgage financing on behalf of banks, with the positive situation of the Euribor.
As far as the types of real estate assets, the upward trend in the number of transactions is led by existing home sales, which represent nearly 70% of the units sold this year. This applies to primary residences as well as vacation homes. In the case of vacation homes, the number of transactions is expected to remain stable throughout 2016.
In terms of the data obtained in 2015, the communities that are expected to have the strongest growth in transaction activity are Asturias, Catalonia, the Basque Country, the Community of Madrid, La Rioja, and the Community of Valencia, as well as the Canary Islands and the Balearic Islands. All should have a year-on-year variation of more than 10%. The only community in which the number of transactions will drop compared to last year is Extremadura, where transactions will focus primarily on existing homes.
10% more homes started and 12.5% more homes completed
Another indicator that confirms the market’s recovery since mid-2015 is the growing number of new developments being started. This number is expected to reach 44,600 homes by the end of 2016, resulting in a year-on-year increment of about 10%. The trend of new real estate developments varies by community, and the regions with the strongest concentration are the cities of Barcelona and Madrid, along with their metropolitan areas.
There is also expected to be a 12.5% year-on-year increment in the number of homes completed this year, for a total of 50,800 units, which includes non-subsidized as well as subsidized housing. These figures confirm the market’s upward trend thanks to the recovery of the construction industry in recent months.
25% reduction of new development stock and 17.6% increment of new approved projects
According to the study, new development stock will continue to decrease by approximately 25%, from 492,000 homes last year to 367,500 by the end of 2016.
In cities with more than 100,000 residents, stock levels have nearly become technical stock, although this is not the case in metropolitan areas and remote locations, where it should be more difficult to reduce stock levels because buyers now have better opportunities in locations that are more central.
Of the autonomous communities, Castilla-La Mancha is at the top in terms of new development stock per resident, followed by La Rioja and the Region of Murcia. On the other end, the autonomous communities with the lowest residential stock levels per resident are the Community of Madrid, followed by the Balearic Islands and the Canary Islands.
In light of this situation, production maintained an upward trend in 2015, and it is estimated that new approved projects as well as those started and completed will show two-digit growth in 2016. Specifically, Spain’s residential market will grow by more than 50,000 homes for a year-on-year increment of 12.5%, and nearly 90,000 projects will be approved, which are 17.6% more than in 2015.
The changes in terms of decreased stock and increased production will vary in each region. In communities such as La Rioja, Castilla-La Mancha, the Community of Valencia, Cantabria, Castilla y León, and Aragon, the construction of new homes per resident is growing faster than the average, despite the existence of high stock levels per resident. However, in Murcia, Asturias, and Galicia, where production is not reactivating, stock levels remain high and are expected to decrease gradually.
Housing prices will grow by 3.8% in 2016
The upward trend in the price/value of Spanish homes in 2015 will consolidate this year, and the average transaction value is expected to increase by 3.8% between now and the end of the year. In provinces such as Madrid, Barcelona, Alicante, and Málaga, market performance has followed home pricing growth forecasts, but in many other regions, home prices have remained stable instead of increasing.
The effort that a Spanish family must make to purchase a home has decreased significantly, from over nine years of gross annual income needed to purchase a home at the end of 2007 to slightly over six years at this time.
The rental market has stabilized and nearly 14% of renters are foreigners
According to the data presented in the study, the rental market in Spain has shown significant growth in recent years. More than 21% of Spaniards live in rentals, which is close to the numbers of other European countries with higher percentages in this regard. Between now and the end of the year, the number of rental transactions is expected to continue or increase compared to the number of home sales, and prices should remain stable.
13.9% of renters are foreigners, and citizens of Morocco, the United Kingdom, Romania, Italy, and various Latin American countries are the leading foreign renters in Spain.
Foreigners purchased more than 17% of the homes sold in Spain in 2015
The number of foreign buyers remained stable (and even rose) throughout 2015, for a total of more than 69,000 homes purchased. This figure includes vacation homes as well as primary residences. Foreign residents and non-residents purchased 17.2% of the homes sold in Spain in 2015. Upon analyzing these transactions, most took place in eight provinces: Alicante, Santa Cruz de Tenerife, the Balearic Islands, Málaga, Girona, Las Palmas, Murcia, and Almería.
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