Housing price will increase by 5.4% in 2018
- Residential transactions will increase over 24% in 2018 from the estimate for 2017, with around 670,000 operations expected
- According to the indicators that measure the real estate industry, the housing market in Spain is progressing with clear signs of consolidation
- Housing starts will increase by more than 16% this year, at a similar pace as completed housing, with a growth of over 15%
- Regarding the rental market, the average price of a rental home will be €680 with a mean profitability of 5.7%
Barcelona, 23 July 2018.- The Spanish real estate market continues its positive trend and progress for 2018 is expected, with signs of strengthening. This is the conclusion of the sixth report on the "Residential market in Spain" created by Servihabitat Trends, the market research and analysis platform sponsored by Servihabitat.
According to Iheb Nafaa, CEO of Servihabitat, "2018 is the year in which the housing market in Spain consolidates its progress, with a dynamic market in general terms in the entire country, although there are still differences between regions of the country that must be considered when analyzing the situation".
Increase of 5.4% in home prices
The price presents positive year-on-year variations and that trend is expected to continue with a 5.4% growth for this year, lower than the value at the end of 2017, 6.2%.
Looking at the ratio between the evolution of the price and housing transactions, there are six autonomous communities with good market dynamics. Cantabria, Castilla-La Mancha, Aragon, Asturias, Navarre and La Rioja have more transactions than the national average and a subpar price evolution.
The average effort that a Spanish household must make to acquire a home, in terms of the number of years of gross income that should be employed to pay for it, continues to increase moderately, up to 7 years at the end of 2017.
Transactions increase, with a growth of 24.3% in 2018
According to Servihabitat Trends, transactions are still growing steadily. The total estimate for this year is 669,739 sold homes, an increase of 24.3% from the estimate for 2017.
“This dynamic is the consequence of a macroeconomic context that, even though it leans towards moderation in general terms, is in a growth stage of the real estate cycle", according to Juan Carlos Álvarez, Real Estate Business General Manager at Servihabitat. In this sense, the increased demand in housing is bolstered by several factors: the fast job creation rate and more trust and expectations for the future; more mortgages granted, even if financial entities are still doing this with moderation; and active demand due to investments in real estate.
By autonomous communities, Andalusia, the Community of Valencia and Catalonia lead the transaction volume expected for 2018, with Ceuta and Melilla, La Rioja and Navarre in the last positions.
Regarding the reports from the Ministry of Public Works and the Notaries, the forecasts for 2018 indicate that 8.5% and 91.5% will be the values for new homes and existing homes, respectively.
According to Servihabitat's Network of partner agents (APIs), the most in-demand homes, both apartments and terraced single-family homes have three bedrooms; and detached single-family homes have four bedrooms. In the case of holiday homes, the most demanded apartments have 2 bedrooms and the most demanded terraced and detached single-family homes have 3 bedrooms.
The average time to sell a home in Spain is also decreasing. As indicated by Servihabitat's Network of partner agents, 41% of the sales for first homes took place within 4 to 6 months and 27% have been completed in only 3 months. Regarding holiday homes, the average time for almost half the transactions (47%) went down to three months.
It must be noted that the average age to buy a first home in Spain is 38 years and 46.5 years for holiday homes.
93,895 housing starts and 62,744 completed housing are expected for 2018
Dynamics of home construction investment, unemployment reduction and a reasonable macroeconomic context are encouraging housing starts. For 2018, 93,895 housing starts are expected, which would mean an increase of 16.6% from 2017, which would end with 80,257 housing starts, according to the latest data available and the market behavior analysis.
Thus, an average of 7,825 housing starts per month are expected for 2018, which is an average national increase of 1,114 more certificates compared to the months of the previous year.
The Community of Madrid, Andalusia and Catalonia would still be the autonomous communities with the highest number of projects.
Regarding completed housing, the yearly total will be 62,744 homes, a 15.5% increase and the highest volume of the past 5 years. According to Servihabitat's Real Estate Business General Manager, "the significant change of trend in housing starts that took place in 2015 is showing its results in 2017, after 18 to 24 months of development. In 2018, completed housing responds to the cycle of growth and the intensity of the projects started in 2016 and following months".
The absorption of new construction stock will continue, with a 4% decrease in 2018
The new construction stock maintains a downward trend and stock absorption is expected to continue in 2018 with a 4% decrease expected by the end of the year, added to the 4.1% decrease at the end of 2017. 1
Nonetheless, there is still a ratio of 97.7 new homes per 10,000 people. With this value, there are five autonomous communities with a higher ratio than the Spanish average: La Rioja, Castilla-La Mancha, Community of Valencia, Region of Murcia and Castilla y León.
At this point, it must be taken into account that the behavior of the market is heterogeneous and 49% of the stock is located in the Community of Valencia, Catalonia and Andalusia.
The importance of the rental market is still increasing in Spain
The rental market keeps growing in Spain. In the 15 years between 2001 and 2016, the percentage of owned homes has decreased from 82.8% to 77.8% and conversely, the percentage of rental homes has increased by 5 percentage points, from 17.8% to almost 23%.
However, the difference between the population living in rental homes in our country (22.2%) and the average of the EU-28 (30.7%) is still very high.
The average price of rental homes between 80 and 90 sqm in Spain is €680, 9.7% higher than six months ago, although the Community of Madrid (+14.1%), the Balearic Islands (+9.9%), this increase is even higher. Despite this, the continued trend of average price increases has slowed in some areas and either remained the same or even decreased in recent months.
Average gross rental profitability in Spain is 5.7%, continuing its upward trend, although the increase is moderate overall, in both large and smaller transactions. Despite this increase, this indicator has fallen in the Balearic Islands and in Catalonia.
Foreign buyers are responsible for 17.5% of the total residential transactions in Spain
In 2017, the total volume of homes sold in Spain to foreign buyers has increased to 89,205 properties, a 13.8% increase compared to the same period in the previous year. Therefore, the volume of operations by foreign buyers is 17.5% of the total purchases in 2017.
Purchases by foreign buyers are mainly located in seven autonomous communities: Catalonia, the Community of Madrid, Balearic Islands, Canary Islands, Andalusia, Murcia and the Community of Valencia. Specifically, 93% of the transactions carried out by foreign buyers are located in the main capitals and the Mediterranean coast.
In summary, the housing market in Spain consolidates in 2018, as shown in the forecasts of the main indicators that measure the development of the industry covered in the “Residential market in Spain”, a report prepared by Servihabitat Trends.
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1 This report is based on the official figures and estimates for the last years of the series are applied to the figures from the Ministry of Public Works. Therefore, the annual figure since 2013 differs from the official figure.